Don't Assume 'Adaptable' Units Satisfy Accessibility Requirements

Federal law imposes numerous accessibility requirements that tax credit sites must follow. If your site was designed and constructed after March 13, 1991, you must make your site readily accessible to and usable by people with disabilities. Federal requirements say that all ground-floor and elevator-accessible units (meaning all units in a building with an elevator), public use areas, and common areas must be accessible to people with mobility impairments at first occupancy. The law defines “first occupancy” as a building that has never before been used for any purpose. Also, if your site has four or more units, it’s covered by the Fair Housing Act even if those units are separated by a breezeway, stairway, or firewall. Detached single-family houses, duplexes, triplexes, and multi-story townhouses without elevators are not covered.

You may think that you can avoid fair housing problems if you’re willing to adapt a unit or a portion of your site to make it accessible when a person with disabilities asks you to. But that’s a mistake. If your site isn’t accessible now, you could end up losing tax credits on the site as well as paying large fines and court-awarded damages if a resident or applicant sues you.

Site Violated Accessibility Requirements

The owners of a tax credit site in Montana got into trouble over the issue of accessibility. A federal court found that the owners and the management company violated federal and state fair housing law by failing to make the site “readily accessible” to people with disabilities.

A disabled resident, backed by the Montana fair housing agency and an organization for people with disabilities, sued the owner and management of the site for discrimination on the basis of disability. The resident asked the court to decide that the design and construction of the site failed to comply with the Fair Housing Act and a similar Montana law, both of which required that the site be accessible to and usable by people with disabilities. And, to obtain its tax credits, the owner had signed a restrictive covenant with the state housing agency, agreeing to comply with the Fair Housing Act. The resident claimed that the site also violated that agreement.

Among the violations of the accessibility requirements the resident claimed were: inaccessible ground-floor entrances; improper placement of thermostats, air conditioning controls, and electrical outlets; use of twist-type doorknobs rather than lever or U-shaped handles; installation of top-loading washers and dryers only; and a playground by wooden “railroad ties.”

The owners argued that the site’s design and construction complied with the requirements of the Fair Housing Act. Specifically, the owners argued that a site could comply with accessibility requirements by having “adaptable units” that can later be remodeled if someone with a disability moves in and needs accessible features.

But the court disagreed. It stated that the requirement of “adaptive design” under the act means that the design of the dwelling’s features “must be appropriate for use by persons of all abilities without modification.” This requirement must be met as of the date of first occupancy, not just when a person with a disability moves in, the court said.

The court ruled that, based on the design and construction at the site, the owners and builders of the site had violated federal and state fair housing laws. The court held the management company responsible, along with the owners and builders of the site, for the violations in design and construction [Montana Fair Housing, Inc. v. American Capital Development, Inc., November 1999].

Make Sure Site’s Accessible or Lose Tax Credits

To avoid a similar fate, make sure your site complies with all accessibility requirements in the Fair Housing Act. The Fair Housing Act defines “multifamily dwellings” as buildings consisting of four or more units if such buildings have one or more elevators; and ground-floor units in other buildings consisting of four or more units. All premises within such dwellings are also specifically required to contain features of adaptive design so that the dwelling is readily accessible to and useable by persons with disabilities.

The FHA provides a list of the accessibility features necessary for compliance with the design and construction requirements:

1. The public and common use portions of such dwellings are readily accessible to and usable by disabled persons;
2. All the doors designed to allow passage into and within all premises within such dwellings are sufficiently wide to allow passage by disabled persons in wheelchairs;
3. All premises within such dwelling contain the following features of adaptive design:

• An accessible route into and through the dwelling;
• Light switches, electrical outlets, thermostats, and other environmental controls in accessible locations;
• Reinforcements in bathroom walls to allow later installation of grab bars; and
• Usable kitchens and bathrooms such that an individual in a wheelchair can maneuver about the space.

You should review the accessibility requirements of the act with your attorney and possibly an architect. The specific design and construction standards can be found in the appropriate requirements of the American National Standards Institute (ANSI), Fair Housing Accessibility Guidelines (FHAG), and in HUD’s Fair Housing Act Design Manual. It’s important to note that the FHA Guidelines contain a narrow “Site Impracticality Exception,” which provides that first-floor units don’t have to meet all of the law’s requirements when it’s impractical to have an accessible entrance to the building because of the natural hilly terrain or other unusual characteristics of the site.

If your site, like the one in the Montana case, is merely “adaptable” for later accessibility rather than currently accessible, you could face potentially costly fines and lawsuits, whether you manage the site or own it. And the owner risks denial of a portion of the tax credits on the site if a court finds that either the manager or owner discriminated against people with disabilities or otherwise violated fair housing law. The IRS has stated that the failure of low-income housing credit sites to comply with the requirements of the Fair Housing Act will result in the denial of the low-income housing tax credit on a per-unit basis [General Instructions, IRS Form 8823, “Low Income Housing Credit Agencies Report of Noncompliance”].

If you find that your site isn’t in compliance, correct any violations immediately, before your state housing agency conducts its mandatory inspection of the site, finds these violations, and reports you to the IRS.