For house hunters, there are many factors to consider when purchasing a new property. Natural light, open floor plans, and a big backyard may be on a potential buyer’s wish list. One thing that tends to top the list, however, is the quality of schools in the surrounding neighborhood. It’s commonly accepted by the real estate industry that higher quality schools translate to higher real estate values. The connection between school quality and property values is undeniable, with many studies confirming such a trend.

Fair housing advocates contend, however, that closely tying school rankings to property values has profound consequences. Many schools with lower rankings have a larger population of poor, minority students. Furthermore, the rise of online databases for house hunting, like Zillow, has allegedly increased illegal “steering” of people out of specific communities by prominently featuring school ratings online. Such advertisements and practices may be in violation of the Fair Housing Act.

Property Values and School Ratings

In a 2013 national study by realty brokerage company Redfin, people paid $50 more per square foot for homes in top-rated school districts. The study looked at 407,000 home sales and 11,000 elementary school districts in 57 metropolitan markets. Data was compiled from multiple listing services, as well as school characteristics and test scores from GreatSchools and Onboard Informatics.

“Markham suburbs aerial edit2” Courtesy of IDuke; License: (CC BY-SA 2.5)

Homes located near each other with the exact same square footage, number of bedrooms, and number of bathrooms can vary by tens of thousands to hundreds of thousands of dollars just because they are served by different schools. On the coast in California, for example, the price differential could be upwards of $300,000 to $500,000. Realtor.com recently completed a national study of homes within the boundaries of higher-rated public school districts versus homes in lower-ranked districts. The study uncovered that homes in the higher-ranked districts are 49 percent more expensive on average than the national median list price, and a whopping 77 percent more expensive than homes found within lower-ranked districts.

Real estate agents and industry advocates are quick to point out, however, that such research may not fully account for other factors that increase property values. Amenities such as a neighborhood swimming pool, “walkability,” and other physical improvements and facilities can drive home prices up, not just school ratings. It may be a critical consideration for families with children, but it is not the sole factor that increases property values.

“Steering” and Fair Housing Considerations

“Steering” is a process that influences a potential buyer’s choice of communities or neighborhoods on the basis of race, color, religion, gender, disability, familial status, or national origin. Not only is it unethical, but it limits the choices a potential buyer may have when purchasing a property. Steering was also made illegal under the Fair Housing Act.

The practice occurs when a real estate agent directs a prospective buyer interested in particular properties to equivalent homes in a specific neighborhood or community based on one of the protected characteristics. A real estate agent can “steer” clients by making positive or negative comments about a neighborhood, which can direct a buyer toward or away from a community. This can especially be an issue when it comes to prospective buyers’ questions about schools. Oftentimes characterizations such as “a school with low test scores” or “declining school district” may be used as coded language to talk about race. The advocacy group National Fair Housing Alliance found in a 2006 report that discussing school quality was becoming a proxy for discussing the racial or ethnic composition of a neighborhood.

The achievement gaps between white students and black and Hispanic students are massive and well-documented; the larger the socioeconomic disparity, the larger the achievement gap. Moreover, black and Hispanic students are far more likely to grow up in poorer households, but middle-class black and Hispanic students are more likely than poor white children to attend schools with a higher percentage of poor students. Less qualified teachers, large learning gaps, and lower standardized test scores all translate into one thing–a lower school rating.

The National Association of Realtors even notes that innocent conversations regarding school quality may create an FHA issue. Touting the accolades of a school in one district, while remaining silent on another school may be alluding to a racial distinction that steers prospective buyers out of one neighborhood and into a different one. Realtors must be extremely cautious in accommodating buyers’ preferences during the housing search without purposefully limiting their choices.

Rise of Online Databases and Redlining

In the past, fair housing laws covered statements and advertisements by real estate agencies and landlords. The rise and proliferation of the internet, however, has encouraged the growth of another form of house hunting: research in online databases. While there is a myriad of choices, some of the most popular ones are Zillow, Homes.com, and Redfin.

When a potential buyer is looking at a particular property on one of these sites, a link to a local school rating is prominently featured. With just a click of the mouse, the racial and ethnic composition of a school is unveiled, and the sites feature a color-coded system for the school rating: green, yellow, and red.

