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State investigating North Little Rock over rejection of adult care home 

House of Three project undermined by bureaucracy, according to owner.

click to enlarge Koy Butler at the home he owns on Arlington Road in North Little Rock image
  • Brian Chilson
  • Koy Butler at the home he owns on Arlington Road in North Little Rock.

The stately gray brick house with black plantation shutters sits alongside a quiet, curved street in Little Rock's upscale Leawood neighborhood, indistinguishable from the homes around it. Inside, two of the women who live there sit around the kitchen table, family style, with their caretaker and two visitors, enjoying a lunch of roast beef and potatoes, washed down with iced tea. A partially finished jigsaw puzzle rests on a table in the adjacent dining room.

Meanwhile, a dozen miles away on Arlington Road in North Little Rock, a more modest red brick ranch house in the Lakewood neighborhood that was in the remodeling process sits half finished and abandoned. Weeds poke up through the concrete in the driveway, and a giant dumpster outside overflows with construction waste.

Koy Butler owns both of these houses. He intended the second to be like the first — a place where up to three elderly disabled people receive around-the-clock care in a home setting, surrounded by their own furniture and prized possessions, rather than the sterile environment of a nursing home. But Butler's House of Three, as he calls it, ran into a bureaucratic buzzsaw in North Little Rock, fueled by neighborhood politics, leaving him marooned with an unfinished project.

Frustrated, Butler filed a complaint with the Arkansas Fair Housing Commission, which is now investigating whether the city violated state and federal fair housing laws by requiring Butler to seek rezoning of the property for his adult care home, which both the Planning Commission and the City Council rejected.

Butler and his attorney, Dana McClain, contend the federal Fair Housing Act prohibits cities from using zoning rules to treat housing for the disabled differently from housing for anyone else. Butler now wants the city to pay $553,000 to make him whole financially.

"I just don't see why the city is dragging their feet," he said. "I've got so much invested in that house that I can't move forward until that's off my balance sheet."

To add insult to injury, on one of his many trips to City Hall to untangle the mess, he was hit by a car on Main Street, leaving him with a cast on his foot.

In an interview, North Little Rock City Attorney C. Jason Carter conceded "absolutely" the city could have done a better job of dealing with Butler's request. But he said the root of the problem was that the city had never previously been faced with a project of this type in a residential neighborhood.

"I'd call this a case of first impression in North Little Rock," Carter said. "And we were stumbling our way through it."

Butler, who has worked in the nursing home industry and is also an alderman in Lonoke, opened his first House of Three in Leawood in 2013. It's a for-profit business, but he said it's also something of a mission.

"It's just more of a personable option, and I just wanted to take care of them more individually," he said. "I want to make a living taking care of people. That's what I've always done."

W.C. Maynard's wife, Jenny, is a resident of the Leawood home, which he said was a vast improvement over her previous care environments.

"It's the best place we've ever found," he said. "That's why we're here. I'd give (Butler) an A-plus"

The House of Three is what is known as an adult family home, designed as an alternative to institutional care. The residents live together as a family with an in-house caregiver.

"We know that seniors want to live in their own homes, or, short of that, in their own communities," said Krista Hughes, director of the Arkansas Department of Human Services Division of Aging and Adult Services. "All data shows that people would like to remain in the least restrictive environment possible."

These types of homes, while well established in other parts of the country, are fairly new to Arkansas. Hughes said there are only three homes of this kind in the state specifically approved for Medicaid funding, although there are likely many more homes like the House of Three where elderly disabled people are paying for their care privately. The total number is unknown because state law only requires care homes to be licensed if there are more than three people living there.

An aging population is increasing the need for long-term care for the elderly. Statewide, there are more than 21,000 elderly and disabled people who use Medicaid long-term services, with thousands more receiving private care. And people in nursing homes often don't actually need the intensive level of care they provide, Hughes said.

