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Fair Housing & Discrimination – Part II

Part I of this article asked – May a landlord choose to reject all tenants receiving Section 8 rental subsidies without violating Fair Housing Laws?

In brief, the response to that question was that Fair Housing laws do not make all discrimination illegal. As far as this author is aware, there is no explicit prohibition within federal or state Fair Housing laws prohibiting discrimination against persons receiving Section 8 subsidies. Fair Housing laws make it unlawful to discriminate against persons based upon their membership in a protected class.

Part II discusses four discriminatory impact cases in detail. Courts in some jurisdictions have concluded that the practice of discriminating against Section 8 tenants does have a discriminatory effect on protected classes and is therefore prohibited. The disparate impact theory has ramifications beyond Section 8 subsidies and is an important concept for any landlord.

In the 1996 case of Williams v. 5300 Columbia Pike Corporation, 103 F.3d 122 (4th Cir.(Va.) 1966) a housing cooperative converted itself into condominiums. Under the old housing cooperative, the occupants did not own their units. Instead, the housing cooperative leased units to the members of the cooperative. For financial reasons, the housing cooperative converted to condominiums.

As part of the conversion, the occupants had an opportunity to buy their unit from the cooperative. Some of the occupants were unable to obtain financing to purchase their units. The plaintiffs, all of whom were black and one of whom was disabled, sued asserting that the conversion plan disproportionately injured groups protected by Fair Housing laws as those laws prohibit discrimination based on race and handicap. Plaintiffs argued that though the conversion plan was facially neutral, it adversely affected blacks and the handicapped. Plaintiffs presented statistics that ethnic minorities were less successful in purchasing their units than white persons.

The appellate court agreed with the trial court’s dismissal of the claim: “Crudely stated, the conversion placed only one obstacle between a resident and the purchase of his or her unit(s): money.” The court further stated “although it is no doubt true that the ‘neutral criterium’ price may disparately impact blacks and the handicapped because they may, on average, be poorer than whites or non-disabled persons, this type of injury extends beyond the reach of the Fair Housing Act.” The court continued “. . . The Fair Housing Act is not so expansive that it would require sales or rentals of residences to those who concede that they are unable to pay the price faced by all other buyers or leasers. The Fair Housing Act does not purport to grapple with the truism that, all other things being equal, those with money are better off than those without it.” The court concluded that “. . . When the alleged injury to a claimant is solely the product of a facially neutral price . . . no claim based on disparate impact can be brought under the Fair Housing Act.”

Yet there is a growing body of precedent regarding policies which, on their face, did not discriminate against members of a protected class, nevertheless caused liability for the landlords because they had a discriminatory effect.

One of these cases is Gilligan v. Jamco Development Corp.,108 F.3rd 246 (C.A.9 1997), in which an owner of an apartment complex refused applications from all prospective tenants who received benefits from the federal Aid to Families with Dependent Children program (AFDC). An appellate court reversed the trial court’s dismissal of the claim stating among other things, that even if the rejection of tenants who received the subsidy is neutral on its face, it could have the effect of discriminating against families. The appellate court found that the plaintiffs had stated (though not necessarily proved) a meritorious case.

Another discriminatory effect case is Ryan v. Ramsey, 936 F. Supp. 417 (S.D. Tex 1996) in which a landlord discriminated against persons receiving Social Security disability benefits. In rejecting the Defendant’s Motion to Dismiss, the court recognized the disparate impact theory.

A third case is HUD v. Ross, Fair Housing-Fair Lending (P-H) P25,075, 1994 WO 326437 (H.U.D.A.L.J.), in which the landlord refused to rent to persons receiving AFDC and Section 8 subsidies. The Plaintiffs brought a case based in part on the theory that refusal to accept the AFDC subsidies had a disparate effect on women. The administrative law judge in HUD v. Ross concluded that the rejection of tenants receiving the subsidies did have a disparate impact and was discriminatory against women.

These four cases don’t decisively answer the question asked by this article. In two of the cases, the landlord rejected tenants receiving AFDC subsidies – a practice which has the direct consequence of discriminating against families. In the third case, the landlord rejected tenants receiving Social Security disability benefits – a practice which directly discriminates against disabled persons. In two of the cases, the plaintiffs merely survived a Motion to Dismiss; they did not necessarily win. The one unabashed victory for the plaintiffs was from an administrative law judge decision, not a decision by a court. Nevertheless, the doctrine of disparate impact has ample support. Landlords should be mindful that practices which, on their face, are neutral amongst protected classes may still create liability because they have a discriminatory effect against certain protected classes.

A version of this article appeared in the Colorado REALTOR® News, the monthly publication of the Colorado Association of REALTORS®.


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