2023 Scorecard: Using Fair Housing Court Cases to Improve Your Compliance Efforts

Cases from the past year offer six important lessons.

 

 

• Ronald Reagan was in the last year of his presidency;
• George Michael’s “Faith” was the number-one song on the Billboard year-end chart;
• “Who Framed Roger Rabbit” was the year’s top-grossing film; and
• The average price of a gallon of gas was $0.90.

All of these things happened in 1988, which is the last time Congress made significant amendments to the federal Fair Housing Act (FHA). Three and a half decades later, the fundamental rules of the FHA remain the same: It’s illegal to discriminate on the basis of a person’s race, color, religion, sex, national origin, family status, or disability.

Regrettably, housing discrimination is still a major problem in the U.S. And litigation accusing landlords of committing it is at an all-time high. There were 33,007 fair housing cases filed in 2022, according to the National Fair Housing Alliance (NFHA), the highest number reported in a single year.

It’s a pretty safe bet that not all of these 33,000+ defendants are actually guilty. And among those who did run afoul of the law, chances are that many if not most did so inadvertently without intending to discriminate. While deliberate discrimination still exists, most landlords in America not only understand but also agree with the FHA’s equal housing objectives. The problem isn’t so much what the law says as what it actually means in real-life situations.

Example: Most landlords know that they’re obligated to make reasonable accommodations for individuals with disabilities to the point of undue hardship; the reason they get into trouble is that they don’t know how to determine whether a requested accommodation is “reasonable.” Unfortunately, you won’t find within the four corners of the FHA or its regulations an ironclad definition of “reasonable accommodations” that you can use to resolve all the situations you encounter in managing your property. The people who write statutes and regulations also understand that they can’t foresee every situation; so, they rely on the courts to determine how the rules apply in actual cases.

Bottom Line: If you want to know what the FHA really means, you must look to the court cases. While each case is different, the rulings establish general principles that you can then use to evaluate your own fair housing compliance efforts. Knowing how the cases get decided can also help you make legally sound judgments about what to do and not to do in actual situations.  

The problem is getting your hands on the information. Court cases aren’t easy to track down, let alone read and digest, especially if you’re not a lawyer. And, at a minimum of $700 per hour, you probably don’t have the budget to hire an attorney to do the analysis for you.

But what you do have is the Coach. As we do at the end of every year, we’ll give you a briefing of the key fair housing case rulings from 2023, explaining what you need to know about each case, including:

• What happened;
• Why the landlord got sued for discrimination;  
• How the case turned out; and
• The compliance lesson you can take away from the case.

WHERE THE SCORECARD CASES COME FROM

While tens of thousands of fair housing cases get filed each year, only about 100 actually make it to court and get officially reported. The vast majority of cases are abandoned, decided on a procedural technicality, or settled without a trial. Still others get screened out by the U.S. Department of Housing and Urban Development (HUD). Explanation: When somebody files a discrimination complaint, the HUD Fair Housing and Equal Opportunity (FHEO) office does a preliminary investigation. If the FHEO investigator finds “no reasonable cause” to believe that discrimination occurred, HUD drops the complaint; if it finds “reasonable cause,” the case goes forward to a HUD Administrative Law Judge (ALJ) or maybe a federal court.

But HUD ALJ cases aren’t widely reported. Consequently, our analysis is based on the relatively few cases that reach federal or state court directly via a lawsuit from an individual, fair housing organization, HUD, or another federal or state agency.

It’s also important to note that there are a number of fair housing settlements made each year. While significant, especially to the landlords that end up shelling out major settlement amounts, because settlements don’t address the merits of the case, they don’t contribute to the formation of new law. As a result, we don’t include them in the Scorecard.  

HOW THE CASES ARE DECIDED

Among the small handful of cases that get reported in the official court reporting digests, almost none of them result from an actual trial. Most reported cases are rulings on what are called “summary judgment” motions determining whether the claim should even go to trial. While this might sound like so much legal mumbo jumbo, summary judgment is the dynamic that drives fair housing litigation. As such, it has enormous implications for what, if anything, you’ll end up having to pay if you’re ever sued for a fair housing violation.  

Explanation: Once a fair housing complaint is filed, the landlord can make a motion for summary judgment asking the court to make a ruling based on the pleadings without holding a trial. The argument: There’s no point in holding a trial because the pleadings make it clear that we’re not guilty of an FHA violation.

