What Is Housing Discrimination? A Real Estate Agent’s Guide to Understanding & Combating Housing Discrimination

The National Bureau of Economic Research (NBER) recently put the real estate industry to the test. It created 18 fictitious characters with names that suggested various races and used them to respond to listings of homes and apartments. The NBER found a marked difference in the responses each name received. In the study of more than 8,000 listings, the names indicative of people of color received significantly lower response rates.

Of the 50 cities tested, all but 5 showed biases.

The NBER study of housing discrimination showcases how widespread the problem is. The National Fair Housing Alliance (NFHA) estimates there are more than four million cases of housing discrimination each year. And those are just the reported cases.

What Is Housing Discrimination?

Housing discrimination is the illegal practice of discriminating against someone renting or buying housing based on:

• Race
• Color
• Religion
• Sex (including gender identity and sexual orientation)
• Familial status
• National origin
• Disability

The federal Fair Housing Act (FHA) protects people from discrimination when they are buying or renting a home, getting a mortgage, and engaging in other activities related to securing housing. The Office of Fair Housing and Equal Opportunity enforces these laws regarding housing discrimination.

“The FHA makes it illegal for a seller, landlord, or real estate agent to refuse to sell, rent, or make housing available to people based on their race or another status in a protected class,” explains Lauren Blair, a real estate attorney with FreeAdvice.com. “It is also illegal to offer different terms, conditions, rates or prices to people because of their race, gender, disability, or marital status.” Different state and municipal laws also prohibit discrimination based on things like immigration status, lawful occupation, hairstyles, and a criminal record.

Can Real Estate Agents & Brokers Be Sued for Housing Discrimination?

People ask, “Can I sue for housing discrimination?” The answer is yes.

In addition to federal office enforcement, the FHA allows for real estate agents to be sued for housing discrimination whether they actively participate in discriminatory practices, or simply allow their clients to do so.

“In addition to federal law, people likely have the ability to sue under the laws of the state they live in,” says Blair. “Most states have their own fair housing or civil rights laws that protect against discrimination in housing and credit application processes.”

5 Types of Housing Discrimination

Housing discrimination is not always obvious, and it’s not just about race.

1. Implicit Bias

While no agent or broker in their right mind would allow a listing that bars certain races, genders, or minority groups from applying, there are still ways that implicit bias — known as disparate impact — can occur. Here’s a list of ways that discrimination (even if unintentional) can present itself as well as real examples of outright discrimination.

• A real estate agent refusing to show applicants listings in certain areas
• A real estate agent steering certain minority groups to communities where they are already largely represented
• A home seller and agent requiring a photo submitted with the purchase offer
• A co-op board giving preferential treatment to “friends and family” of existing owners
• A landlord requiring a single female applicant to have a second source of income or large financial reserves
• A landlord requiring applicants to have full – time employment, which could discriminate against veterans and people with disabilities

2. Sexual Orientation & Gender Identity

In February 2021, the U.S. Department of Housing and Urban Development announced that it would start investigating cases of discrimination against LGBTQ+ community members seeking housing. The following 17 states and the District of Columbia also have laws prohibiting housing discrimination based on sexual orientation and gender identity, says David Reischer, real estate attorney and CEO of LegalAdvice.com:

• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Hawaii
• Illinois
• Iowa
• Maine
• Massachusetts
• Minnesota
• Nevada
• New Jersey
• New Mexico
• Oregon
• Rhode Island
• Vermont
• Washington

Another four states prohibit housing discrimination based on sexual orientation but are silent on gender identity discrimination:

• Maryland
• New Hampshire
• New York
• Wisconsin

3. Rental Funding Sources

The state of Virginia recently filed 13 lawsuits against 29 real estate companies and their agents, alleging discrimination over funding sources for rent. Agents told renters they would not accept Housing Choice vouchers, a refusal that a July 2020 state law made illegal.

A housing watchdog group in New York sued 36 real estate agents and landlords over similar claims that landlords refused to rent to people with Section 8 housing vouchers, which is illegal under the state’s law.

4. Rental Practices

Real estate agents involved in rental properties should be aware of several discriminatory rental practices for potential renters such as changing offers to members of protected classes, such as:

• Less favorable contract terms
• High pricing
• Biased credit and lending practices
• Additional or unnecessary fees

5. Disability

While we most often think of discrimination in terms of race, Blair sees an upward trend in cases brought for discrimination based on disability. An NFHA study showed that nearly 55% of all complaints about housing discrimination involve accessibility and disability issues.

Complaints and lawsuits concern issues such as inaccessible websites or offices and refusing to rent to people with disabilities, all of which are prohibited by the Americans with Disabilities Act.

Real Housing Discrimination Lawsuits Examples

Here are some recent examples of complaints that turned into lawsuits.

