Laws Protecting Applicants & Residents Who Receive Housing Assistance

This month's lesson discusses how to avoid discrimination based on source of income, a catchall phrase that generally refers to lawful sources of income, such as wages, alimony, and public assistance. The Fair Housing Act (FHA) does not ban discrimination based on source of income, but many state and local governments have adopted some form of protection based on source of income.

In this month's lesson, we'll give you five rules to help you comply with fair housing law related to source of income. Then, you can take the Coach's Quiz to see how much you have learned. Finally, in the Legal Update (see p. 8), we'll take a look at recent court decisions on source of income under federal fair housing law.

WHAT DOES THE LAW SAY?

The FHA prohibits housing discrimination based upon race, color, national origin, sex, familial status, disability, or religion. It does not include source of income, but many state and local governments have added source of income to protected characteristics under their fair housing or civil rights laws.

As of June 2008, 13 states have such laws, according to a statement by the National Multi Housing Council (NMHC) and the National Apartment Association (NAA). Those states are:

• ⧫ California

• ⧫ Minnesota

• ⧫ Oregon

• ⧫ Connecticut

• ⧫ New Jersey

• ⧫ Utah

• ⧫ Maine

• ⧫ North Dakota

• ⧫ Vermont

• ⧫ Maryland

• ⧫ Oklahoma

• ⧫ Wisconsin

• ⧫ Massachusetts

On the local level, 17 cities, including Los Angeles, New York, Philadelphia, Seattle, St. Louis, and Washington, D.C., prohibit housing discrimination based on source of income. In addition, county governments in Illinois, Maryland, Oregon, and Washington state have such laws, according to the National Housing Law Project.

Generally speaking, those laws apply to lawful sources of income, such as earnings, grants, gifts, inheritance, pensions, annuities, alimony, child support, and government or private assistance. In some states, those laws also protect individuals receiving public housing assistance through the federal Section 8 voucher program.

HOW SECTION 8 VOUCHERS WORK

Under the Section 8 voucher program, the federal government provides rent subsidies to eligible low-income families who rent from participating communities. With funding from the federal government, the local housing authority issues vouchers to residents to rent units in private market-rate communities, explains Henry Korman, a Boston-based fair housing attorney. The residents pay 30 percent to 40 percent of the monthly rent, and the voucher is used to pay the balance, up to a certain limit, he says.

Communities that accept Section 8 vouchers must sign a standard housing assistance payment contract with the housing authority. They also must attach a HUD-required addendum to the lease, which prevails over the standard lease terms and may not be changed by the owner or the resident. Among other things, those provisions provide that the failure of the housing authority to pay its portion of the rent does not constitute a breach of the lease. Communities also must allow inspection of the unit and meet certain quality standards, as well as comply with periodic reporting requirements.

Because of these administrative and regulatory requirements, many communities prefer not to participate in the Section 8 voucher program. Under federal law, participation by communities in the Section 8 housing program is voluntary. There is no direct requirement in federal law or HUD regulations that a community must accept Section 8 vouchers.

Given the voluntary nature of the Section 8 voucher program, the question is: Do state or local laws banning discrimination based on source of income require communities to accept applicants with Section 8 vouchers? The answer varies, depending on the particular language of the state or local law and how the courts have interpreted it (see “How Source-of-Income Laws, Court Rulings Vary,” p. 3).

COACH'S TIP: Regardless of where your community is located, certain federal housing programs prohibit owners from discriminating against applicants with Section 8 housing vouchers. For example, the low-income housing tax credit program bans participants from turning away otherwise qualified applicants because they have Section 8 housing vouchers. If your community participates in such a program, the law applies even if it is not subject to any state or local laws banning discrimination based on source of income.

5 RULES FOR COMPLYING WITH FAIR HOUSING LAW and SOURCE OF INCOME

Rule #1: Determine if State or Local Law Bans Source-of-Income Discrimination

Many state and local governments have adopted laws banning discrimination based on source of income, but they vary considerably in how they are written and what they cover. Consult your attorney to determine whether your community is subject to such laws and to get the details about what they say.

