Back to School: How to Avoid Fair Housing Trouble When Renting—or Not Renting—to Students

TIME OUT!

California Court Rules that Roommate-Matching Services Don’t Violate the FHA

The leading case on the FHA liability of a roommate selection service occurred about a decade ago when fair housing groups in southern California sued the online roommate-matching service, Roommate.com, for discrimination by enabling users to screen potential roommates based on their sex, sexual orientation, or whether children would be living with them. The Ninth Circuit Court of Appeals ruled that Roommate.com wasn’t liable because the FHA doesn’t apply to individuals making decisions about the sharing of living spaces. “There’s no indication that Congress intended to interfere with personal relationships inside the home,” the court concluded [Fair Housing Council of San Fernando Valley v. Roommate.com, LLC, 666 F.3d 1216 (9th Cir. 2012)].

However, the ruling is narrow and based on the fact that Roommate.com isn’t actually a housing provider. “A business transaction between a tenant and landlord is quite different from an arrangement between two people sharing the same living space,” the court reasoned. This suggests that the defense that got Roommate.com off the hook probably wouldn’t work if the landlord was the one enabling roommate selection on the basis of protected characteristics.

Leasing to students who attend or college or university in your geographic market can be an excellent source of income. At least 79 percent of the students attending a two- or four-year college live off-campus, according to the Urban Institute. In many rental markets, demand for student rental housing exceeds supply. Leasing to students also offers certain advantages, like the willingness of students to sign multi-year leases, even though they typically leave town during the summer. And because students tend to be less price-sensitive than other prospects, especially if they have student loans covering housing costs, student rentals often generate higher yields.

But leasing to students also poses risks, most notably, the fact that students typically have little to no credit or rental history. In addition to relative lack of financial reliability, students tend to be transient, noisy, and more apt to mistreat or destroy property. For these reasons, many landlords deliberately choose not to rent to students.

Whatever your attitude on the subject happens to be, making decisions about leasing to students based on their status as students raises subtle issues of fair housing that are easy to overlook. Accordingly, if there are students in your housing market, you need to be aware of and capable of maneuvering around the fair housing risks. And, with students headed back to school, we’re dedicating this month’s lesson to showing you how to do this. First, we’ll explain how landlords can be held liable for a form of discrimination that the fair housing laws don’t even mention. Then, we’ll set out six rules to ensure that your leasing personnel make legally sound decisions about marketing and leasing to students. At the end of the lesson, you can take the Coach’s Quiz to see how much you’ve learned.  

WHAT DOES THE LAW SAY?

The federal Fair Housing Act (FHA) makes it illegal to refuse to rent or deny a person housing because of their race, color, religion, sex, handicap (disability), familial status, or national origin. Most states also add pregnancy and ancestry to this list. Other additional bases for protection under state fair housing laws commonly include age, sexual orientation, military status, and source of income.

With one exception (the District of Columbia), no state’s fair housing law lists students as a protected class. However, refusing to rent to students because they’re students can still get you into a heap of trouble under fair housing law. Here are six rules to follow to ensure this doesn’t happen to you.

6 RULES FOR AVOIDING DISCRIMINATION COMPLAINTS

WHEN RENTING TO STUDENTS

Rule #1: Be Careful About Adopting a “No Student” Rental Policy

Refusing to rent to students because they’re students isn’t necessarily illegal, but it isn’t necessarily legal, either. In other words, the fact that federal and state fair housing laws don’t list students as a protected class doesn’t necessarily mean you’re allowed to discriminate against them. There are two ways a no-students rental policy can constitute fair housing discrimination:  

1. Direct discrimination under local fair housing laws. Federal and state laws don’t represent the total universe of fair housing liability. Municipalities can also adopt their own local antidiscrimination laws. And while local laws can’t be any less stringent, they can be stricter than federal and state rules. One common way they do this is by adding groups to the list of protected classes, which may include students, particularly in college and university towns.

2. Indirect discrimination. Refusing to rent to students may also constitute indirect discrimination against groups the FHA and state fair housing laws do list as protected classes. This would be the case where a landlord uses status as a student as a pretext to reject an applicant or evict a tenant because of his or her race, religion, family status, etc.

Example: A landlord doesn’t want to rent to an applicant because she has young children, but since that’s clearly illegal, he tells her that she can’t rent the unit because she’s a student. This would be indirect discrimination, especially if the landlord rents to other students who don’t have kids.   

Recognize that you can also be guilty of indirect discrimination against students on the basis of their protected class(es), even if that’s not your intention. Explanation: In applying the laws, the U.S. Department of Housing and Urban Development (HUD), state fair housing agencies, and courts rely on the so-called rule of “disparate impact” discrimination to hold policies and practices that appear neutral on their face illegal to the extent they have the effect of discriminating against a group the law protects. This is true even if there was no intent to discriminate.

