12.2: Part II- Fair Housing
- Page ID
- 35914
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)Protected Classes
Discrimination in real estate has been addressed through various federal, state, and local laws and regulations. Certain groups that have faced discrimination over the course of time have been identified and specifically designated as “protected classes” that laws and regulations are intended to safeguard.
Federal fair housing laws recognize seven protected classes, and the California state fair housing laws recognize twelve. The federal-protected classes are (1) race; (2) color; (3) religion; (4) sex; (5) national origin; (6) familial status; and (7) disability. The state protected classes in California include all the federal classes and (8) sexual orientation (includes gender identity and gender expression; (9) marital status; (10) ancestry; (11) source of income; and (12) age. For details, see Appendix X.
If these classes are protected, what is a “non-protected” class? Seemingly obvious, a non-protected class is a classification of individuals who do not belong to any of the protected classes. For example, a person cannot be considered a protected class due to political affiliation, such as “Democrats” or “Republicans.” Other examples of non-protected classes are “cigarette smokers” and “consumers with a low FICO credit score.”
Persons wishing to claim discrimination must show that they are (1) a member of a protected class, (2) qualified for the housing in question, (3) rejected from the housing in question, and (4) that the housing remained available or was given to someone who is not a member of a protected class during the course of events. If these four essential conditions are proven to be true, the discriminatory agency has an obligation to “articulate a legitimate, non-discriminatory reason” for denying the housing.
Fair Housing Agencies and Regulations
Fair Housing Agencies: HUD and DFEH
The federal government established the Office of Fair Housing and Equal Opportunity (FHEO), a part of the U.S. Housing and Urban Development Agency (HUD), in 1968 to enforce provisions of the Fair Housing Act (see related sections below). The agency is intended to eliminate housing discrimination, promote economic opportunity, and encourage growth of diverse, inclusive communities. This Office leads the nation in the enforcement, administration, development, and public understanding of federal fair housing policies and laws [Fair Housing: Rights and Obligations | HUD.gov / U.S. Department of Housing and Urban Development (HUD)]
Housing providers that receive HUD funding, loans insured by the Federal Housing Administration (FHA), and lenders insured by the FHA are subject to HUD program regulations (https://www.hud.gov/program_offices/fair_housing_equal_opp (Links to an external site.)).
In California, the Department of Fair Employment and Housing (DFEH) investigates fair housing complaints. “The Department of Fair Employment and Housing (DFEH) is the institutional centerpiece of California’s broad anti-discrimination and hate crimes policy. The mission of the DFEH is to protect the people of California from unlawful discrimination in employment, housing, and public accommodations (businesses) and from hate violence and human trafficking in accordance with the Fair Employment and Housing Act (FEHA), Unruh Civil Rights Act, Disabled Persons Act, and Ralph Civil Rights Act. The employment anti-discrimination provisions of the FEHA apply to public and private employers, labor organizations, and employment agencies. ‘Housing providers’ includes public and private owners, real estate agents and brokers, banks, mortgage companies, and financial institutions” (https://www.dfeh.ca.gov/about-us/ ).
Federal and State Fair Housing Laws
Fair housing is designed to ensure that all individuals have the right to choose any housing they wish. Federal, state, and local laws have been enacted to protect individuals from discrimination in housing transactions, including transactions related to rents, sales, lending practices, and insurance. Fair housing regulations are intended to guarantee that discrimination will not affect transactions regardless of the age, race, religion, family status, or physical ability of the people involved.
Federal housing laws apply to all states; the State of California has additional laws of its own. Violations of federal housing and lending laws are also violations of California housing and lending laws. Federal and State laws specifically prohibit discrimination in the sale, rental, or financing of real estate transactions.
