Abusive Code Enforcement: Eminent Domain by Another Name

Charlestown, like many cities, has adopted ordinances that require property owners to maintain their properties in a safe condition. These ordinances require, for example, that trash be picked up regularly, that steps have handrails, and that bedrooms have windows.7 Until 2016, the city had conducted very little code enforcement, but that abruptly changed. Beginning in the summer of 2016, the city unleashed a torrent of code enforcement targeted specifically at the Pleasant Ridge neighborhood. City officials began performing exterior inspections of properties in Pleasant Ridge and mailing citations to the owners. So far, this campaign has primarily targeted landlords who own multiple rental properties, rather than smaller landlords and owner-occupied houses.

The citations state that the owner accrues penalties of $50 per violation, per day. Multiple citations are issued per property, which means that a single property will begin accumulating hundreds of dollars in fines each day. The fines can be for things as minor as a torn screen, weeds taller than eight inches or chipped paint. In many cases, the fines begin the day the citation was issued, not the day the owner received it. So owners can easily be on the hook for thousands of dollars in fines before they even receive notice, and the fines continue to accrue until the owner is able to repair the property.

The city knows that many of the residents cannot afford to pay these exorbitant fines, leaving them only two options: Sell their home to Neace Ventures or raze it to the ground to have the fines waived. The scheme would be bad enough if Neace were offering fair market value for the homes, but it is not. The inspections regime has been a windfall for Neace. Not only has it compelled more than 140 homeowners to sell—it has also forced them to sell at a considerable loss. Most of the homes have a tax assessed value of between $25,000 and $35,000, and they would be worth much more if the city had not caused the market to collapse by announcing in 2014 that it was going to destroy every home.

The fair market value, which is what current owners—many of whom live on fixed incomes or have limited means—would be entitled to under eminent domain, is at least double the current tax assessed value. But Neace’s standing offer is a comparatively paltry $10,000.8 The net savings of the city’s scheme for Neace, so far, has been close to $2 million based on tax assessed value alone. Homeowners in Pleasant Ridge do not want any money; they just want to keep their homes and be left alone.

If there were any doubt that the city’s code enforcement policy is really just about driving people out of their homes, Mayor Hall dispelled it on November 22, 2016, when he posted a message on his Facebook page discouraging the residents of Pleasant Ridge from repairing their homes, calling it a waste of money. He stated that the people who oppose his plans “have already cost property owners thousands of dollars by giving out false information, false claims and false hope.”9 The “thousands of dollars” he was referring to are the expenditures that homeowners have made ensuring that their properties are up to code.

In other words, even though homeowners are being fined for not complying with the code, the mayor says that they should not bother to repair their properties because he intends to tear them down regardless. Additionally, after Neace purchases a property, the city stops all enforcement activity against it and allows tenants to continue living there.

So the city’s enforcement policy was never about the safety of residents. Instead, it has only ever been about getting these affordable homes into the hands of a private developer.

Plaintiff Pleasant Ridge Neighborhood Association

One of the properties the city has cited for code violations is owned by the Pleasant Ridge Neighborhood Association. The Association was formed by a group of Pleasant Ridge residents in 2014 with the mission of opposing the city’s plan to demolish the neighborhood. The Association also helps economically struggling residents maintain their homes. For example, the Association organizes neighborhood cleanup days, when volunteers help other homeowners by painting window frames and mending steps and porches.10

As part of its mission, in 2015 the Association purchased a duplex for $17,000 and remodeled it. The Association now rents out each side of the duplex to three residents for $450 per month. The residents work low-wage jobs, and they appreciate having such affordable housing. The duplex generates revenue that the Association can use to advance its mission and also demonstrates to the neighborhood that properties can be affordably restored and repaired.

Although the Association takes excellent care of the duplex—indeed, one of the objectives of purchasing the property was to ensure that it was well maintained—it was unable to escape the city’s code enforcement blitz. On September 26, 2016, a city official inspected the exterior of the duplex and cited the Association for 12 minor code violations, like a ripped screen and small hole in the lattice work, or violations that posed no immediate threat to health or safety. The city also—against the tenants’ wishes and after obtaining a warrant—inspected the interior of the duplex on November 2 and 3 and issued citations for a further four violations, which were also minor. The Association addressed each violation immediately. Nevertheless, by the time repairs were complete, the fines had exploded to $8,950, a sum that would bankrupt the Association and force it to sell the duplex.

The Association appealed these excessive fines to the Board of Public Works and Safety, requesting that it waive the fines in light of their minor nature and the fact that the Association had made immediate repairs. The city attorney, however, recommended the fines only be waived if the Association adopts a “permanent solution” for the code violations—that is, sell to Neace or raze the property.11 The city subsequently adopted a resolution making the city attorney’s recommendation the official policy of Charlestown, and the Board then denied the Association’s request to waive the fines.12

Other Residents Are Also Fighting Back

The Association is fighting not only for its own rights but also for the rights of its 50 members and the Pleasant Ridge neighborhood as a whole. Plaintiff and Association President Josh Craven is a single dad to his 4-year-old daughter, supporting her with his job as an exterminator. Josh grew up in Pleasant Ridge and he cannot realistically afford to own a home anywhere else.