Such a system is reminiscent of “redlining,” a practice where maps showed communities with minorities in a red shade, denoting where financial investments were denied and systematically withheld from borrowers. After the Great Depression, the U.S. government wanted to evaluate the riskiness of mortgages with the help of local realtors and appraisers. Neighborhoods with minority residents were consistently marked red, considered high-risk for any mortgage lender. The practice was so extreme that a single black household in a middle-class neighborhood could make the entire area too risky for mortgage loans. Without access to better mortgages, black families looking to buy homes were forced to turn to predatory lenders. Redlining is now banned, but it has left behind racism and segregation that still shapes housing today in cities large and small. 

Most of the time the school ratings are based on one or very few factors, usually aggregate standardized test scores. Test scores are consistently disparate along socioeconomic lines, and it is well established that minority students are more likely than their white counterparts to live in poverty and go to school in poorer districts. Thus, such a one-dimensional view of a school’s performance, along with using a factor that is racially biased, seems to be a significant issue when displaying this information prominently on a house hunting website.

Modern Day “Steering?”

House hunting online has only become more popular in recent years. A joint study conducted by the National Association of Realtors and Google unveiled that 90 percent of home buyers searched online during their home buying process. Furthermore, the study found that 89 percent of new home shoppers used a mobile search engine at the onset and throughout their house hunting research. Currently, fair housing laws only affect those who sell housing, which are landlords and real estate agents. The laws do not appear to assign any sort of liability to websites, which are now being utilized across the country at a rapid rate.

Katie Curnutte, vice president of communications at Zillow, contends that these school ratings merely serve as a starting point for potential buyers to do further research and to connect with real estate agents. If the information provided is just neutral, it is difficult to argue that there is discriminatory intent. The color coding system in conjunction with readily accessible demographic data, however, could be a 21st-century form of “steering.” Given the popularity of online resources, resolving these issues to help combat housing segregation is of critical importance.

Conclusion

The rise of web platforms for home buying may be exacerbating a persistent issue in the fight for fair housing. Many advocates consider online databases with easily accessible school rating numbers to be part of a “legal gray area,” one with very little oversight. Moreover, it is apparent that housing and schools ratings are stuck in a cycle–encouraging housing patterns that maintain racial segregation, particularly through school budgets. The use of a color coding system by a website for local school districts–with green denoting “good” and red denoting “bad”–may be just as damaging as a casual conversation with a real estate agent steering people to live in certain communities.

It is no surprise that prospective homeowners have many concerns when it comes to purchasing a new property. It is one of the largest and most intimate investments a person can make. Home buyers with children in the public school system certainly have a right to be concerned about school quality. Striking a balance between honest information and activities that do not violate the FHA is imperative to ending housing discrimination and segregation. Moreover, drafting straightforward legislation to regulate house hunting websites and databases is the next step to ensuring the FHA remains applicable in the 21st century.

Resources

Primary

National Fair Housing Alliance: Unequal Opportunity–Perpetuating Housing Segregation in America

National Association of Realtors: The Digital House Hunt: Consumer and Market Trends in Real Estate

Additional

New York Times: Money, Race, and Success: How Your School District Compares

The Atlantic: The Concentration of Poverty in American Schools

NPR: Race, School Ratings and Real Estate: A ‘Legal Gray Area’

NPR: Interactive Redlining Map Zooms In On America’s History Of Discrimination

Realtor.com: Review of Housing Insights in Top Rated School Districts

National Association of Realtors: Steering, Schools, and Equal Professional Service

Washington Post: School Quality is Tied to Home Prices in New Study. But Other Factors May Affect Values

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

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Research and analysis done by Law Street’s Law School Rankings team: Alexis Evans, Anneliese Mahoney, Julia Bryant, Sean Simon, Alex Simone, Inez Nicholson, Ashlee Smith, Sam Reilly.

Click here for detailed ranking information for each of the Top 10 Law Schools for Real Estate Law.

Click here to see all the 2016 specialty rankings.

Click here for information on rankings methodology.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Top 10 Law Schools for Real Estate Law: #3 Southern Methodist University Dedman School of Law appeared first on Law Street.

Research and analysis done by Law Street’s Law School Rankings team: Alexis Evans, Anneliese Mahoney, Julia Bryant, Sean Simon, Alex Simone, Inez Nicholson, Ashlee Smith, Sam Reilly.

