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Fair Housing Alert: Did a D.C. Court Just Make it Okay for Landlords to Discriminate?

The answer is still no, but a recent ruling may make it easier for Landlords to defend against Fair Housing Act (“FHA”) lawsuits alleging acts of unintentional discrimination with a discriminatory effect.  On Monday, the U.S. District Court for the District of Columbia issued its opinion in the case of American Insurance Association, et al. v. U.S. Department of Housing and Urban Development, et al. (“AIA v. HUD”). First, some context: if you are reading this, you are likely familiar with the FHA.  Under the FHA, landlords cannot refuse to rent to or negotiate with a person because of that individual’s inclusion in a particular protected class. Landlords cannot discriminate against a person in the terms, conditions or privileges of sale or rental, or in in the provision of services or facilities to those protected class individuals.  “Protected class” includes race, color, religion, national origin, sex, familial status and handicap.  Some jurisdictions have even broader protected classes. There are essentially two broad categories of discrimination relevant here:

1. Intentional discrimination, for example, refusing to rent to people from a certain country, and

2. Unintentional discrimination with discriminatory effects, such as having the misguided policy of banning “odiferous cooking,” when this policy may discriminate—in effect—against Indian nationals or others who enjoy using traditional spices.

Historically, it has been less than certain whether landlords can be liable not only for intentional acts of discrimination, but for acts with discriminatory effects as well.  HUD tried to change that in 2011.  It issued a rule to “prohibit housing practices with a discriminatory effect, even where there has been no intent to discriminate.”  This was called the “Disparate-Impact Rule,” and it was the main point of contention in AIA v. HUD. In brief, AIA brought a lawsuit against HUD, challenging the “Disparate-Impact Rule.”  The Court ruled against HUD in this case and invalidated HUD’s Rule.  The Court found that the FHA prohibits intentional discrimination only.  HUD exceeded its authority by trying to also create liability for discriminatory effects claims. The result in this case signals a sea change.  To date, eleven Circuit Court of Appeals throughout the country have found that the FHA includes discriminatory effects claims.  As the D.C. Court notes, however, all eleven of those decisions came before the Supreme Court decision in Smith v. City of Jackson.  There, the Supreme Court made it clear that the availability of discriminatory effects liability “turns on the presence, or absence, of effects-based language.”  The Court in this case found no such “effects-based language.”  Further, this U.S. District Court for the District of Columbia is not bound by the decisions of those other Courts.  This case in conjunction with Smith, could signal a shift towards courts’ excluding discriminatory effects liability under the FHA. So, where does this leave us?  Despite the outcome of this decision, we will advise our clients to exercise the utmost caution going forward.  First, the Supreme Court is weighing this very issue in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, which is likely to be decided this term.  Secondly, as a practical matter, you are better off avoiding practices leading to a discriminatory effect.  This invites lawsuits by tenants who believe the alleged discrimination was intentional.  It of course goes without saying that you should continue do everything reasonably within your power to discourage intentional discrimination at your properties. John Raftery website head shotOur office is available to answer any of your questions or concerns on how this recent decision may affect your specific property.  Please contact John Raftery at 240.507.1702 or by e-mail at jraftery@offitkurman.com. In the meantime, we will continue to advise our clients as this issue develops.    

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