Example: A University of Vermont student with a minor child applies for a two-bedroom apartment. The landlord denies the application, and the student sues for family status discrimination. The landlord moves for summary judgment, contending that the building is reserved for students only. And since the minor child isn’t a student, she’s not qualified. The Vermont court agrees and dismisses the student’s family status discrimination claim. “The undisputed facts” show that the landlord “declined to process plaintiff's housing application because the. . . Apartments were for students only and plaintiff's minor child was not a student. No reasonable person could conclude otherwise” [Spinette v. University of Vermont, 2023 VT 12].  

Winning on summary judgment enables the landlord to put the case to bed unless the tenant appeals. Losing the motion isn’t a final ruling on the merits. It just means that the tenant has enough of a case to get the right to go to trial and prove its claims. But in the real world, summary judgment is the turning point. Denial of summary judgment puts the tenant in the driver’s seat and forces the landlord to make a tough decision between risking a trial or paying money to settle the case (although the landlord can also appeal the denial).

Almost all of the cases in the 2023 Scorecard involved a summary judgment ruling.

6 KEY LESSONS FROM THE SCORECARD CASES

We found 84 reported 2023 cases in which a federal court had to decide whether a housing provider committed housing discrimination against a rental prospect or tenant. Of these, the landlord was found not liable in 51 cases and liable in 26; seven of the cases were split decisions. Here’s a breakdown of the key cases and their practical implications for your own compliance efforts.

Lesson #1: Refusing Housing Vouchers Is Source of Income Discrimination

While landlords won roughly two of every three cases in 2023, the most significant fair housing case of the year was a landlord loss. It involved what is rapidly becoming a major source of fair housing litigation, namely, source of income discrimination, which occurs when a landlord excludes an applicant or tenant who has the money to pay rent because of where that money comes from.

Although source of income isn’t a protected class under the FHA, the contention is that excluding recipients of child support, Section 8 vouchers, unemployment benefits, veterans benefits, etc., has a disparate and discriminatory impact on the disabled and people of certain races, national origins, etc., who disproportionately rely on these sources of income. Source of income is also a protected class under the fair housing laws of over 80 cities and 20 states.

The NFHA reports that there were 1,713 source of income discrimination complaints filed in the U.S. in 2022, a 39.8 percent jump from 2021 levels. That number is likely to rise again in 2023. The biggest of these is a case that began in January.

Situation: A nonprofit housing group brought a massive lawsuit accusing real estate agents, brokerage firms, management companies, and landlords of violating New York City and State source of income discrimination laws. Based on the use of testers, the group claimed that the defendants refused to accept CityFHEPS vouchers that enable prospective tenants with income at or below 200 percent of the federal poverty level to rent apartments. The defendants denied the allegations and challenged the group’s “standing”—that is, legal status to bring the case.

You Make the Call: Did the group have a valid claim for source of income discrimination?

Answer: Yes

Ruling: The New York court denied the defendants’ motion for summary judgment, concluding that there was ample evidence supporting the group's claims, including the alleged remarks of a leasing agent that the landlord was looking for an “excellent applicant” for a rent-stabilized apartment and wouldn’t accept CityFHEPS vouchers for the unit [Housing Rights Initiative, Inc. v. Elliman, Index No. 154472/2022, 2023 NY Slip Op 31496(U)(Sup. Ct. NY; 5/2/23)].

Takeaway: You have every right to establish income criteria and screen prospects to ensure they meet them. If they’re not financially qualified, you may reject them. What you may not do is reject those who do meet your income criteria because of the kind of income they have. More specifically, you can’t exclude qualified prospects simply because they’re unemployed, hold housing vouchers, or receive other forms of financial assistance other than wages. Avoiding source of income discrimination means being prepared to accept not just wages but any and all forms of legal income.

The Elliman case also exposed potential blind spots in fair housing compliance training. There was evidence that real estate brokers turned away callers who indicated that they would be using vouchers to pay rent because they were seeking units in luxury buildings. You can’t afford to live in this property and should seek an apartment in a building where vouchers are accepted, the brokers allegedly said. These remarks violated fair housing laws banning statements indicating a preference or exclusion of persons from housing based on a protected class. You need to ensure that your own leasing agents don’t say or believe such things. 