Ask your attorney to help you establish or review your policies to ensure compliance with those requirements, particularly when it comes to Section 8 housing vouchers or other housing assistance programs. Depending on the language used in the law and how the courts may have interpreted it, your community may be required to accept applicants who receive Section 8 housing vouchers or other forms of housing assistance.

Example: In Massachusetts, the law bars communities from discriminating against individuals who receive public assistance or rent subsidies, including Section 8 housing vouchers. It also covers applicants who participate in a state subsidy program for temporary housing. In a recent case, an applicant with such a subsidy was turned away by a community's property manager because several provisions of the standard form lease required by the program were “unreasonable and excessive.”

Despite objections that the lease terms could cause the community “substantial economic harm,” the court ruled that the community violated state fair housing law by refusing to rent to the applicant because of her participation in the program [DiLiddo v. Oxford St. Realty, Inc., November 2007].

Even if your community is not subject to any current laws regarding source of income, ask your attorney to keep you updated on developments on the state and local levels. An increasing number of states and localities are extending fair housing protection to other characteristics—including source of income—beyond those covered under the FHA.

Example: In March 2008, New York City added “lawful source of income” to its protected classes under the city's Human Right's law. The law generally prohibits the owners of buildings in New York City with six or more units from refusing to rent to any person because of his lawful source of income, including any form of federal, state, or local public assistance or housing assistance, including Section 8 vouchers.

Rule #2: Don't Reject Prospects Solely Based on Source of Income

To comply with state or local protections based on source of income, your community may not exclude prospects solely because of their source of income. Even if you have concerns that prospects who rely on alimony or child support may fall behind on rent payments if their spouses don't pay them, you can't turn away prospects from renting in your community simply because they may need help to afford your rent.

Furthermore, if your state or local laws include Section 8 housing vouchers within fair housing protections, you may not reject applicants solely because they have Section 8 vouchers. For example, your community may not publish advertisements that say “No Section 8,” or tell prospects over the phone that you do not accept Section 8 housing vouchers. If you do, you may trigger a fair housing complaint because you are effectively screening out all Section 8 prospects before they even apply.

Rule #3: Apply Screening Policies Consistently

If your community is subject to state or local laws banning discrimination based on source of income, you must apply screening policies consistently to all prospects and residents to avoid a fair housing violation.

For example, your community has the right to verify all applicants' income and ability to pay the rent. If they get financial assistance, verifying their income will not violate state or local laws banning discrimination based on source of income—as long as you do so for all applicants and apply the same income criteria (taking into account their financial assistance) as for your other prospects.

If an applicant has a Section 8 housing voucher, for example, you have to take into account the amount of the voucher to measure her capacity to make monthly rent payments, advises Korman.

Example: Connecticut law prohibits discrimination based on lawful source of income, including housing assistance, but it has an exception that allows communities to reject applicants based on “insufficient income.”

After an initial call about an advertised unit, a Connecticut prospect with a Section 8 housing voucher called again to inquire whether the unit was still available. Allegedly, she was told that she didn't make enough income to qualify for the unit. During another call, she also was told that the community chose not to participate in the Section 8 housing program.

Earlier this year, the state's highest court concluded that the community violated state fair housing law by refusing to rent to the prospect because of her source of income. The court rejected the owner's defense based on insufficient income, ruling that an owner may refuse to rent to a prospective Section 8 resident only if the individual did not earn sufficient income to meet his or her personal share of the rent, along with other obligations reasonably associated with the tenancy [Commission on Human Rights and Opportunities v. Sullivan, January 2008].

COACH'S TIP: Even in communities not subject to such state or local laws, inconsistent application of your screening policies could trigger a fair housing complaint under federal law. If, for example, your community has a policy not to accept Section 8 housing vouchers, you risk a fair housing complaint if you make an exception for someone you know, after you have already turned away others—including members of protected classes—who had Section 8 housing vouchers.

Rule #4: Reject Prospects Who Can't Meet Screening Criteria

You do not have to accept an applicant who receives financial assistance, if he fails to meet your other legitimate screening criteria. State or local laws that forbid discrimination based on source of income generally prevent you from rejecting a prospect solely because of the source of his income. But they do not require you to accept a prospect getting financial assistance, if you have other nondiscriminatory reasons to reject him, such as a criminal record, as long as you apply that policy consistently to all applicants.