Click here for detailed ranking information for each of the Top 10 Law Schools for Immigration Law.

Click here to see all the 2016 specialty rankings.

Click here for information on rankings methodology.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Top 10 Law Schools for Real Estate Law: #10 USC Gould School of Law appeared first on Law Street.

What do you get when you cross a get-rich-quick scheme with a for-profit college, while adding a healthy dose of reality TV megalomania? The answer is Trump University–a series of “classes” designed to teach aspiring young entrepreneurs the secrets of real estate passed on from the Donald himself.

Trump University, which Marco Rubio used as fodder for his attacks on Trump during last night’s Republican primary debate, did indeed exist, and many people are mad about it. Rubio was correct when he told the debate audience that there are pending lawsuits against Trump for his involvement with the organization.

There are currently two active class action lawsuits against either Trump or his company. The first is Cohen v. Donald J Trump, a lawsuit against Mr. Trump specifically which cites a violation of the Racketeer Influenced and Corrupt Organizations Act. This lawsuit highlights that the New York State Education Department warned Trump that it was unlawful to call the unlicensed ‘school’ a university. There’s also a national lawsuit named Makaeff et al. v Trump University LLC, which cites a violation of state consumer protection false advertising and elder financial abuse laws. Some people who paid for an education with Trump University are dually covered by these class actions.

Some of the failures of Trump University can be attributed to mismanagement. But many of the complaints against it allege deception and fraudulent practices. The university promised to reveal Trump’s real estate secrets. This was done through video advertising featuring Donald himself as well as flyers mailed out with Donald Trump’s signature. When interested would-be students attended these free seminars they found a marketing pitch for a three-day conference that would cost about $1,500.

Naturally a portion of these free attendees decided to pay for the three day conference–after all who wouldn’t pay less than $2,000 to receive “the last real estate education you will ever need for the rest of your life?” But these attendees were disappointed yet again when they arrived at the three day conference only to find that they were able to take a picture with a cardboard cutout of Donald Trump, and then encouraged to sign up for a Gold Elite program. At this point, the students who hadn’t realized how similarly this program structure reflected Scientology and had never heard of a scam, agreed to charge $35,000 to their credit cards for this special program.

The lawsuits claim that Trump University even provided scripts for the students to use when calling their credit card companies to explain how they could afford such a large charge. Students were allegedly told to include potential future earnings in their income reports to allow the credit card companies to provide such a sizable sum.

In typical Trump fashion, almost every detail of the lawsuit has been denied. The executive vice president of the Trump Organization Allen Garten said that “there’s no merit to these allegations whatsoever” and that the suits came forward “completely out of a financial motivation.” Garten points to a “98 percent approval rating,” but many claimants have argued they felt pressured to fill out good ratings, with some claiming they were given the survey before the program began.

There are some participants who say that the Trump University experience was beneficial for them, including one customer who paid for the Gold Elite Package, who claims that calling the education helpful “would be an understatement.” This is in stark contrast to one of the claimants in the lawsuit saying that after her $35,000 payment she was unable to reach any of the instructors for further tutelage.

As Donald J. Trump continues to totally dominate in the polls, in the primaries, and in delegates, his opponents are scrambling to cut down his support. The scandal of Trump University may prove to be a useful tool for eroding Trump’s success, but so far, nothing seems to stick to the candidate.

Sean Simon

Sean Simon is an Editorial News Senior Fellow at Law Street, and a senior at The George Washington University, studying Communications and Psychology. In his spare time, he loves exploring D.C. restaurants, solving crossword puzzles, and watching sad foreign films. Contact Sean at SSimon@LawStreetMedia.com.

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What happens when your dream house becomes a nightmare? A couple in Westfield, New Jersey found out when they started living the plot of a horror movie after buying their so-called dream house last year.

What they want to know now is who is “the watcher” and why didn’t the previous owners mention him?

Courtesy of Giphy.

The Story

After purchasing a $1.3 million house, you might like to move into it; however, when the watcher doesn’t want you to, then you might not. Which means that $1.3 million just went down the drain.

A couple found this out the hard way when, after putting down the $1.3 million, they started getting threatening letters from someone who called himself “the watcher.” And the watcher had a lot to say.