Five Acts of legislation, federal and California, are anti-discrimination landmarks related to housing and lending. These include:
- Fair Housing Act
- Equal Credit Opportunity Act (ECOA)
- Home Mortgage Disclosure Act (HDMA)
- Holden Act (California Housing Financial Discrimination Act )
- Unruh Civil Rights Act
Fair Housing Act
The Fair Housing Act of 1968, also known as Title VIII of the Civil Rights Act, was a landmark piece of legislation aimed at combating housing discrimination in the United States. Enacted on April 11, 1968 during the civil rights movement, the Fair Housing Act was a response to the pervasive discrimination based on the race, color, religion, sex, national origin, disability, or familial status of individuals seeking housing. Its primary purpose was to eliminate the unfair practices that had long plagued the housing market and contributed to systemic inequalities and segregation. The Act sought to ensure that all Americans have equal access to housing opportunities, regardless of their background or characteristics. In addition, the legislation aimed to create more inclusive and diverse communities.
Over the years, the Fair Housing Act has been amended and expanded to strengthen its protections, reflecting a commitment to fostering fair housing practices and promoting equal opportunity in housing for individuals and families across the nation.
Equal Credit Opportunity Act (ECOA)
Prior to the Equal Credit Opportunity Act (ECOA) of 1974, the real estate industry, including lending organizations, practiced various forms of discrimination to block some groups of people from having access to purchasing property. Lenders would, for example, offer certain groups access to a loan, but with terms less favorable than loans for other borrowers. These practices were widespread, and individuals were often denied credit or offered less favorable terms based solely on their personal characteristics.
The Equal Credit Opportunity Act (ECOA), a federal law commonly known as “Fair Lending,” was enacted to address discrimination in lending practices, ensuring that all individuals have an equal opportunity to obtain credit without facing discrimination based on race, color, religion, national origin, sex, marital status, age, or receiving public assistance. The ECOA made redlining and other discriminatory lending practices illegal, promoting fair and equal access to credit for all legally and financially qualified individuals. The law also requires that a lender/creditor who denies an application for credit must provide the applicant with a statement of reasons or written notification of the applicant’s right to obtain a statement of reasons.
See Title 15 of the United States Code, Section 1691 et seq.
Home Mortgage Disclosure Act (HDMA)
Congress passed the Home Mortgage Disclosure Act (HMDA) in 1975. This legislation requires financial institutions to collect and submit. lending data to authorities, fair housing organizations, and others to assure that they comply with ECOA (Equal Credit Opportunity Act).
California Housing Financial Discrimination Act (Holden Act)
The California legislature enacted the Housing Financial Discrimination Act, also known as the Holden Act, in 1976 to prevent redlining and improve access to home financing in minority communities. This Act applies to residential properties with one to four (1 – 4) residential units intended to be owner occupied and also applies to owners seeking home improvement loans, even if the owner will not occupy the property. (Source: California Health and Safety Code §§35800–35833)
According to this Act, financial institutions are prohibited from discrimination in financial assistance. Actions that are illegal under this law include:
- Refusing to lend due to neighborhood trends (redlining).
- Discrimination in the availability of financing.
- Appraising using neighborhood trends based on changes in race, color, etc.
The ramifications of not complying with this Act include being sued under the Act.
California also addressed problems of credit discrimination by regulating the issuance of consumer credit reports, access by the consumer to such reports, and the obligations of credit reporting agencies. As a result, providers of consumer credit reports are subject to the requirements of State law and must provide notice to the consumer when credit is denied.
Source: California Civil Code Section 1785.1 et seq. 15 U.S. Code 1691
The Unruh Civil Rights Act
The Unruh Civil Rights Act (California Civil Code § 51, et seq.), which applies to all aspects of real estate activities, declares: “All persons within the jurisdiction of this State are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin or disability are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever…” The Unruh Act intends to give all persons full and equal accommodations, advantages, facilities, privileges, or services in businesses of every kind. With specific regard to seniors, in 1984 the California legislature enacted Civil Code §51.3 to ensure accessible housing options for seniors.
Undocumented Immigrants, Persons with Disabilities, and Seniors
Let’s examine a few regulations related to protections of particular groups.
California Civil Code §1940.3: Undocumented Immigrants.
In California, undocumented immigrants have limited protection status through California Civil Code §1940.3, which holds that landlords cannot force a tenant to make any kind of statement regarding citizenship or legal status. Landlords may not inquire into immigration or citizenship status or require any prospective tenant to make a statement or produce documentation of her immigration or citizenship status. However, a landlord may request a social security number for the purpose of determining credit worthiness.