"In many cases, it's simply because there were not options available in their communities," she said. "We are trying to develop this model of supported housing."

Hughes, who spoke on Butler's behalf before the City Council, said she was concerned the city's denial "could easily discourage other people" who might want to provide such housing alternatives.

"What Koy is trying to do is simply have an extended family environment for people who want to live there," she said.

Butler also ran into red tape in Little Rock when he first sought approval for the Leawood House of Three. The city initially told Butler he would have to get a special use permit but eventually decided an adult care home fits within the city's definition of a family residence — and that the federal Fair Housing Act prevents the city from placing restrictions on housing for the disabled that it doesn't place on housing for the people who are not.

So last August, Butler decided to buy the house on Arlington Road, which was zoned R-1, the most restrictive category for residential housing in North Little Rock. Before he could complete the purchase, he sought confirmation from Planning Director Robert Voyles that the House of Three would be allowed under the existing zoning.

"I am of the opinion that your description of the House of Three complies with the definition of family as described in the North Little Rock Zoning Ordinance," Voyles replied in an email.

A week later, Voyles wrote Butler back to say that based on consultations with the city's legal staff, "I retract my previous statements." He informed Butler he would need to get the property rezoned to R-2 and get a special use permit.

The city's objection was that Butler was operating a for-profit business. Under North Little Rock's zoning ordinance, a family residence is defined as nonprofit. However, R-1 zoning does allow home-based businesses, as long as they are subordinate to the residential use and don't change the "residential character" of the structure. (City business licenses have been issued to a telemarketing firm and a plumber located within a block of Butler's Arlington Drive house.) And if Butler were merely renting out the house as a landlord for a profit, he could rent to up to five unrelated people without having his property rezoned.

Why the different treatment for Butler?

"I think because he's not just renting the property out. He's providing services," Carter said.

Carter also said city officials were unclear whether Butler would also be providing housing to elderly people who aren't disabled, who would not be eligible for federal disability protection. But Butler said he always made it clear House of Three residents would all be disabled. A letter he sent to Voyles in August said all residents "will have a physical or mental impairment that substantially limits one or more major life activities, thus leaving them handicapped by the Fair Housing Act."

By the time Butler learned of the city's objections, he had already purchased the home and begun renovations, based on Voyles' initial email. Carter conceded the city sent Butler mixed signals.

"You never want to give people conflicting information. You always want to be as clear as possible. And obviously, this is not one of those cases," he said. "Local government needs to have predictable processes, and that's how we could have done this better."

However, Carter also pointed to a 1997 Arkansas Supreme Court case, Russellville vs. Hodges, in which the high court ruled against a property owner who built an illegal trailer park based on a faulty interpretation of zoning regulations by a city official. The court ruled the city could force the trailer park to be removed because the official didn't have the power to waive the regulations on his own.

But McClain said the Russellville case isn't applicable because his dispute with the city isn't about zoning, it's about housing discrimination against the disabled.

After the city's change of position left him no other option, Butler did apply for the rezoning and special use permit. When his neighbors in Lakewood found out about it, they started to object, complaining an adult care home would lower their property values.

"I had people call and leave me ugly messages on the phone and send me emails," he said.

Among the groups objecting was the Lakewood Property Owners Association. Ken Sullivan, the association's executive director, said "our objection is that we didn't want it to be rezoned."

Asked if the association would have objected to the city allowing the House of Three to operate as a permitted use under R-1 zoning, as was done in Little Rock, Sullivan said "I can't really speak to that."

"We were opposed to it being rezoned as a business," he said.

When the rezoning came up last December, it drew a standing-room-only crowd to the City Council chambers. Most of those on hand, including family members of House of Three residents, supported Butler. But the City Council voted 6-2 against the rezoning, based on the concerns about precedent of allowing a business use in what is an R-1 neighborhood. That's when construction on the half-finished House of Three came to a halt.