For example, he claimed he had been watching the house for a decade and that his father watched the house before him and his grandfather before that. He claimed the former residents knew about him and that he had asked them to give him some young blood.

Creepy quotes from the letters include:

• “Do you need to fill the house with the young blood I requested? Once I know their names I will call to them and draw them to me.”
• He once “ran from room to room imagining the life with the rich occupants there.”
• “Have they found what is in the walls yet? In time they will.”
• “Who has the rooms facing the street? I’ll know as soon as you move in.”

Courtesy of Giphy.

Now, it is understandable that you might be a little freaked out if you started getting these letters because at the very best it means you are about to get one weird neighbor, and at the worst it could be a whole lot worse than that.

However, if you disclose these skeevy letters, you might have a little problem selling your house because nobody wants to buy a house being watched by a creepy weirdo. Which is the situation this couple finds themselves in now.

The previous residents did not disclose this information–even though it is alleged that they got at least one letter from the watcher a couple of weeks before they closed–and they sold the house. This couple made a big deal about it (because why wouldn’t you? I’d want some police protection, too) and now everybody knows and nobody wants to buy.

Which is why the buyers decided to sue.

The Lawsuit

The buyers decided that the sellers had a duty to disclose the watcher and that the watcher had a duty to not stalk them. Because of this, they decided to sue them both.

Here is the problem with both of the suits:

• Under New Jersey law, you have to disclose latent defects–think, the old wiring is likely to start a fire. However, there is no known requirement to report other things such as house stalkers. While there is a chance that a lawyer could somehow turn this on its head and win the case (since this is pretty unique and there is no current case law to give us a hint to the verdict), the chances are probably pretty low.
• Since nobody knows who the watcher is, it will be pretty hard to serve him papers. Though, of course, they could always deliver them to the house where the watcher seems to spend a lot of time. He will probably see them when they come if he is as good a watcher as he claims to be.

If You Know Anything …

The biggest problem in this case, of course, is that nobody seems to know who the watcher is, which makes it hard to catch him (or her, but I’ve been using him in the most gender-less way possible).

So if you live in the area and have information, don’t hesitate to tell the police. It would be nice to get this guy–or girl–off the streets.

Ashley Shaw

Ashley Shaw is an Alabama native and current New Jersey resident. A graduate of both Kennesaw State University and Thomas Goode Jones School of Law, she spends her free time reading, writing, boxing, horseback riding, playing trivia, flying helicopters, playing sports, and a whole lot else. So maybe she has too much spare time. Contact Ashley at staff@LawStreetMedia.com.

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“UUGGHH.” That’s how Minneapolis-based street artist Eric Rieger, aka Hottea, responded to the latest indication of gentrification in New York. One-ninety Bowery has stood the test of time. The imposing six-story limestone Renaissance Revival relic has long been a cultural landmark. Built in 1899, then Germania Bank of New York City serviced its surrounding community, “Little Germany” (Kleindeutschland), once the largest German-American–then-bourgeois–enclave in the country.

In 1966, long after the bank dissolved, photographer Jay Maisel bought the abandoned edifice and converted its facilities into the largest single-family home in New York City. That was until Fall 2014, when Maisel reluctantly sold his spacious dwelling to one of the most voracious real-estate developers swallowing up NYC properties today. RFR Holdings LLC bought the property for an undisclosed price in September, valued between $35 and 70 million, with plans to flip the building, marketing it as ideal for retailing at the base with condominiums above, and offices, or even an art gallery. 

190 Bowery, courtesy of erin williamson via Flickr.

Courtesy of erin williamson via Flickr.

Should we be surprised? With the New Museum a block away, a Whole Foods Market nearby, scores of luxury apartments, boutiques, and art galleries immediately South, it was only a matter of time before 190 Bowery succumbed to SoHo, the epicenter of loft living. RFR will be responsible for the “renovation” of the building’s cultural memory, of course; developers have already issued a rendering of the facade scrubbed clean of the layers of graffiti, on which artists including Keith Haring, COST, NEKST, Shepard Fairey, and others have made their marks for the last three decades. One-ninety Bowery is “the last remaining part of ‘old New York’,” lamented Hottea. “This building is so iconic… it’s been there for years. I think it reminds a lot of people of what New York used to be, and how that’s being taken away… UUGGHH. That’s all I can say. When is it going to stop?” But such is the normal arch of the gentrification narrative, 5 Pointz being a glaring example. We should, however, be concerned with the manner in which this process is taking place.