DEEP DIVE

States that Have Banned Source of Income Discrimination

States that have adopted laws banning source of income discrimination in housing include:

• California
• Connecticut
• Colorado
• Delaware
• District of Columbia
• Hawaii
• Maryland
• Massachusetts
• Minnesota
• New Jersey
• New York
• North Dakota
• Oklahoma
• Oregon
• Rhode Island
• Texas (covers homeowners associations only)
• Utah
• Vermont
• Virginia
• Washington
• Wisconsin (doesn’t cover housing vouchers)

Lesson #2: Fair Housing Advocacy Groups Must Have Standing to Sue

HUD has limited enforcement resources. Litigation by nonprofit fair housing rights groups acting as “private attorneys general” is an integral part of FHA enforcement. Roughly 55 percent of this year’s Scorecard cases, including the Elliman case, were brought by such groups. Moreover, many of the cases brought directly by rental applicants and tenants relied on evidence gathered by these groups, including via the use of testers. This activity raises issues of what’s called “standing.”

Explanation: There are constitutional limits on who can file a lawsuit. To bring a case, a plaintiff must have an actual injury that a court can remedy. This is called the rule of “standing.” Two kinds of persons have standing to file a lawsuit under the FHA: an “aggrieved person” and HUD or another government agency. The definition of “aggrieved person” includes organizations like fair housing groups. But to establish standing as an organization, the group must show that:

• It suffered an “injury in fact” that’s actual and not just conjectural or hypothetical;
• There’s a causal connection between the injury and the conduct complained of; and
• It’s “likely” and not just “speculative” that a favorable court ruling will redress the injury.

A key 2023 federal case sheds light on the first prong of the organizational standing test.

Situation: The Louisiana Fair Housing Action Center (LaFHAC) sued a landlord for excluding individuals with a criminal record in violation of the FHA based on evidence gathered by testers. To establish “actual injury,” the group claimed that it had to “divert significant resources” to counteract the landlord’s discrimination, including time and money for investigation and education and outreach that it would have used for other activities.

You Make the Call: Did the group suffer “injury in fact” for purposes of organizational standing?

Answer: No

Ruling: The Fifth Circuit of Appeals concluded that LaFHAC lacked standing to bring the lawsuit. Investigation, education, and outreach weren’t diversions but rather “routine activities” for the group. So, dedicating resources to these activities in no way impaired the group’s capacity to operate or achieve its fair housing mission, the court reasoned [La. Fair Hous. Action Ctr., Inc. v. Azalea Garden Props., L.L.C., 2023 82 F.4th 345 (5^th Cir., Sept. 14, 2023)].

Takeaway: The Azalea Garden ruling is in line with the organizational standing rules followed in other circuits. Bottom Line: When a fair housing group or its members don’t suffer direct injury, it must establish organizational standing. Diversion of resources is a legitimate way to do that. However, the diversion must force the cancellation, postponement, or otherwise curtail core activities; simply engaging in those activities isn’t a diversion.

Lesson #3: Blanket Criminal Record Ban May Be Disparate Impact Racial Discrimination

Possessing a criminal record isn’t a protected class under the FHA. However, statistics show that a disproportionate number of African Americans are arrested and incarcerated in the U.S., as compared to white persons. As a result, a rental policy of excluding any person with a criminal record may constitute what’s called “disparate impact” discrimination against African Americans and nationalities with disproportionately high arrest and prosecution numbers. Six of the 84 cases in this year’s Scorecard included allegations of FHA discrimination on the basis of criminal record. Criminal record discrimination may also be banned under state or local fair housing laws.

Situation: A Michigan landlord rejected an otherwise qualified African-American applicant after an online check revealed that he had been convicted of a felony in connection with a domestic disturbance four years earlier. While acknowledging the conviction, the applicant insisted that he was fully rehabilitated. But the landlord stubbornly refused to budge from the community’s policy of not accepting anyone with a criminal conviction while stressing that it doesn’t “consider cases individually.” The applicant and a local fair housing group sued for racial discrimination. The landlord moved for summary judgment, claiming that the statistics about arrest and incarceration rates of African Americans nationwide were too general to prove disparate impact in a particular community.   

You Make the Call: Did the applicant have a valid claim for racial discrimination under the FHA?