The question now before the Arkansas Fair Housing Commission is whether North Little Rock violated fair housing laws. Butler believes the city did, pointing to a document on the U.S. Department of Justice's website that lays out the following scenario:

"Suppose a city's zoning ordinance defines a 'family' to include up to six unrelated persons living together as a household unit, and gives such a group of unrelated persons the right to live in any zoning district without special permission. If that ordinance also disallows a group home for six or fewer people with disabilities in a certain district or requires this home to seek a use permit, such requirements would conflict with the Fair Housing Act."

In 2011, Jonesboro lost a federal court case after it denied an application to house eight handicapped children and two house parents in a group home. It cost the city $90,000. 

In 2003, the city of Sedona, Ariz., was forced to pay $530,000 to the operator of a residential home for recovering drug addicts, who are considered disabled under federal law. After the home had been purchased, the city turned down a use permit when neighbors complained.

The Little Rock City Board of Directors initially balked at applications by Oxford House Inc. to set up group homes in residential neighborhoods for recovering drug users and alcoholics, but relented once it became familiar with the Fair Housing Act. Its defining ordinance for home occupancy does not include the nonprofit requirement.

The Arkansas Fair Housing Commission was expected to issue a ruling on Butler's complaint in mid-March but extended the deadline "to make additional efforts to conciliate [settle] the complaint," according to a letter the commission sent to Butler. A decision still has not been reached.

Carter said city officials have met with the commission's staff, which has already prompted a change in the way North Little Rock will handle these types of requests going forward.

According to Carter, the city was informed it was required by federal law to have a process in place for making reasonable accommodations for housing for the disabled, which the city lacked. So under a new procedure approved by the City Council in March, a property owner who wants to operate a home for disabled residents can make a free application for a "reasonable accommodation" to the city's Board of Adjustment.

Applicants have to prove they are entitled to protection under the Fair Housing Act, show how the city's regulations inhibit that protection and prove the accommodation they are seeking is reasonable. Rulings by the Board of Adjustment can be appealed to Pulaski County Circuit Court. While that takes the City Council out of the loop, the city can still appeal rulings it doesn't like.

Carter said that had a reasonable accommodation policy been in place when Butler sought approval of the House of Three, the problems he experienced could have been avoided.

"When we didn't have one, we steered Mr. Butler in the best direction that we could have steered him," Carter said.

Alderman Murry Witcher, who supported the House of Three when it came before the City Council in December, said once the state investigation is complete, he expects the council to consider additional changes to accommodate adult group homes, which he believes are needed in the city.

"At that time, we'll have to address it," he said. "I think whatever that language is, it will be something that both the [state] folks and the city attorney will agree."

In a memorandum prepared for North Little Rock Mayor Joe Smith in January, Voyles suggested three options: Removing the "nonprofit" requirement from the definition of family housing, amending the zoning ordinance to allow group homes as a defined under federal law as a permitted use or allowing adult care homes to operate as a home business. So far, none of those changes have been adopted.

McClain said she believed the city's new reasonable accommodations process still didn't meet the requirements of the federal law.

"It's quite vague in terms of how they're going to actually proceed with it," she said, adding the new process still puts an "overly cumbersome" obstacle in the way of disabled people who need housing by forcing them to get permission from the Board of Adjustment or appeal to Circuit Court.

Carter disagreed.

"I don't think that it does run afoul of the Fair Housing Act, and I don't think it's too vague," he said.

As for Butler, he said he had so soured on his experience dealing with North Little Rock that he no longer wanted to operate the House of Three on Arlington Road. However, he does want the city to purchase the house from him, reimburse him for the money he spent on remodeling it and pay his legal fees and other expenses — a bill that, as of this writing, exceeds $553,000.

He said he also wanted assurances from the city that what happened to him won't happen to anyone else.

"I wasn't surprised that there was some opposition because it's a change," he said. "I was surprised the attorneys for the city didn't take a closer look at the Fair Housing Act."

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