How to Protect Your Community from Race Discrimination Claims

This month, in honor of Martin Luther King Day, our lesson focuses on discrimination based on race—the bedrock of fair housing law. When the landmark legislation was enacted in 1968, Congress declared that ensuring fair housing throughout the United States was a national policy of the “highest priority.” The law's broad provisions banning housing discrimination were intended to replace racially segregated neighborhoods with “truly integrated and balanced living patterns.”

Among the seven characteristics protected by the law, race has been a primary focus of fair housing enforcement. For much of the law's history, the majority of formal fair housing complaints were based on race. In recent years, disability claims have taken the top spot, but race discrimination complaints are a close second: Of the 10,155 complaints filed in fiscal year 2010, HUD reports that 48 percent alleged disability discrimination, while 34 percent alleged discrimination based on race—more than double the next leading source of complaints (family status, at 15 percent).

Fair housing enforcement officials and fair housing advocates remain vigilant for racial discrimination in housing. Federal funding earmarked for fair housing initiatives have led to increased testing, often triggering lawsuits—and large cash settlements for damages and penalties. Some recent examples:

• In November 2011, the Justice Department announced that a federally subsidized rental community in Rolla, Mo., agreed to pay $295,000 in monetary damages and civil penalties in a fair housing lawsuit. The complaint alleged that a former manager engaged in a pattern or practice of race and sex discrimination, sexual harassment, and retaliation against current and prospective residents. Allegedly, the former manager refused to rent to African-Americans and males, refused to allow residents to have African-American visitors, sexually harassed female residents, and retaliated against residents who complained about discrimination [U.S. v. Harris, November 2011].

• In June 2011, the owner of a rental housing community in Rockland County, N.Y., agreed to pay a civil penalty of up to $55,000 to settle allegations of discrimination based on race or color, according to the Justice Department. Among other things, the community was accused of misrepresenting the availability of apartments, quoting African-American prospects higher rental rates than quoted to non-African Americans, and failing to negotiate with African-American prospects for the rental of available apartments [U.S. v. Pearl River Gardens, LLC, June 2011].

• In February 2011, the Justice Department announced that the owners of several properties in Detroit Lakes, Minn., agreed to pay $25,500 to a prospective resident and her son to settle allegations that they refused to rent her a dwelling because of her race. According to the complaint, a prospective resident called in response to an advertisement for a rental unit and was told that the unit was available. When she arrived to view the unit, however, the owner allegedly said it was not for rent, adding, “No way. No way. It's not for rent. I can't do this. I'm not renting to these kinds of people.” When contacted by the prospect's attorney, the owner allegedly explained that the next-door neighbors threatened to move out if she rented to “black people.” When the attorney said it was illegal to refuse to rent to someone because of race, the owner allegedly responded that the prospective tenant had dogs, and that was why she refused to rent the unit. Allegedly, she also said that she planned to move into the unit herself, but rented it to a white male a month later [U.S. v. Beck, February 2011].

These examples may be extreme, but communities can face fair housing trouble for far less obvious transgressions. This month's lesson will highlight the pitfalls that can lead to race discrimination claims and suggest four rules to ensure compliance with fair housing law. Then, you can take the Coach's Quiz to see how much you've learned.

WHAT DOES THE LAW SAY?

The Fair Housing Act (FHA) prohibits discrimination in housing because of race, color, religion, sex, national origin, familial status, or disability.

The law outlaws various housing practices that either exclude or discriminate against prospects, applicants, residents, or their household members and guests, based on race or other protected characteristic. One key provision makes it unlawful to refuse to rent, negotiate, or otherwise make housing unavailable to anyone based on his race. Another bans discrimination against anyone in the terms, conditions, privileges, services, or facilities because of his race or other protected characteristic. Other provisions ban discriminatory advertising and retaliation against anyone who complains about discrimination.

In analyzing cases under the FHA, courts often distinguish between two types of discrimination claims: disparate treatment and disparate impact. In general, disparate treatment means intentionally treating someone differently than others because of a protected characteristic. Examples range from overt misconduct—refusal to rent to African Americans—to subtle—failure to respond to phone or email inquiries from prospects whose voice or name suggests that they are African American.

In contrast, disparate impact cases generally involve neutral policies or practices, even if there is no intent to discriminate, if they have a disproportionately ill effect on racial minorities or other protected groups. Such claims often come up in cases against government bodies based on zoning or other regulatory restrictions, but the law is broad enough to apply to both public bodies and private multifamily housing communities, according to HUD.