• In Michigan, an interracial couple was told their offer of $300,000 for a home would not be accepted, that they needed to raise the offer, and that the homeowner was accepting only all – cash offers with no contingencies or inspections. The agent involved dissuaded the couple from moving forward. However, the house was sold to a white buyer for $300,000 with a down payment and mortgage; he was also allowed to have a home inspection before finalizing the deal. The agent was fired and a lawsuit was filed.
• A California couple with three children was denied rental of a two – bedroom apartment. Under the FHA, you cannot limit or deny housing because a family has children (under age 18). The owner/manager of the rental property paid the family $6,000 in settlement fees.
• In Georgia in the case United States v. Coldwell Banker Joe T. Lane Realty, Inc., both the broker and agent were found liable after the agent steered prospective buyers to certain neighborhoods based on race.
• In Illinois, the listing agent and broker were ordered to pay $30,000 in United States v. Sabbia after being found guilty of housing discrimination by refusing to sell a home to an African American couple.
• In Illinois, a realtor lost his license and, along with broker RE-MAX East-West, had to pay $120,000 after steering Hispanic buyers away from predominantly white neighborhoods.
• First Boston Real Estate was sued after an agent demonstrated a pattern or practice of discrimination in selling homes.
• In New York, in the case United States v. Burgundy Gardens, owners were fined $25,000 and required to pay $150,000 into a victim’s fund after the on – site agent told African Americans that properties were not available while telling white renters that properties were available.
• In New York a consent decree agreed to by Village Realty of Staten Island Ltd. and one of its former real estate agents assessed $17,500 in fines and victim compensation after a finding of discrimination.

How Real Estate Agents & Brokers Can Prevent Housing Discrimination

1. Recognize your own biases: “The first thing real estate agents and brokers can do to prevent housing discrimination is to examine their own implicit biases,” advises Blair. “No one likes to think of themselves as operating on prejudice, but fighting against racism requires an acknowledgment of systemic racism built into the housing and financing sectors.”
2. Educate yourself: Reischer says education is an important part of preventing housing discrimination. “Real estate agents and brokerages should have systems in place that educate and train agents on unlawful conduct,” he says.
3. Prepare to advocate: Real estate agents should also be aware of potential bias in the overall lending and home – buying process that can draw them into lawsuits. An African American homeowner in Indianapolis recently filed a lawsuit over her home appraisal. After getting two low appraisals, she had a white friend get an appraisal for her. In the third appraisal, the home value increased by more than $125,000. “Agents and brokers should also make sure they push back against appraising the value of homes based on the racial makeup of the neighborhood,” advises Blair.
4. Consider all avenues of discrimination: Real estate agents also need to think about housing discrimination when working with outside resources during the home – sale process. For example, a black Ohio couple received two separate home appraisals. One was $100,000 more than the other — and was after they replaced pictures of their family with photos of white people.
5. Stay connected: Keep your ear to the ground about people in your networks who might be practicing discriminatory behaviors so you don’t refer clients to them. Also stay tuned in to recent U.S. housing discrimination cases. They might shed light on practices you hadn’t considered or seen before.
6. Create a plan: Know what you will do if you see housing discrimination in action — and prepare the agents in your brokerage as well. Even if agents are not directly involved in housing discrimination, they may be cited in lawsuits or asked to testify.

Realtor Code of Ethics: How to Respond to Housing Discrimination

The National Association of Realtors’ code of ethics reminds real estate agents and brokers that they have an affirmative duty to their clients, customers, and the public. Realtors are prohibited from discriminating against buyers or sellers or disclosing information that shows favoritism toward or against anyone.

Here’s an example for you: In Clinton-Brown v. Hardick, a buyer sued after the sellers verbally agreed to sell their property but backed out when they found out the buyers were African American. Upon receiving the purchase agreement, the sellers asked the agent if the buyers were black. When the agent said yes, the sellers refused to move forward. The agent immediately informed the sellers that she could not continue to work with them, withdrew the listing, and reported the incident to her broker. According to the NAR, “The agent’s decisive and prompt actions in response to the client’s fair housing violations were appropriate and helped shield the agent from liability in the lawsuit.”

The NAR recommends these actions when clients violate the fair housing laws:

• Remind clients of their obligations under the Fair Housing Act and of your policy not to discriminate.
• Discontinue representation of any client who has made a statement or taken an action in violation of fair housing laws.
• Report the situation to your broker.
• Document the situation in writing, including what actions you took in response to your client’s violations.

The NAR also recommends that agents talk with an attorney if they are unsure whether a client’s actions may be discriminatory.

Final Thoughts

Real estate agents need to be on the lookout for anything that could indicate that their clients are engaging in housing discrimination. If something just doesn’t feel right, you have an obligation to investigate.

Your best defense against possible FHA violation is to take action when you suspect a discriminatory practice is taking place. Follow the guidelines from the National Association of Realtors to better protect yourself.

 

Image courtesy of istock.com/Alena Butor

 

Last updated on Jul 24, 2024.
Originally published on Jun 30, 2022.

More:

• Real Stories
• Real Estate

The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice. Click here to read our full disclaimer