Answer: Yes

Ruling: The Michigan federal court rejected the motion and allowed the applicant to take his claims to trial. “Even countrywide statistics may be sufficient to plead a disparate impact claim where a challenged policy has a clearly disproportional effect on a protected class,” the court reasoned. Besides, the applicant also cited state and county statistics showing the same disproportionate rates of minority arrests and incarceration [Lyman v. Montclair at Partridge Creek, LLC, 2023 U.S. Dist. LEXIS 166464].

Takeaway: As a landlord, you have a responsibility to ensure your community is safe and secure. But while a blanket exclusion based on criminal history might look like a legitimate, nondiscriminatory safety policy, in the view of HUD and many courts, it has a discriminatory impact based on race. By the same token, HUD and DOJ guidelines also say that landlords can reject or evict a person that poses a “direct threat” to the health and safety of other tenants. Rule: Having a criminal record isn’t automatic proof that a person is a direct threat. You must do an individualized assessment of each case based on:

• How long ago the conviction occurred;
• The nature of the crime for which the person was convicted—arrests without a conviction don’t count;
• Evidence of rehabilitation; and
• Other evidence related to whether the person poses a threat to safety.

Lesson #4: Liability Is Based Not Just on What Policies Say But How They’re Enforced

In determining whether a landlord has committed discrimination, HUD, fair housing groups, and courts consider not only what policies say but how they’re actually enforced. Rental policies or restrictions that appear neutral on their face will constitute discrimination to the extent they’re selectively enforced based on race, etc. An Idaho landlord learned this lesson the hard way.

Situation: An Idaho landlord adopted a strict policy banning visitors from parking in spots reserved for tenants. In November 2016, two service providers, one black the other white, visited a tenant at the community. Upon returning to their vehicles, they discovered that the black service provider’s car had been booted while the white service provider’s car had not—even though they had both parked in similarly marked spaces.  

You Make the Call: Did the fair housing group have a valid claim for racial discrimination?

Answer: Yes

Ruling: The Idaho federal court had no problem in relying on this incident as evidence in refusing to dismiss a case alleging a pattern of discrimination over a six-year period. There was also evidence of an earlier incident where the landlord booted the car of a Black visitor who briefly parked in a tenant’s space. When she asked about having the boot removed, the landlord’s parking enforcement agent indicated that he had been “specifically instructed to show no leniency toward the African residents in enforcing the parking rules” [Intermountain Fair Hous. Council, Inc. v. Tomlinson & Assocs., 2023 U.S. Dist. LEXIS 57012].

Takeaway: It’s not enough that parking and other community rules apply to everybody. You also must ensure that those rules are enforced in a consistent and even-handed manner, regardless of the violator’s race, sex, etc.

Lesson #5: Overly Broad Restrictions on Assistance Animals Is Disability Discrimination

Continuing previous patterns, most of the 2023 Scorecard cases alleged discrimination on the basis of disability; most of the disability discrimination claims alleged failure to make reasonable accommodations, specifically with regard to assistance animals. Explanation: The FHA requires landlords to make reasonable accommodations “necessary to afford a person with a disability the equal opportunity to use and enjoy a dwelling.” Waiving a no-pets rule so that a disabled rental applicant or tenant can keep an assistance animal is the classic example of a reasonable accommodation.

But allowing a tenant to keep an assistance animal is only one issue; it’s also important to understand the rules that apply after that. Landlords have the right to hold tenants responsible for ensuring that their assistance animals obey safety, sanitation, noise, property, and other community rules. However, they may not impose unreasonable restrictions.

Situation: A Philadelphia apartment community makes allowances to its longstanding no-pets policy for assistance animals, as long as tenants meet certain strict rules:

• Assistance animals are allowed only in freight and not passenger elevators;
• Assistance animals must wear a bark-suppressing collar at all times;
• Tenants must pay deposits on their assistance animals and maintain $1 million in insurance naming the landlord as a beneficiary; and
• Tenants guilty of more than three violations forfeit their rights to keep their assistance animal.

A tenant who owns an assistance animal sued the landlord, seeking punitive damages for disability discrimination.

You Make the Call: Did the tenant have a valid claim for refusing to make reasonable accommodations?