For example, fair housing expert Nadeen Green has long advocated against an absolute/all-inclusive “no felons” rental policy based on her concerns that fair housing advocates (and ultimately the government) may take a close look at their effect. She pointed to a recent fair housing conference where advocates considered whether restrictions against ex-offenders limit the ability of protected classes to obtain housing. Among other things, they discussed whether a policy denying housing to all felons has a disparate impact on African Americans because a disproportionate number of those with a criminal background are African American. In lieu of such a harsh policy, Green encourages communities to consider limiting restrictions to felonies that may have an actual impact on the multifamily housing environment: crimes against people or property, for example, or drug manufacturing or distribution.

4 RULES FOR AVOIDING RACE DISCRIMINATION CLAIMS

Rule #1: Keep Race Out of the Leasing Process

It's illegal to allow race to play any part in decisions about who may live in your community. The FHA bans refusing to rent or making housing unavailable to anyone based on their race—or that of their household members or anyone associated with them. Since state and local laws generally mirror the FHA, such conduct may draw scrutiny from state and local fair housing officials, in some cases resulting in hefty damage awards.

Example: In March 2011, A New York community was found liable to pay upwards of $50,000—including damages for mental anguish, punitive damages, and attorney's fees—for refusing to rent a unit to an African-American woman because of her race. Among other evidence, both the prospect and an African-American tester testified that the owner told them that the unit had been rented, when in fact it remained available. By contrast, white testers were told that the unit was available; it was ultimately rented to a white couple [Matter of New York State Division of Human Rights v. Caprarella, March 2011].

Under the FHA, it's unlawful to represent to anyone, because of their race, that a dwelling is not available for rental when such dwelling is in fact available. Furthermore, the FHA bars unequal treatment in the application process, for example, by using different rental procedures or screening criteria—such as income standards, application requirements, application fees, credit analysis, rental approval procedures, or other requirements—because of race or other protected characteristic, according to HUD regulations.

Example: In July 2010, the owners and operators of a rental community in Ann Arbor, Mich., agreed to pay $82,500 to settle a lawsuit for allegedly treating African-American prospects less favorably than white prospects. Though the community denied the allegations, fair housing testing allegedly revealed that the owner and property manager denied the availability of apartments to African Americans while telling white prospects about units that were available; failed to show them available apartments; quoted them later dates of availability than they quoted to white persons; and refused to accept or process applications from African-American prospects because of their race [U.S. v. Acme Investments, Inc., July 2010].

To ward off discrimination claims, adopt racially neutral policies, procedures, and qualification standards for leasing units in the community. Include a fair housing policy that makes it clear that your community is an equal housing provider.

Rule #2: Focus on Employee Training

Putting solid nondiscriminatory policies down on paper is a good first step, but effective employee training will put them into action. In every workplace, employers create rules, but they can be forgotten or worse—ignored—unless employers take the time to emphasize why the rules are so important. In the multifamily housing environment, the rules are there to shield not only the community, but also the employees themselves, from potential liability for a violation of fair housing law. Employees, managers, and other individuals can face personal liability for discrimination under the FHA, so they have a vested interest in following the rules.

Among other things, your community's policies should stress that employees could trigger a fair housing claim based on their comments—offhand or otherwise—that express a preference for or against someone based on race. Explain that employees could be accused of unlawful steering if, through their comments or conduct, they discourage a prospect, based on race or other protected characteristic, from living in the community or in certain parts of the community. Make sure that employees understand that even well-intended actions could amount to unlawful steering—for example, by showing prospects only units where neighboring units are occupied by people of the same race. The law bans any conduct that limits a prospect's housing choices based on race, so employees must understand—and consistently follow—rules requiring leasing agents to tell prospects about all available units that meet their requirements.

Provide periodic fair housing training not only to your leasing staff, but also to all employees who may have contact with the public, residents, or their guests. And make sure to include fair housing basics in the training provided to new hires. Keep records of the dates and names of employees who attended training to document your efforts to ensure fair housing compliance.

Rule #3: Prevent Personal Biases from Derailing Fair Housing Efforts

Even the best policies and training won't protect your community from fair housing problems if an employee's personal biases are allowed to spill into the leasing office or elsewhere in the community. Remnants from the country's racial history—or tensions from the current political debate about immigration—could affect how employees treat African Americans, Asians, and other racial minorities.

