Effect of the Fair Housing Act on Rentals - Module 2 of 5

 Effect of the Fair Housing Act on Rentals

Prior to the passage of the Fair Housing Act, housing discrimination was an extensive problem in the United States, resulting in segregated minority communities throughout the country. The Act was created to help alleviate some of these issues and provide fair housing opportunities for all. Sections 804 and 805 of the FHA list the rights of a tenant and the obligations of a landlord in a rental arrangement.[1] Landlords are required to abide by these regulations, and failure to do so can result in a variety of legal sanctions.  

FHA and Rental Advertising

FHA regulations apply from the very outset of a landlord’s efforts to rent an available property. Landlords commonly use advertisements to announce the availability of housing and attract potential tenants. Under the FHA, advertisements cannot include discriminatory language. This becomes an increased risk when advertisements go beyond the apartment’s amenities to list desirable qualities in a tenant. Courts have ruled that the inclusion of some descriptions can be construed as excluding certain people. For example, “bachelor pad” may be seen as discriminatory against married couples and/or women. “No children, please” can certainly be found to exclude families with children. Even a phrase like “in walking distance to St. Michael’s Catholic church” may be interpreted as discriminatory based on religion. Of course, not all such language is illegal as discrimination is a case-by-case analysis, but these are issues to watch for in housing ads.

The Court of Appeals for the Sixth Circuit dealt with this issue in Miami Valley Fair Housing Center v. The Connor Group.[2] The defendant advertised an apartment unit, “Our one-bedroom apartments are great bachelor pads for any single men looking to hook up.” An Ohio-based fair housing organization brought a complaint against the defendant alleging housing discrimination based on gender and family status. The trial court applied an “ordinary reader” standard, looking at how someone who is neither extremely suspicious nor insensitive would interpret the advertisement. The trial court observed, “If an ordinary reader who is a member of a protected class would be discouraged from answering the advertisement because of a discriminatory statement, then fair housing laws have been violated.” The appeals court disagreed with this assessment, taking issue with use of the word “discouraged.” Ruling in favor of the defendant, the appeals court stated, “we consider only whether an ordinary reader would find that the advertisement indicates a preference and not whether the ad would discourage the reader… an ordinary reader could find that the ad, while badly worded, shows no indication that women or families would be unwelcome, but merely expresses an opinion about who would find the apartment appealing.”

To avoid accusations of discriminatory advertising, many landlords include disclaimers in their ads. For example, they may add a statement that they rent according to the FHA, an assertion that they do not discriminate in their rental decisions or an image of the fair housing logo. 

Discriminatory Rental Terms

When renting units, landlords cannot use varying rental terms for varying tenants based on a discriminatory classification. This type of FHA violation can occur in a variety of ways, including higher rental  charges, larger security deposits and more extensive or intrusive screening requirements. In the United States vs. Ridge Way Management, the defendant entered a consent decree with HUD based on finding that “the defendants discriminated against African Americans by quoting higher rental and application fee rates to them than to white apartment seekers.”[3]

When selecting rental applicants, owners and managers have the right to undertake a non-biased screening process that is equally applied to everyone. For example, it is reasonable for landlords to require that all applicants submit to a credit check, income verification and criminal background screening. However, when this information is used to advance a discriminatory purpose or if certain applicants are subjected to more stringent rental requirements than others, the screening process can violate the FHA. In the United States vs. Dyersburg Apartments, HUD filed a complaint against an apartment complex for FHA violations based on race.[4] The complaint alleged that the complex denied housing to an African American applicant due to his criminal record, but then decided to rent units to two white applicants with felony convictions on their criminal records. Landlords cannot use screening information to discriminate against certain rental applicants.

In some cases, FHA violations result from the amount of security deposit required of certain tenants, instead of a denial of housing. While landlords are generally allowed to request deposits for protection against excessive damage to the premises, they cannot arbitrarily set these deposit amounts based on discriminatory reasons. For example, it is unlawful to require higher deposits from families with children based on the assumption that children cause more damage to property than other renters. Housing violations may also result when landlords require renters of a certain race or religion to remit higher security deposits than other renters.

