Lawsuits Involving Owners' Withdrawal from Section 8 Program

Source of income is not among the protected characteristics listed in the Fair Housing Act, but a recent federal appeals court ruling has raised questions about potential liability under the FHA if a community withdraws from the Section 8 program.

In the 1990s, two federal appeals courts emphasized the voluntary nature of the Section 8 housing program to rule that communities could not be liable under the FHA for excluding individuals with Section 8 housing vouchers. In one case, affecting communities in Illinois, Indiana, and Wisconsin, the court ruled that a community did not have to participate in the Section 8 housing program and therefore could not be liable for racial discrimination based on the “disparate”—that is, disproportionately negative—impact that withdrawal from the program might have on minorities [Knapp v. Eagle Property Management Corp., 1995].

In the other case, affecting communities in Connecticut, New York, and Vermont, the court agreed that owners could not be liable under the FHA for any impact that its policy to exclude those with Section 8 housing vouchers may have on individuals with disabilities. The court also ruled that a community did not have to accept applicants with Section 8 housing vouchers as a reasonable accommodation for their disabilities.

The applicants argued that their disabilities prevented them from working, thereby making them eligible for housing assistance, so the community's refusal to reasonably accommodate them by accepting their Section 8 voucher violated the FHA. The court disagreed, ruling that the FHA required communities to make reasonable accommodations for disabilities, but not to relieve disabled individuals of financial difficulties related to their disability [Salute v. Stratford Greens Garden Apts., 1998].

In November 2007, however, a federal appeals court disagreed with the other courts, ruling that an owner could, in principle, face liability under the FHA if its withdrawal from the Section 8 program had a disparate impact on members of a protected class.

The case originated in Kentucky when a community decided that it would no longer accept Section 8 housing vouchers because of disputes with the housing authority about rental payments made on behalf of Section 8 residents. The local human relations commission ruled that the owner's withdrawal from the Section 8 program amounted to unlawful racial discrimination under the FHA because it had a disparate impact on black residents.

A court sided with the owner, ruling that a community owner could not be liable under the FHA by withdrawing from the Section 8 program solely because it had a disparate impact on members of a protected class.

Late last year, the appeals court upheld that decision, but for different reasons. In a decision affecting communities in Kentucky, Michigan, Ohio, and Tennessee, the court ruled that an owner could be liable under the FHA if its withdrawal from the Section 8 program had a disparate impact on members of a protected class, but there was not enough evidence to show that had occurred in this case.

The court rejected the owner's emphasis on the voluntary nature of the Section 8 voucher program. Even though an owner often could withdraw from Section 8 without violating the terms of Section 8 or the FHA, it did not mean that withdrawal from Section 8 could never constitute a violation of the FHA.

For example, the court said, an unexplained withdrawal from Section 8, combined with strong evidence of disparate impact, might show that a community entered Section 8 expecting to draw residents of one race, then withdrew based on discriminatory motives when it attracted residents of a different race [Graoch Assocs., #33, LP v. Louisville/Jefferson Cty. Metro Human Relations Commission, November 2007].