Regardless of the source of their income, you do not have to accept applicants who can't demonstrate the ability to pay their rent. If, for example, an applicant receives housing assistance, but can't demonstrate the ability to pay the unsubsidized portion of the rent, you may reject her application because her income is insufficient to meet your community's financial qualifications—not because of the source of that income.

Rule #5: Don't Treat Residents Differently Based on Source of Income

Fair housing protections based on source of income do not stop with the application process but continue throughout the tenancy. That means you may not treat them differently or apply your rules and policies more strictly to residents based on their source of income. To avoid a potential violation, train your staff to treat all your residents in the same professional manner—regardless of their source of income.

COACH'S TIP: Keep source-of-income information confidential. Doing so will help ensure that that residents getting assistance are not treated differently based on their source of income. For example, if your maintenance staff doesn't know which residents may be receiving public assistance, you have a valid defense to a claim from a resident that she received poor or delayed responses to her maintenance requests because of discrimination based on source of income.

Fair Housing Act: 42 USC § 3601 et seq.

Coach Source

Henry Korman, Esq.: Attorney at Law, 236 Lewis Wharf, 28 Atlantic Ave., Boston, MA 02110; (617) 227-5070, ext. 31; henrykorman@comcast.net.

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How Source-of-Income Laws, Court Rulings Vary

In Oregon, the law bars discrimination based on source of income, but it defines source of income to exclude “federal rent subsidy payments under [the Section 8 housing program].” In contrast, Massachusetts law bars discrimination against individuals “receiving federal, state, or local housing subsidies, including rental assistance or rental supplements,” which courts have interpreted to include Section 8 housing vouchers.

In states where the law does not specifically refer to housing assistance, courts have reached opposite conclusions about whether state or local laws banning discrimination based on source of income also cover Section 8 housing vouchers. In many cases, the decisions are based on whether the courts believe that federal law—which makes participation in the Section 8 voucher program voluntary—supersedes state or local laws that ban discrimination based on source of income.

That was the conclusion of a federal appeals court, for example, when it ruled that the Wisconsin law banning discrimination based on source of income did not apply to Section 8 housing vouchers [Knapp v. Eagle Property Mgmt. Corp., April 1995].

In a number of recent rulings, several courts have come to the opposite conclusion. In January 2008, the Connecticut Supreme Court upheld its previous ruling that the state's law banning discrimination based on “lawful source of income” barred an owner from excluding a prospect with a Section 8 housing voucher [Commission on Human Rights and Opportunities v. Sullivan, January 2008].

And in April 2008, a federal court in the District of Columbia issued a similar ruling when it refused to dismiss a claim that a community violated D.C. law, which bans discrimination based on source of income, when it allegedly refused to accept a prospect with a Section 8 housing voucher [Bourbeau v. Jonathan Woodner Co., April 2008].

Section 8 Issue May Reach Supreme Court—Eventually

When Congress created the Section 8 program, it explicitly made the program voluntary because it recognized that there are costs and burdens imposed on property owners who choose to participate, according to NMHC and NAA. Those groups spearheaded a recent effort to get the U.S. Supreme Court to weigh in on whether states and localities can force property owners to participate in the federal Section 8 program by passing laws making it illegal to deny a voucher holder based on his source of income.

The effort failed, at least for now, in June 2008 when the court declined to hear an appeal of a November 2007 ruling by the Maryland Supreme Court that a community must accept prospects with Section 8 vouchers under a county ordinance prohibiting discriminatory housing practices based on source of income. Maryland's highest court rejected the owner's argument that the ordinance was invalid because it conflicted with federal law by effectively requiring him to participate in what was supposed to be a voluntary federal program.

The court also ruled that the owner couldn't justify its policy to exclude those with Section 8 vouchers based upon the administrative burdens of the program. The court said that the administrative burden was no defense to a housing discrimination claim unless the burden was so severe as to amount to a deprivation of its property or violation of due process [Montgomery Cty., Maryland v. Glenmont Hills Assocs., November 2007].

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