RFR Holdings LLC was founded in 1991 by Aby Rosen and Michael Fuchs, German-born real-estate tycoons who together own 71 properties globally. Over the last year, Rosen and Fuchs have spent $250 million on Manhattan land purchases, $500 million on office building acquisitions, and nearly $150 million on retail property–a spending spree to rival that of Quicken Loans founder Dan Gilbert who now owns most the real estate in downtown Detroit. Aside from the starkly different cities in which their properties are located, Gilbert’s Rock Ventures is an American-based firm, while RFR Holdings LLC has headquarters in New York and Frankfurt. “We can buy something more expensive because we have our own capital, plus European capital that looks for longer returns,” Rosen explained in a recent New York Times interview. “We don’t have to get in and out quickly, and having this long view allows us to be more aggressive.”

Aby Rosen, courtesy of Christopher Peterson via Wikimedia.

RFR’s acquisitions represent a broad trend of foreign investment in American real estate since the late 1980s. In lieu of escrow accounts in Swiss banks and securities in the Caribbean, which have come under intense international scrutiny, foreign investors have poured their money into global real estate, which can serve as a “convenient pied-à-terre, an investment hedge against a wobbly home currency,” according to New York Magazine, “or an insurance policy—a literal refuge if things go bad.” After the U.S. housing crisis from 2007 to 2010, property values in American cities plummeted, and while the U.S. economy has been recovering, they are still relatively “low” compared to cities around the world.

The market rate for luxury apartments in Hong Kong, for instance, is between $4,100 and $5,000 per square foot; in London the same properties are valued at $3,300 to $4,100. By comparison, Manhattan properties cost half that, ranging from about $2,100 to $2,500; alas–well out of reach for even upper middle-class inhabitants, yet quite attractive for transnational ultra-rich investors. Since 2008, roughly 30 percent of condo sales in Manhattan have been to overseas addresses, or through ambiguous entities like limited-liability corporations, such as RFR Holdings LLC, which often serve as middlemen for foreign investors. Over the last decade the majority of New York property sales have gone to investors in Russia or Saudi Arabia; over the last year, however, China has spent $22 billion on New York properties–72 percent more than they spent in 2013–claiming the lion’s share of foreign investment in American real estate. “The global elite,” according to Michael Stern, owner of JDS Development Group, “is basically looking for a safe-deposit box.”

Such gentrification on the global scale should not surprise us–it is a historical trend, and the redevelopment of 190 Bowery was inevitable. But there are dangers to this phenomenon, which reach further than the displacement of middle and working class communities, and erasure of their identity and culture. There is virtually no local market for premium properties in New York City. Urban properties as investments cease to be homes. Foreign investors lack vested interest in maintaining these properties primarily because they do not live there; the American city has effectively become a place of visitors, void of close community ties and stewardship. This hollow space is lifeless. Urban properties as investments are mostly uninhabited by their affluent proprietors; they either serve as vacation homes, or remain empty retainers of wealth. Meanwhile, middle-class homes let rooms to AirBnB, and subdivide apartments as room-shares marketed at exorbitant rates on Craigslist. We are experiencing the emergence of an absentee rentier class that not only augments our urban housing crisis; this urban real-estate bubble may threaten the systemic integrity of our economy.

What needs to change? Buyers of new construction in the city often qualify for significant tax abatements–a vestige of the neoliberal initiatives of the late 1970s and early 1980s designed to increase private investment and reverse the effects of urban crisis. Moreover, entities like RFR, based in Europe with an increasing presence in New York, have capitalized on liberal transnational financial regulations. American cities must update their zoning laws, with an eye to equitable development. New York no longer needs a mainline feed of private investment to remain viable. The effects of unfettered transnational capital currents erode the fabric of urban communities. If “UUGGHH” is not a lament, it is surely an expression of our impotence.

Ryan Purcell

Ryan D. Purcell holds an MA in American History from Rutgers University where he explored the intersection between hip hop graffiti writers and art collectives on the Lower East Side. His research is based on experience working with the Newark Public Arts Project and from tagging independently throughout New Jersey and New York. Contact Ryan at staff@LawStreetMedia.com.

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