In United States v. Katz and All Real Estate Services in Montana, the United States District Court considered a complaint regarding pet deposit requirements and disability housing accommodations.[5] HUD filed a complaint alleging that a tenant with a traumatic brain injury was charged $1,000 to cover the pet deposit for her service animal, even though she filed the proper request to waive the deposit pursuant to section 804(f) of the Fair Housing Act. HUD’s complaint also alleged that the defendant threatened to evict the tenant after she sought the return of the deposit. The jury returned a verdict in favor of the United States, awarding $37,000 in damages. 

These types of cases can also arise from a denial of a lease. Someone who suspects that a denial of housing was discriminatory may file a complaint with a local housing advocacy organization, state fair housing agency or regional HUD office. The agency will investigate the circumstances surrounding the housing denial and, if the investigatory findings support the allegations made, a lawsuit can be filed.

FHA Landlord Exemptions 

While most rental property owners are subject to the terms of FHA, some property owners and landlords are exempt. For example, the FHA typically is not applicable when a building has fewer than five apartments with one occupied by the owner.[6] This is referred to as the “Mrs. Murphy Exemption,” based on a hypothetical landlord called Mrs. Murphy, an elderly widow.[7]  She wants to rent part of her house, but due to the typically compact nature of these small owner-occupied buildings, she has a reasonable desire to be very particular about which tenants she wants in the house. She would not be held to regulations of the FHA. 

The Mrs. Murphy Exemption has been the subject of legal debate for decades and recently came under scrutiny in Cervelli v. Bufford, based on Hawaii’s fair housing laws.[8] A lesbian couple was refused housing at a bed and breakfast whose owner-maintained house rules prohibiting guests from sharing bedrooms with romantic partners if they are not a married man and woman. When the lesbian couple tried to reserve a room in advance, the landlord denied the request stating that it would violate her religious beliefs. The Hawaii Intermediate Court of Appeals rewrote the Mrs. Murphy fair housing exemption, ruling that the exemption only applies to long-term rentals. It then declared that the defendant’s home was a place of public accommodation and found her in violation of Hawaii’s fair housing laws. 

Another FHA rental exception applies to single-family homes that are rented without a broker. The FHA generally does not apply when the owner of a single-family home rents the dwelling independently without the use of a real estate agent or broker.[9] 

A third FHA rental exception exists for religious organizations that lease apartments on properties that they operate for non-commercial purposes.[10]  Under these circumstances, the organization can limit occupancy or give preference to members of its religion. For example, if a church rents an apartment located in the church building, it may be allowed to give preference to members of its religion when screening potential tenants.

This exception is solely for religion, and discrimination based on any other protected class is still prohibited. The court examined this distinction in United States v. Hughes Memorial Home, where a private home for children was held not to be exempt under the Act because it discriminated on the basis of race, and not religion.[11] The federal government brought the complaint, alleging that the defendant “had made dwellings unavailable to black children, in violation of the Fair Housing Act of 1968.” The defendant countered by arguing that the organization’s activities were not covered by the FHA because it was a religious institution not engaged in the commercial sale or rental of residential properties. As stated by the court, “Evidence that defendant's operations are covered by the Act is… established by the fact that Congress created a carefully limited exemption for certain religious organizations. This exemption is inapplicable by its terms to the operation of Hughes Memorial Home… Even if the Home were a religious organization, it would not qualify for the exemption because religion is not the basis for discrimination.”

Owners of senior housing may also be able to assert an FHA exemption, but solely regarding rentals to families with children. Though the Act generally prohibits discrimination against renters with children, properties qualifying as senior housing may be exempt from this provision.[12] To classify as senior housing, the property must meet certain conditions, such as only housing communities aged 55 and older. Properties participating in federal, state or local senior housing program may also qualify for the exemption. Specific FHA requirements include ensuring that at least 80 percent of the occupied units are 55 years of age or older and maintaining proper age verification policies.  