Example: In 2009, a federal court in Florida refused to dismiss a lawsuit filed by an African-American prospect, who claimed that she was mistreated while trying to lease a condominium unit. After a showing, the prospect said she filled out an application and asked the leasing agent to accompany her to the bank to get the application fee. Before they left, according to the complaint, the condo association manager—who allegedly identified herself as the “condo leasing manager—entered the unit and told the prospect that it had already been rented. Allegedly, the leasing agent disagreed and said it was available, but the manager warned the prospect that she still needed approval by the condo association and advised her of strict rules against loud parties or having multiple boyfriends staying the night. As she left, the manager allegedly shook hands with the leasing agent—but not the prospect, who had offered her hand. The prospect said that she left without submitting the application, and, in a follow-up email, she complained that the manager's conduct was “unprofessional” and “very racially motivated.”

The court ruled that she was entitled to further proceedings in her fair housing case. Based on the evidence, the court said it was reasonable to conclude that the manager's actions “were rooted in negative racial stereotypes, and that her initial statement that the unit was unavailable had the same roots” [Moore v. The Club at Orlando Condominium Assn., November 2009].

Keep personal biases out of the community, starting with the first contact from a prospective resident. Whether it's in person, by telephone, by email, or other online contact, inquiries from prospective residents about the availability of housing at your community must be treated the same, regardless of their actual or perceived race. A common form of fair housing testing is to check for “linguistic” profiling—that is, phone calls from paired testers, one of whom sounds like a member of a racial minority—to determine if they are treated differently.

Increasingly, fair housing testing has turned to online communications—that is, comparing the responses to emails from paired testers, one of whom has a name that suggests he's a member of a racial minority. Often, the tests reveal significant differences in response rates based on the perceived race from the name in the email. And in a new study, researchers studied the content of the responses and reported finding signs of subtle discrimination: Replies sent to prospects perceived to be white were longer and sent more quickly, and the language used was more polite, contained more information, and invited further correspondence more often than those sent to the prospects perceived to be African American.

COACH'S TIP: Some social scientists suggest that people of all races to some extent have an implicit racial bias. Unconsciously, it could lead employees to be friendlier or more helpful to white prospects than to others, raising the perception that members of racial minorities are not welcome at your community. Though not unlawful in itself, that perception may be enough to cause someone to suspect that any adverse action—the denial of his application, for example—was motivated by racial bias.

Rule #4: Make Sure Rules Are Fair— and Enforced Fairly

Fair housing claims often stem from adverse actions taken against residents for violating lease provisions or community policies or rules. In some cases, it's a claim of “disparate treatment—that is, that the rules are being selectively enforced because of a resident's race or other protected characteristic. Less commonly, it's a claim of “disparate impact,” where seemingly neutral rules have a disproportionate effect on racial minorities or other protected groups. In some cases, both claims are raised.

Example: A federal court refused to dismiss a claim that a New York co-op violated fair housing law based on a rule requiring that purchasers obtain three references from existing co-op owners. Allegedly, fair housing testing revealed that a broker downplayed the importance of the rule to white testers posing as prospective buyers, suggesting ways to make it easier to get the references. In contrast, according to the complaint, she emphasized the importance of the rule to African-American testers and refused to show them any homes for sale since they didn't know anyone already living there. The complaint alleged that employees at the co-op were aware of the disparity but did nothing about it.

The court ordered further proceedings on claims of disparate treatment and disparate impact. The court said that the allegations could show intentional race discrimination based on the reference policy itself, and its enforcement, with accommodations for white prospective buyers and none for African-American buyers. The court also ruled that the reference policy itself might have an illegal disparate impact based on statistical evidence that such policies may serve to keep African Americans out of co-ops in the Bronx [Fair Housing Justice Center, Inc. v. Silver Beach Gardens Corp., August 2010].

Nevertheless, communities can successfully defend such claims with proof of a legitimate, nondiscriminatory reason for the policy or rule—and proof that it's applied consistently without regard to race or other protected characteristic.

Example: In April 2011, an Illinois condo association fought off a racial discrimination claim based on its decision to stop providing valet parking at the community. The complaint alleged that nearly all of the building's residents were African American. Though residents included both renters and owners, 75 percent of the owners were white and most rented their units to African Americans. Allegedly, African-American renters were “locked out” of the meeting in which condo owners voted to discontinue a longstanding policy of providing valet parking. An African-American resident sued, claiming disparate treatment and disparate impact under the FHA.