Plaintiff Tina Barnes is a medical billing clerk who cares for her disabled adult daughter and is raising her two granddaughters as her own. Tina was elected to the Charlestown City Council in November 2015 to represent the Pleasant Ridge neighborhood. Like Josh, she has no realistic alternative to Pleasant Ridge, and she and her daughter and granddaughters will be homeless if forced out by the city.

Plaintiffs David and Ellen Keith have lived in Pleasant Ridge since the 1970s. David is a retired autoworker and Ellen is a hairdresser in downtown Charlestown. Pleasant Ridge is also home to their extended family. They have a daughter, a granddaughter and even two great-grandchildren living next door in Pleasant Ridge. If Mayor Hall and Neace force them out of their home, they will be left nearly destitute in their retirement.

Plaintiff Bolder Properties, LLC, is a company owned by Jeffersonville, Indiana, resident Ann Eldridge. Ann used Bolder Properties to buy four duplexes in Pleasant Ridge to provide her with retirement income. Ann uses this revenue to support herself, her brother and her elderly mother. She takes particular pride in the quality of her rental units, which provide safe and affordable housing to 18 low-income Pleasant Ridge residents. But she will be left essentially bankrupt if she is forced to abandon her properties—the $10,000 she would receive for each duplex is far less than what she still owes on them. Instead of being driven out of the neighborhood, Ann only wants to keep making an honest living on her properties by providing quality homes to those who need them.

These plaintiffs, along with many other members of the Association, are determined to save Pleasant Ridge. They believe that government cannot push people aside just because they are not as wealthy as the sort of citizens Mayor Hall would prefer. The neighborhood intends to prove that you can fight City Hall and win.

The City’s Plan Is as Unlawful as a Plan Can Be

The Institute for Justice is teaming up with the Pleasant Ridge Neighborhood Association and other homeowners to fight back by filing a lawsuit against the city. The city of Charlestown’s campaign of code enforcement violates an array of laws and constitutional provisions.

First, the city’s code enforcement violates its own housing maintenance code. The code allows the city to fine a property owner only when the owner fails to correct deficiencies after being notified of the problem in writing and after being given reasonable time to comply.13 Yet the city’s building inspector has been imposing fines that immediately begin to accumulate on a daily basis. That is flatly illegal under the code.

Second, the city’s code enforcement also violates Indiana’s Unsafe Building Law.14 Like the city’s housing maintenance code, the state statute prohibits immediate fines and daily accumulating fines. The statute also allows fines only if the municipality makes an express finding that the property owner willfully failed to comply with a written order identifying deficiencies in the property. Finally, the statute caps any fine at $5,000. Yet, to take but one example, the city imposed immediate fines on the Association’s home, which accumulated daily and exceeded the $5,000 cap, despite never making a finding that the Association had willfully failed to comply with a written order. Nor could it have made such a finding, as the Association complied immediately.

Third, the city violated the First Amendment by singling out the Association for selective prosecution on the basis of its political activities. The Association has been engaged in extensive political speech opposed to the city’s land grab, and the city targeted the Association in order to stop this opposition. It is well established that even when the government has discretion about how to enforce the laws, government cannot exercise that discretion with the purpose of selectively punishing people for their political speech. For example, while traffic cops do not have to pull over every speeding car, they cannot constitutionally pull over only speeding cars with Hillary Clinton bumper stickers.

Fourth, the city is violating the due process and equal protection guarantees of both the Indiana15 and U.S.16 constitutions. While there is nothing wrong with a city enforcing a maintenance code when the objective is simply to protect the health and welfare of residents, the city of Charlestown is not trying to protect its residents. Rather, the city is using its maintenance code as a pretext. Its real objective is to force low-income residents to sell their homes to a private developer, for pennies on the dollar, just so the developer can build bigger homes for wealthier people. This is an illegitimate and unconstitutional governmental objective. The Indiana Legislature, through its eminent domain reform law, has already outlawed this kind of redevelopment. The city may not twist and bend other laws to circumvent this legislative reform.

Finally, the city is violating the excessive fines provisions of the Indiana17 and U.S.18 constitutions, which require that a fine be proportional to the offense. Most of the fines the city has assessed have been for insignificant violations of the housing maintenance code. Nevertheless, the fines are in many cases equal to a substantial portion of the total value of the properties. The city has intentionally calibrated these fines to make it impossible for owners to keep their homes. That is the very definition of excessive.

Conclusion

The city of Charlestown is not using an $8,950 fine against the Association’s duplex to protect the people of Pleasant Ridge. It is using it to force the Association to sell to Neace Ventures, just as it has previously used fines to force most other landlords in the neighborhood to sell. And individual homeowners will be next. Mayor Hall has made it perfectly clear that Pleasant Ridge must be demolished and rebuilt from scratch by Neace. But the Indiana and U.S. constitutions prohibit the city from going forward with its illegal scheme. The residents of Pleasant Ridge want nothing except to stay in their homes. They will soon have their day in court.