In United States vs. City of Santa Rosa, the Department of Justice reached a consent agreement with the city and a housing development for seniors based on allegations that neither party took appropriate actions to adequately qualify for the senior housing exception to the FHA.[13]  Under the consent agreement, the housing development was prohibited from excluding families with children from the development unless it properly sought certification as an age-restricted community for people 55 years or older and conformed to the FHA. In addition, the homeowners’ association had to pay $44,000 in compensatory damages to the aggrieved people.

Even when property owners are exempt from FHA regulations, there may still be state and local fair housing laws that they must follow. For example, while the FHA may not apply to owner-occupied buildings with fewer than five apartments, fair housing laws within the state of Massachusetts are more inclusive, applying to all but owner-occupied buildings with fewer than three apartments.[14] To adhere to all fair housing laws, owners and landlords must comply with FHA regulations and the applicable state and local fair housing legislation. 

Addictions and Behaviors

Other fair housing exemptions may arise from the specific circumstances of the renter or rental arrangement. For example, drug and alcohol addiction is generally protected as a disability under the FHA.[15] Therefore, landlords are prohibited from discriminating against people based on their addictions, and they cannot deny a rental or evict a tenant solely due to alcohol or substance addiction. However, while addiction is protected as a disability, illegal drug activity is not. The FHA excepts “current, illegal use of or addiction to a controlled substance” from its list of protected classes.[16]

Other federal regulations also clarify the definition of a disability, stating that disability-based discrimination does not include "addiction caused by current, illegal use of a controlled substance.”[17] Landlords can lawfully take actions to prevent harm by dangerous tenants. Even if a tenant is protected under the FHA, landlords may deny a rental or evict the tenant for harm caused to property or other tenants. There are no FHA protections for “an individual whose tenancy would constitute a direct threat to the health or safety of other individuals or whose tenancy would result in substantial physical damage to the property of others”[18]

HUD Activities to Prevent Discrimination

Regulations placed on landlords extend to their representatives and employees. To raise awareness among tenants, the Justice Department’s Civil Rights Division implemented a nationwide initiative “to increase the Department’s efforts to protect individuals from harassment by landlords, property managers, maintenance workers, security guards and other employees and representatives of rental property owners.”[19]

Once HUD implements an FHA complaint investigation, agents will work with each side to reach a mutually agreeable resolution. If they reach an agreement, it will be reduced to writing and monitored for future compliance. Alternatively, if no agreement is reached, HUD may bring a case in the administrative or federal courts.

When faced with fair housing complaints, it is unlawful for landlords to retaliate against the complaining tenants. Some common acts of retaliation that may be taken by landlords include: 

·         Termination of a month-to-month tenancy

·         Unjustifiably refusing to renew a lease

·         Increasing the rent, or

·         Decreasing services available to the tenant, such as locking the laundry room or impeding access to cable.

If the court finds that a landlord retaliated against a tenant in response to a fair housing complaint, it may award financial damages and/ or injunctive relief. In United States v. DeRaffele, the jury returned a verdict for $43,500 based on allegations of housing discrimination against families with children.[20]  Part of the damages were awarded for the landlord’s retaliatory actions of filing a lawsuit against the family after learning of their housing discrimination complaint. 

Another type of retaliation may come in the form of a constructive eviction, where the landlord acts in a way that makes the property uninhabitable. United States v. Cabusora involved allegations of constructive eviction and attempts to make rental units unavailable based on racial discrimination.[21]  The complaint alleged that owners and managers of an apartment complex violated the FHA based on family status by enforcing restrictions to limit children’s presence in the hallways and common areas of the apartment. HUD reached a consent agreement with the owners, which included a requirement that the defendant pay $25,000 compensatory damages for emotional distress and civil penalties of $20,000.

In our next module, we’ll further examine the Fair Housing Act as it relates to real estate sales and transactions.