Answer: Yes

Ruling: The Pennsylvania federal court denied the landlord’s motion for summary judgment. To qualify for punitive damages, a plaintiff must show that a landlord’s denial of a reasonable accommodation “involves malicious intent or reckless or callous indifference” to the rights of others. The court concluded that the facts the tenant alleged were enough to allow a court to reach that conclusion and gave her the green light to try to prove those claims at trial [United States v. Dorchester Owners Ass’n, 2023 U.S. Dist. LEXIS 12432].

Takeaway: HUD Guidelines expressly state that you can’t make individuals with disabilities pay extra fees or deposits as a condition for receiving a requested accommodation. That includes charges for an assistance animal necessary to assist a person with a disability. In other words, if it’s reasonable for the applicant or tenant to have the animal, you must allow it without any additional charges. However, what you can do is hold the tenant responsible for any actual damage the animal does to the apartment after the lease ends. You can also hold the tenant accountable if the animal violates building rules, such as by creating a danger or nuisance to others in the building.

Lesson #6: Landlords Can Be Liable for Tenant-on-Tenant Harassment

Landlords may be liable for discrimination if they harass or allow their leasing staff, managers, and other agents to harass tenants on the basis of race, etc. Recent cases pose the controversial question of whether landlords can also be liable for the harassment committed by their tenants. The two federal courts that had specifically addressed this issue until now have reached conflicting results. In 2023, another federal court weighed in on the question of tenant-on-tenant liability.

Situation: A tenant claimed he was sexually harassed by his next-door neighbor, citing a series of incidents in which the neighbor allegedly:

• Insulted him in Spanish;
• Blocked his path so that his chest touched the neighbor’s chest;
• Leered at his crotch area;
• Snuck up behind him; and
• Told gardeners to use a leaf blower to blow dust toward his apartment.    

The tenant claimed that all of this amounted to a hostile housing environment and sued the landlord for sex discrimination.

You Make the Call: Did the tenant have a valid claim for tenant-on-tenant harassment?

Answer: No

Ruling: The California federal district court granted the landlord’s motion for summary judgment. A landlord could, in fact, be liable for a hostile housing environment, as long as tenants can show they were subjected to: (1) unwelcomed (2) sexual harassment that was (3) “sufficiently severe or pervasive so as to interfere with or deprive the tenant of [his] right to use or enjoy [his] home.”

However, the court continued, the neighbor’s alleged conduct in this case, while no doubt annoying, wasn’t severe enough to prove a hostile housing environment interfering with the tenant’s enjoyment of his apartment [Pardo-Pena v. Spector, 2023 U.S. Dist. LEXIS 13904, 2023 WL 2202515].      

Takeaway: The issue of landlord liability for tenant-on-tenant harassment remains unresolved, except, arguably, in the Second Circuit, which has rejected the theory. While ultimately decided in favor of the landlord, the Pardo-Pena ruling opens a new dimension in the controversy by likening housing to the workplace and exposing landlords to the risk of liability for “hostile housing environment” the way an employer can be liable for a “hostile work environment.”

Bottom Line: Regardless of what the law says, landlords have not only a moral but business imperative in seeking to provide a respectful housing environment in which no tenant has to endure harassment of any kind. Best practice: The starting point for preventing tenant-on-tenant harassment is to create and implement a written anti-harassment policy as part of your community rules. Such a policy should include seven elements:

• A statement of policy that condemns harassment and expresses your company’s commitment to provide a respectful housing environment enabling all tenants are to enjoy their tenancy;
• A clear and broad definition of harassment as including any “action, conduct, or comment that can reasonably be expected to cause offense, humiliation, or other physical or psychological injury or illness to a tenant or other person,” accompanied by a list of examples;
• A process or mechanism that tenants can use to report the harassment they experience or witness;
• Assurances that tenants will suffer no retaliation of any kind for reporting harassment in good faith;
• Protocols and procedures for responding to, investigating, and resolving the harassment complaints that you receive;
• Language indicating that tenants will be held accountable for any harassment they’re found to have committed; and
• Clarification that filing a harassment complaint with you doesn’t take away a tenant’s right to file a housing discrimination complaint (to the extent the harassment is based on race, sex, etc.) with HUD or state fair housing agencies.

Coach’s Tip: For more guidance on this topic, as well as a model policy, see our May 2021 lesson, How to Limit Liability for Tenant-on-Tenant Harassment