Example: After getting repeatedly burned by students who default on their rent, a Louisiana apartment community resolves that it will no longer lease to students. On its face, the policy is neutral and nondiscriminatory since students aren’t a protected class under state or local fair housing laws. However, the landlord’s no-student policy becomes more problematic if the community is in the town of Grambling, home to the public historically Black university Grambling State University. Because Grambling is also the only university in the town, banning students is most likely to affect Grambling enrollees, most of whom happen to be Black. Result: The policy may be deemed a form of indirect discrimination on the basis of race or color.

Other protected classes that may suffer disparate impact discrimination as a result of a facially neutral no-student rental policy include:

• Religion, for example, if the apartment community is located in a town with a large religious university like South Bend, IN, site of Notre Dame University;
• Sex, especially if your community is home to a single-sex college or university like Wellesley, MA;
• Age, to the extent that students tend to be younger, which could be problematic in the 21 states that ban age-based housing discrimination (AK, CA, CT, DE, DC, HI, IL, MA, MI, MT, NH, NY, ND, OK, PA, RI, VT, VA, WI);
• Source of income, for example, students whose chief sources of rental funds are student loans or parents, which would raise a red flag in the 13 states that ban source-of-income discrimination (DE, DC, ME, MA, MN, NJ, NY, ND, OK, OR, UT, VT, WI); and
• Marital status, to the extent students tend to be single, which could be seen as a form of disparate impact discrimination in the 23 states where marital status is a protected class (AK, CA, CO, CT, DE, DC, HI, IL, MA, MI, MN, MT, NH, NJ, NM, NY, ND, OR, RI, VT, WA, WI).

Coach’s Tip:

Note that there are special restrictions on renting to students at HUD, Low-Income Tax Credit, and Bond-financed properties. Check your program rules if your property participates in any of these programs.

Rule #2: Be Careful About Charging Students Extra Fees, Deposits, or Rent

Rather than simply refusing to rent to students, you may decide to charge them extra to compensate for the risks they present, such as special fees to review their student loan records and/or personal references, higher security deposits covering the increased risk of nonpayment and damage, or a premium rent. While this might seem like a legitimate demand, it can also constitute discrimination. “Imposing less favorable rental terms on the basis of a protected characteristic is also a form of discrimination,” warns a Georgia fair housing attorney. Bottom Line: If excluding students is discriminatory in your jurisdiction, so is charging them additional fees and deposits. It’s just a different variation on the theme.

Compliance Strategy: Speak to your attorney and make sure you know all of the protected classes—federal, state, and local—in your jurisdiction before adopting a policy to exclude or treat people differently because they’re students.  

Rule #3: Be Careful About Favoring Students Too Much

Rather than shying away from students, your inclination may be to do just the opposite and target student renters. For example, landlords in college towns may offer special student discounts, nine-month leases and other perks and deals not available to other renters. However, favoring students at the expense of others can also get you into fair housing trouble in two ways:

1. Unlawful preference of protected classes. First, recruiting students from religious universities, historic Black colleges, single-sex schools, and similar institutions may be seen as a form of favoring individuals of particular religions, races, or gender, just as a ban on leasing to such students could be deemed a form of excluding them. “Making rental decisions on the basis of protected characteristics is still discriminatory even if it actually results in more favorable treatment,” cautions the Georgia attorney.

2. Indirect exclusion of other protected classes. Favoring students can also raise red flags if it has the effect of excluding certain groups. Thus, for example, because students tend to be young and single, student deals may be seen as a way of avoiding renting to older persons and families with children.

Compliance Strategy: While offering student specials may be justifiable, especially for landlords of housing designed for students or who are located in college towns, try to avoid engaging in the following practices without first speaking to your attorney and getting the green light:

• Implementing a “students-only” rental policy;
• Refusing to rent to applicants because they’re not students;
• Marketing only to students, for example, by advertising only in university publications;
• Offering special deals just to students—thus, for example, nine-month leases should be available to any qualified renters, not just students; and
• Avoiding the use of phrases like “ideal for students” in your advertising, even if you think the property actually is ideal for students.

Rule #4: Avoid Steering

Steering, or seeking to limit or influence a person’s housing choices on the basis of one or more protected characteristics, often comes into play when renting to students. Because students tend to play loud music or party late into the night, it may be tempting to direct them to particular areas, floors, or parts of the community where they won’t disturb others. However, this is a form of illegal steering, even if your intent is just to make students feel comfortable.   

Steering issues arise not just in conventional apartment communities but also those designed for students that rent “by the bed” to separate individuals who sign their own lease to share the unit as roommates. Since the students who share the unit typically don’t know each other, the landlord decides which roommates make up each household. This creates the perfect recipe for steering in the not at all uncommon case that the landlord uses race, sex, religion, or sexual preference as a criterion in selecting renters for particular units, for example, by putting all Black renters together in the same unit. Steering may also result when you make such selections in response to a tenant’s request, like where a white tenant asks you to put her in a unit with only white roommates.

Compliance Strategy: Adopt a written policy stating that your community won’t make room assignments on the basis of protected class. The one exception: Communities are allowed to designate a unit with shared living space as all-male or all-female.

