Recently, national standards for whether certain housing practices violate the Fair Housing Act (FHA) have changed. Previously, housing practices that intentionally discriminated against a protected class were considered a violation of the FHA. As of March 18, 2013, however, housing practices with a “discriminatory effect” may also violate the FHA. The U.S. Department of Housing and Urban Development (HUD) issued this new rule, which establishes that housing practices which cause disparate harm to a certain class of people violate the FHA even if the intent was not to discriminate against a certain class of people because of their race, color, religion, gender, handicap, familial status, or national origin. This new rule imposes a new standard for determining whether a given housing practice has an unjustified discriminatory effect. Under this new standard, a plaintiff must first prove that a certain housing practice results in a discriminatory effect. Second, the defendant must prove that the housing practice is necessary to achieve a substantial and legitimate business necessity. Lastly, a plaintiff must show that the substantial and legitimate business necessity can be met by a less discriminatory housing practice. The inquiry of whether a housing practice has a discriminatory effect is fact-specific and is determined on a case-by-case basis. Nevertheless, the FHA provides that a housing practice may have a discriminatory effect if it actually or predictably results in a disparate impact on a group of people, or if the housing practice creates, perpetuates, or increases segregated housing patterns on the basis of race, gender, handicap, familial status, or national origin. Because this definition is broad, and to some extent aggressive, housing providers must now closely scrutinize their current practices to ensure that such practices do not have a discriminatory effect; or if they do have a discriminatory effect, that such practices serve a substantial and legitimate business interest. Given the numerous and varied housing practices, it is imperative to consider the possible effects of certain housing practices, and whether those housing practices could potentially violate the FHA.
- Occupancy Limits: Certain housing providers impose occupancy limits to prevent overcrowding in units, which could cause health and safety hazards. While such a practice is seemingly impartial to any class of people, certain limits may disproportionately exclude families with children. For example, if a housing provider prohibits more than two individuals per a bedroom, a couple with one child is excluded from renting a one-bedroom apartment.
- Resident Screening and Criminal Background Checks: Individuals with a criminal background are not a protected class under the FHA; however, housing practices that require screening of prospective tenants based on criminal arrests and convictions may have unintended discriminatory effects because of the disproportionate numbers of minorities and males with criminal records. Weeding out prospective housing residents with a criminal history may be unnecessarily restrictive and may not be the least nondiscriminatory way of serving a substantial and legitimate business necessity, especially if a housing provider’s records do not indicate that tenants with previous criminal backgrounds are unable to meet their lease obligations.
- Resident Screening and Credit Checks: A tenant’s credit worthiness and ability to pay rent is of fundamental importance to any housing provider. For this reason, many housing providers request a credit report for prospective tenants. While it is not unusual for housing providers to deny a prospective tenant based on a poor or incomplete credit history, such a housing practice may disproportionately affect recent immigrants who do not possess verifiable credit histories in the United States. Thus, if a prospective resident does not have a sufficient credit history, a housing provider may consider accepting additional forms of documentation from the tenant to support their ability to pay rent.
- Section 8 Vouchers: In jurisdictions where Section 8 voucher participation is voluntary, a housing provider’s withdrawal from the Section 8 voucher program may have a disparate impact on a protected class of people. Reasons for withdrawing from the program may include administrative difficulties or payment delays, and many housing providers do not necessarily refuse to accept vouchers because of a discriminatory intent. However, voluntarily opting out of the Section 8 voucher program may have a discriminatory effect on certain classes of people such as minorities, families with children, and persons with disabilities.
While tailoring housing practices to avoid potential liability under the FHA may pose a challenge, housing providers should review their policies to ensure that each policy is clearly a legitimate and significant business necessity, and that there are no alternative less discriminatory practices available to accomplish that same business necessity.