Mayor Eric Adams’s law department is in settlement talks in a landmark federal lawsuit charging that the city’s longstanding practice of giving neighborhood residents preference in affordable housing lotteries promotes racial segregation.

The outcome of the case could redefine who can snag a coveted new apartment where rents are subsidized and set in line with a tenant’s income, including in some of the city’s most desirable neighborhoods.

Just how wide is the potential reach of the decision in Noel v. New York City? Among the hundreds of thousands of people trying their luck in the Housing New York lottery is a close relative of the judge in the case, Laura Taylor Swain.

Judge Swain has been handling Noel since civil rights lawyer Craig Gurian filed it in 2015. In May she cleared the case to go to trial on the plaintiffs’ core allegation: that a “community preference” setting aside half of lottery apartments for residents of local community districts violates the federal Fair Housing Act by intensifying existing patterns of racial separation.

At the same time, Swain urged both sides to reach a settlement, and in July Adams’ law department and Gurian exchanged offers. Subsequently the city’s lawyers notified the judge that they “needed time to consider” plaintiffs’ settlement offer and were “determining whether to make” a counter-offer.

Connected to the Case

The judge’s connection surfaced in a May 19 letter from the court clerk for the Southern District of New York to lawyers in the case, revealing that Swain had recently learned that one of her “close family members has entered the City of New York’s affordable housing lottery program.”

The relative, the letter states, lives in the same community district as an affordable housing project that they applied to get into. “Because at least one of the family member’s applications is for a property in a Community District in which both the family member’s address and the housing project are located, the family member will benefit from the City’s community preference policy,” the letter states.

Judge Swain does not “anticipate that the circumstance will affect or impact her future decisions in this case,” but circumstances may be grounds for recusal “because the judge’s impartiality might reasonably be questioned,” the letter from clerk Ruby Krajick states.

Swain offered to recuse herself from the case she has presided over for eight years, unless all parties in the case agreed she could stay on, the clerk communicated.

In response, lawyers for both the plaintiffs and the city waived the recusal. She remains on the case and has ordered both sides to prepare for trial if they can’t reach a settlement before then.

“We don’t think there’s any problem with the judge deciding it,” said Gurian, who represents two Black housing applicants contesting the protocol.

He contended that the application by the judge’s “close relative illustrates our point” regarding how community preference discourages integration.

Gurian said applicants such as the judge’s “close relative” are both rewarded and punished by community preference protocol that he dubs an “outsider restriction” policy: “Sometimes when the close relative applies, that close relative gets an advantage. Sometimes when the close relative applies, the close relative is disadvantaged.”

Previous analysis by THE CITY showed that in neighborhoods where very little affordable housing is built, chances of its residents winning a lottery unit are quite low. Community preference gives a big leg up to people living in districts where affordable development is relatively plentiful.

‘History of Segregation’

Noel is not Gurian’s first ambitious anti-segregation legal case. In 2006, he filed a federal lawsuit charging that Westchester County took in millions of dollars in federal aid but failed to make the required effort to get affordable housing built in the county’s exclusive suburban communities. In 2009, Manhattan federal judge Denise Cote found Westchester County had “utterly failed” to meet its fair housing requirements, and Westchester settled by agreeing to reforms aimed at increasing affordable apartments within its borders.

Gurian then focused his attention on New York City, which has an overall racially diverse population but is extremely segregated by neighborhood.

“New York has a long and ugly history of segregation,” Gurian said. “It was obvious that the outsider-restriction policy built on that history instead of fighting it. It was long past time to recognize that all our neighborhoods should belong to all of us, regardless of where we might be moving from.”

Community preference began in 1988 as a way to mollify local elected officials who advocated that neighborhood residents should get first priority for affordable housing built in their neighborhoods. Under Mayor Ed Koch, the rule required that 30% of affordable housing go to residents of the neighborhood where a development project was located. It expanded to 50% in 2002 under Mayor Mike Bloomberg.

Tough Odds

The odds of hitting the New York City housing lottery are daunting, Department of Housing Preservation and Development (HPD) data shows. Between 2014 and 2020, more than 27.2 million applications were filed for affordable units, including from individuals who filed multiple applications. Of those, tenants signed 27,819 leases.

Analyzing millions of HPD application records from those years, THE CITY found that higher-income tenants have the greatest chance of securing an apartment, and lower-income tenants the least.

Community preference has given applicants seeking housing within their own neighborhoods a major advantage among the 18 million applications in lotteries that included set-asides of apartments for local residents: While only 5% of the applications came from individuals living within the targeted community districts, leases signed went 50-50 to those within and without, according to HPD’s data.

The Noel plaintiffs are two Black New Yorkers who entered city-run lotteries for apartments located outside the community districts where they lived and failed to get housing.

The suit alleges that this policy violates the federal Fair Housing Act because it perpetuates racial segregation and works against integration.

The plaintiffs contend that because the insider pool within a community district is “typically less diverse than the outsider pool, it has a race-based disparate impact.” 

Gurian has presented data showing this tilt: Black applicants make up 34% of apparently eligible applicants from outside districts, but make up only 10% of apparently eligible applicants from inside districts. White apparently eligible applicants make up 10% of outside applicants, but 27% of inside applicants.

Viewpoints Vary

Under Mayor Bill de Blasio, city lawyers fought the suit aggressively, asking Swain to throw it out. His top housing officials asserted that affordable housing could not be built without the local political support that constituent set-asides help ensure.

In April the judge granted City Hall’s request to dismiss the argument that community preference had a disparate impact on Black and Hispanic housing lottery applicants. But Swain also rejected the city’s argument that because some neighborhoods are integrated, community preference does not have the overall impact of perpetuating segregation. 

“The court is not convinced, however, that a municipality cannot be held liable for perpetuating segregation as long as its policy or practice results in some integration, no matter how minimal,” she wrote. The judge declared that the plaintiffs “may be able to prove that the community preference policy causes a discriminatory effect” if they provide “sufficient evidence demonstrating that the policy has a significant effect on inhibiting integration.”

Speaking with THE CITY, Gurian said that under the de Blasio administration, the city argued that people want to stay in their own communities and should therefore get preference for much-sought-after affordable units.

But in arguing his case, Gurian has presented data showing that in three out of four lotteries, 85% of applicants for housing come from outside the community district.

“That’s true for all racial groups, which indicates people are not wedded to staying in their own neighborhoods with their own racial group,” he said. “People just want affordable apartments.”

Ready for Trial

Gurian has asked Swain to reconsider her rejection of their disparate impact argument and said he is preparing to go to trial. He declined to discuss the status of ongoing settlement talks. A spokesperson for the city’s Law Department did not respond to THE CITY’s questions. 

If Adams rejects the plaintiffs’ settlement proposal, a trial is set for early next year.

While de Blasio fought aggressively to continue the practice of community preference, it’s not entirely clear where Adams stands on this issue.

During his campaign for mayor, Adams was split. In a list of promised reforms he dubbed “100+ Steps Forward for NYC,” he called for encouraging more middle- and lower-income housing to be built in more affluent neighborhoods by eliminating community preference in those areas. But he appeared to support its continued use in lower-income neighborhoods.

“The mayor should take a decisive step away from the policy of his predecessors and settle this case, especially as he is already on record as recognizing that the current policy is not in the city’s interest,” Gurian said. “But if he chooses instead to own the policy, we’re confident that a jury of ordinary New Yorkers will see the overwhelming evidence of racial discrimination and rule for the plaintiffs.”

Deputy Mayor for Communications Fabien Levy did not respond to THE CITY’s request for comment.