If possible, hire a third-party vendor to do roommate matching. If you have to do matching in-house, use a software program designed to ensure that selections don’t discriminate. In either case, ensure that the actual pairings and assignments are based on objective criteria, such as smoker/non-smoker or personal likes and dislikes, that are in no way tied to race, national origin, or other protected class.

Finally, stand your ground if a student objects to a roommate on the basis of race or other protected class and demands to be transferred. Giving in to the demand makes you an accomplice in discrimination. Moreover, once tenants sign the lease, you can insist that they abide by community rules and take legal actions, which may include eviction, if they refuse.   

Rule #5: Stick to Your Standard Rental Screening Processes

The first four rules talk about pitfalls and practices to avoid. The key question thus becomes: What exactly should you do to avoid discrimination issues when dealing with students. The Answer: Screen students the same way you treat any other prospective tenant.

Paradoxically, the starting point is to recognize that renting to students does pose special risks. The key to compliance is not to pretend those risks don’t exist, but to establish a fair and consistent system for dealing with them. You have every right to base your rental decisions on the same criteria you use to judge any other rental applicant. Accordingly, as with other applicants, the screening of students should include checks of:  

• Job history;
• Income;
• Credit reports;
• Rental and eviction history;
• Criminal background; and
• Sex offender status.

What makes renting to students different isn’t so much the screening process and criteria but how you choose to apply them. Explanation: Most students have little to no independent income or rental or credit history. This is a perfectly legitimate reason not to rent to them, provided, that you consistently reject other applicants found to have such deficiencies. But you can’t just assume that applicants won’t be responsible and reliable tenants simply because they’re students.

Moreover, leasing to students may still make sense even if they lack the normal credentials. There are ways to minimize the financial and other risks of leasing to students, including requiring students who have insufficient credit history to get a parent, guardian, or other financially responsible party to cosign the lease. In addition to affording you financial recourse, “students are less likely to pay rent and leave the apartment undamaged when they know their parents have signed the lease,” notes the Georgia attorney.

Another way to protect yourself is to require students to get renters’ insurance. In addition to reducing your risk of liability, students with renters’ insurance will be more likely capable of paying rent if their personal property gets lost, stolen, or damaged; the policy also protects you from potential liability if the student’s guest has an accident on your property.

Just remember: If you allow students to have cosigners and/or require them to get renter’s insurance, you must do the same for all applicants.

Rule #6: Make Reasonable Accommodations for Students with Assistance Animals

Once students sign a lease and move in, they become entitled to fair housing protections as a tenant. In other words, FHA rules apply to student housing. That includes both traditional and on-campus housing. One of the requirements is that landlords make reasonable accommodations for tenants with disabilities. Exempting the assistance animals of disabled tenants from a community no-pets policy has become a particularly thorny issue in the student housing context in recent years.  

Example: A federal court ruled that the University of Nebraska could be liable for denying a student’s request to let an incoming freshman with an anxiety disorder keep a specially trained therapy dog in her dorm room. The university claimed that the FHA doesn’t apply to campus housing, but the court disagreed and allowed the claim to go to trial [U.S. v. University of Nebraska at Kearney, April 2013].

Example: Three years after the Kearney case, Kent State University paid $145,000 to settle a lawsuit alleging that banning students with psychological disabilities from keeping emotional support animals in university-operated student housing was discrimination [U.S. v. Kent State University, Case: 5:14-cv-01992-JRA].  

Compliance Strategy: Whether your community is traditional or on-campus, you must accommodate students’ requests for assistance animals. To do this, ask two questions:

1. Does the student have a disability—that is, a physical or mental impairment that substantially limits one or more major life activities?
2. Does the student have a disability-related need for that assistance animal—that is, does the animal work, provide assistance, or perform tasks for the benefit of a person with a disability—or provide emotional support that alleviates one or more identified symptoms or effects of a person’s disability?

HUD says you can deny the request if you answer NO to either question. But if you answer YES to both questions, you must make an exception to your no-pet policy so the student can live with and use an assistance animal(s) in all areas of the premises where people are normally allowed to go, unless doing so would impose an undue financial and administrative burden on you.

You’re also allowed to ask for more information if the answer to either question is unclear. But there are strict guidelines on what you can and can’t ask for, so you should check with your attorney before making inquiries about the tenant’s disability and assistance animal needs.

DEEP DIVE

FHA vs. ADA: Assistance Animals

The duty to make accommodations for disabilities, including no-pet policy exemptions for assistance animals, is also contained in the Americans with Disabilities Act (ADA). Although the two laws overlap, ADA and FHA assistance animal accommodations rules vary widely.

Specifically, ADA rules cover “service animals,” defined very narrowly as dogs that have been individually trained to do work or perform tasks for a person with a disability and specifically exclude animals providing only emotional support. (The only exception is for miniature horses trained to guide those with visual impairments.)

By contrast, the FHA covers “assistance animals,” defined very broadly as one that works, provides assistance, or performs tasks for the benefit of a person with a disability, including emotional support that alleviates one or more identified symptoms or effects of a disability.

The FHA and not the ADA governs use of assistance animals in housing communities, including student housing. And that means landlords must make accommodations for emotional support animals.