The court dismissed the case, ruling that the resident could not pursue a disparate treatment claim, because he failed to allege any discriminatory intent for the decision to end the valet parking service. The court also rejected claims that the parking policy had a discriminatory effect. Although nearly all the building's residents were African American, the decision to rescind valet parking affected African-American residents in exactly the same way as it did the facility's few white residents. It did not lead to segregated housing or place a burden on African Americans seeking fair housing [Edwards v. Lake Terrace Condominium Assn., April 2011].

Fair Housing Act: 42 USC §3601 et seq.

COACH Sources

Nadeen W. Green, Esq.: Senior counsel, For Rent Magazine, 294 Interstate N. Pkwy., Ste. 100, Atlanta, GA 30339; (770) 801-2406; nadeen.green@forrent.com.

Robin Hein, Esq.: Attorney at Law, Fowler, Hein, Cheatwood and Williams, P.A., 2970 Clairmont Rd., Ste. 220, Atlanta, GA 30329; (404) 633-5114; RobinHein@ApartmentLaw.com.

Sidebar

LEGAL UPDATE

There are recent developments in Washington on whether and how disparate impact claims are treated under the FHA.

On Nov. 7, 2011, the U.S. Supreme Court agreed to hear an appeal involving the disparate impact standard in a case filed by rental property owners in St. Paul, Minn., who challenged the city's enforcement of its housing code.

According to the complaint, the owners rented primarily to low-income households, most of whom received federal rent assistance. The parties agreed that African Americans generally made up a disproportionate percentage of low-income residents in private housing in St. Paul, and specifically, the owners alleged that they rented to a higher-than-usual percentage of African Americans.

The complaint alleged that the city adopted a policy for increased enforcement of its housing code, targeting rental properties and increasing inspection standards to cite every violation found. The policy called for enhanced enforcement efforts at so-called “problem properties” to compel owners to take greater responsibility for their properties or force changes in ownership. To achieve its objectives, the city used various strategies including orders to correct violations, condemnations, resident evictions, real-estate seizures, revocation of rental registrations, and other measures.

Between 2002 and 2005, according to the owners, they received code enforcement orders that, in many cases, cited 10 to 25 violations per property for conditions including rodent infestation, inadequate sanitation facilities, inadequate heat, inoperable smoke detectors, and missing doors or screens. Several were designated as problem properties. As a result, the owners claimed that they suffered increased maintenance costs, fees, and condemnations, and were forced to sell properties in some instances.

The owners sued the city, asserting claims of disparate treatment and disparate impact under the FHA. After a series of proceedings, a federal appeals court ruled that the claims of disparate treatment were properly dismissed. The court found that the city's policy targeted properties occupied mostly by low-income residents, but there was no evidence to show the city had any discriminatory intent: Although racial minorities were disproportionately represented, those low-income residents included people of all races.

In contrast, the court called for further proceedings on the owners' claim that the city's aggressive code enforcement had a disparate impact on racial minorities. Viewed in the light most favorable to the owners, the evidence could show that the city's aggressive enforcement of the housing code temporarily, if not permanently, burdened their rental business, which indirectly burdened their residents. Given the existing shortage of affordable housing in the city and the demographic evidence, it was reasonable to infer that racial minorities, particularly African Americans, were disproportionately affected by those events. Although the city had a legitimate reason to ensure compliance with health and safety standards, the owners identified a viable alternative that would have satisfied the city's interests in code enforcement while reducing its impact on racial minorities.

In granting the city's request for further review, the Supreme Court is expected to address whether the FHA is broad enough to cover disparate impact claims. As noted by the city, the Court itself has never definitively decided the issue and that, in the absence of such guidance, the lower courts have developed different standards to evaluate disparate impact claims, leading to conflicting results in different cities.

Meanwhile, on Nov. 16, 2011, HUD unveiled proposed rules to formalize its longstanding policy that the FHA prohibits housing practices with a discriminatory effect, even where there has been no intent to discriminate. HUD observed that nearly all the federal appeals courts have confirmed its interpretation, but acknowledged some variation in the application of the standard. As a result, HUD intends its proposed rule to establish uniform standards for determining when a housing practice with a discriminatory effect violates the FHA.

HUD has invited public comment on the rule; the deadline is Jan. 17, 2012. To submit a comment on HUD's proposed rule electronically, visit www.regulations.gov; all comments should refer to the docket number (FR-5508-P-01) and title (Implementation of the Fair Housing Act's Discriminatory Effects Standard).

Though there won't be any definitive answers for some time, the court case and HUD's proposed rule could have significant implications for private communities, municipal bodies, and others subject to the FHA. Stay tuned to Fair Housing Coach, which will monitor and report on developments as they occur.