Americans with Disabilities Act (ADA): Persons with Disabilities.
The Americans with Disabilities Act (ADA) of 1990 provides comprehensive civil rights protections to individuals with disabilities for areas of employment, state and local government services, public accommodations, transportation, and telecommunications. Under this act, landlords must make reasonable accommodations and modifications to ensure that disabled people can live comfortably in their units. If such accommodations are not made, housing providers can face legal repercussions.
Source: Disabilities Act of 1990, Pub. L. No. 101-336, 104 Stat. 328 (1990)
The Unruh Act Sections 51.2 and 51.3: Senior Housing.
Two sections of the Unruh Civil Rights Act, which we discussed above, specifically sections 51.2 and 52.3, address discrimination in housing accommodations based on age, among other protected characteristics. Section 51.2 of the Unruh Act prohibits age discrimination in housing, ensuring that individuals aged 62 or older have equal access to housing opportunities. This provision protects seniors from being denied housing or subjected to discriminatory treatment solely based on age, resulting in creation of inclusive communities where seniors can live without facing unlawful barriers or prejudice. Section 52.3 of the Unruh Act specifically allows for the establishment of housing communities exclusively for individuals aged 62 and older.
Housing Discrimination Lawsuits
Housing discrimination can and does result in lawsuits. Here’s a recent example:
In March 2023, a black couple won a discrimination case against an appraiser who provided an unfairly low estimate of the value of their home. The couple had their home value estimated by an appraiser who reported that it was worth $995,000. Very shortly thereafter, they asked another appraiser for an estimate and had a white friend pose as the homeowner. This time, the house’s value was estimated at $1,482,500. The couple sued for discrimination and settled a federal civil rights lawsuit, receiving an undisclosed amount in financial compensation from the defendants (the first appraiser).
This case offers a look into ways that the systemic racism in the housing appraisal system increases race-based inequities in housing valuation. It exposes how properties of white homeowners are valued while properties of homeowners of color are devalued, a stark and current reminder of the longstanding damage that federal policies like redlining have had in dividing American cities.
Source: Guardian, March 2023, “Black couple win discrimination case after their house value was lowballed”
https://www.theguardian.com/us-news/mar/08/black-couple-house-value-discrimination-lawsuit
Housing discrimination lawsuits are not limited to minorities. For example, in a primarily Caucasian community, Caucasian tenants may sue their landlord for discriminatory housing practices, alleging that such practices deprived them of living in a community of diverse residents.
An example of a housing discrimination lawsuit filed by Caucasian tenants is Bennett v. Eastpointe, where the plaintiffs alleged that the city of Eastpointe, Michigan, violated the Fair Housing Act by intentionally maintaining racially segregated housing and discouraging integration (Bennett v. Eastpointe). The plaintiffs claimed that they were harmed by the city’s policies because they were deprived of the social and economic benefits of living in a racially diverse community. The case was settled in 2000, with the city agreeing to implement various measures to promote fair housing and diversity (Settlement Agreement in Bennett v. Eastpointe).
Source: Bennett v. City of Eastpointe, 410 F.3d 810 | Casetext Search + Citator
What does this mean for real estate professionals? If a buyer inquires about the racial characteristics of a neighborhood, it is not legal for the agent to answer the questions. An agent not only should avoid responding to buyer questions about specific protected classes, but also should not engage in conversations about any type of neighborhood characteristics or racial classifications.
Other Penalties for Housing Discrimination
A court, housing agency, real estate association, or other organization with authority that finds that discrimination has taken place may order the owner, the landlord, or the agent, to do one or more of the following:
- rent the particular property to the person who brought the discrimination charge
- pay “actual” damages to an applicant who was illegally rejected, such as additional rent the tenant had to pay elsewhere as a result of being turned down for the subject rental
- pay compensatory damages, such as for the tenant's humiliation or emotional distress, and/or
- pay a civil penalty (under federal law, the first violation carries a penalty of $16,000).
For especially outrageous discrimination, punitive damages of many thousands of dollars could be required, plus the tenant's attorney fees.