Evaluate Your Occupancy Standards to Prevent Discrimination Claims

In this month’s lesson, Fair Housing Coach will take a careful look at occupancy standards, a topic that remains a source of concern for housing communities, and in recent years, has triggered a series of fair housing complaints. Occupancy standards remain a hot topic because, if not properly considered, they can restrict the housing choices of families with children and lead to a host of problems. As a general rule, fair housing law doesn’t prevent communities from maintaining reasonable occupancy policies, but it’s unlawful to set overly restrictive occupancy standards that exclude families with children. The question is, what’s reasonable?

To answer that, let’s take a look at how the occupancy standard baseline was set, what most communities use as a rule of thumb when setting their policies, and the factors HUD uses when considering if a policy is reasonable.

Across the country, communities have come to rely on the industry standard—“two persons per bedroom”—as a reasonable occupancy standard. It comes from HUD in what’s known as the “Keating memo,” which states that the agency considers two persons per bedroom to be a reasonable standard. But, as the memo points out, that’s not a hard-and-fast rule, and the agency will consider other factors, including bedroom size and other “special considerations,” which may make the two-person/bedroom standard unreasonable under the circumstances.

“The Keating memo says two people per bedroom, but it’s a rebuttable presumption,” says fair housing attorney Theresa L. Kitay. “It’s considered the safe harbor occupancy, but that is not the case. If a complaint is filed, HUD is going to consider all of the other things in the Keating memo, including the size of the apartment, the age of the children, etc.”

Indeed, lately the two-person/bedroom standard has been coming under fire. In recent months, fair housing advocates have challenged the use of the two-person/bedroom standard where state or local occupancy laws may allow more people to live there based on square footage and other factors. So far, a couple of cases have settled, and it may take years to resolve any still pending.

In the meantime, your company’s occupancy policy has a higher risk of being challenged by fair housing groups if you stick with a rigid one-size-fits-all two-person/bedroom standard without considering local occupancy standards, unit size, and other factors. To avoid being the next test case, consider evaluating your occupancy policy now.

In this issue, we’ll suggest six rules to help your community avoid triggering a fair housing complaint based on your occupancy standards. Then you can take the Coach’s Quiz to see how much you’ve learned. But first, let’s take a look at fair housing law and what is considered reasonable policy for occupancy standards as outlined in the Keating memo.


The federal Fair Housing Act (FHA) prohibits discrimination by direct providers of housing based on six key characteristics, one of which is familial status, meaning the presence of a child under the age of 18. The law is designed to protect families with children, as well as anyone who has legal custody or written permission to have a minor child living with him or her. This law also applies to pregnant women and anyone in the process of obtaining legal custody, such as through adoption or divorce proceedings.

The only exception to familial status rules is if the community qualifies as “housing for older persons” under the FHA’s strict set of rules. Communities with this designation may operate as “senior” housing for persons 55 years and older. With the exception of senior housing, it’s unlawful to exclude or otherwise discriminate against anyone because there is a child under 18 in the household.

Fair housing law permits communities to set reasonable occupancy standards, but it’s unlawful for occupancy standards to exclude families with children or to unreasonably limit the ability of families with children to obtain housing.

So what does the FHA say about occupancy standards? Here’s where it gets complicated. The FHA itself doesn’t say much, although Congress has recognized that many state and local laws limit occupancy based on number of people or square footage.

“The problem is that it is all over the map,” says Kitay. “It is hard to advise anyone other than to say the strict two-bedroom policy is not likely to be immune from challenge.” She says that you must consider the particular characteristics of the property and have different policies throughout the portfolio. There is no “one size fits all” policy.

Instead of adopting a national occupancy standard, the FHA defers to state and local law by providing that nothing in fair housing law “limits the applicability of any reasonable local, State, or Federal restrictions regarding the maximum number of occupants permitted to occupy a dwelling.” However, fair housing law doesn’t limit using applicable codes, nor does fair housing law require property managers to adopt the square-foot standard contained in some of these codes.

Subject to applicable state and local laws, it’s up to each community to set reasonable occupancy standards. But what’s reasonable? Since the FHA itself didn’t answer that question, it’s been up to HUD, as the government agency charged with enforcing fair housing, to come up with an answer.

Because of confusion about what occupancy restrictions were reasonable under the FHA, a HUD official in 1991 issued the “Keating memo,” which was originally intended as internal guidance to enforcement personnel reviewing discrimination claims involving occupancy standards. After some legal wrangling, Congress in 1998 ordered HUD to adopt the “specific and unmodified standards provided” in the Keating memo as the agency’s official policy.

The Keating memo provides that, as a general rule, HUD considers an occupancy policy of two people per bedroom as reasonable under the FHA. Nevertheless, the memo emphasized that the two-person/bedroom standard was not intended as the only standard, and HUD wouldn’t determine that a community’s occupancy standards are reasonable based solely on the number of people permitted in each bedroom.

According to the memo, HUD may examine any nongovernment restriction on occupancy to determine whether it operates unreasonably to limit or exclude families with children. If bedrooms are unusually large, for example, then it may be reasonable for more than two people to occupy a bedroom. Also, if an apartment is unusually large or has extra rooms, such as a den, an office, or a loft, they may be treated as a bedroom for occupancy purposes. In addition, HUD will look at the age of children, configuration of the unit, and any physical limitations of the housing—such as the capacity for septic, sewer, or other building system—to determine whether an occupancy policy is too restrictive.



Rule #1: Examine Your Current Occupancy Standards

It may be an unexpected task, but it’s an important one. Increasingly, communities have been coming under fire by fair housing advocates for enforcing one-size-fits-all occupancy standards. Since HUD’s two-persons/bedroom occupancy standard is subject to exceptions, adopting an across-the-board standard of two persons per bedroom, without considering factors like size and configuration could lead to a fair housing complaint.

EXAMPLE: In February 2018, two fair housing advocacy groups filed a joint complaint against a residential property management company that owns and/or manages apartment complexes in a number of states citing familial status discrimination. The complaint alleges that the property management company enforces a two person per bedroom maximum occupancy policy at a number of its properties in Michigan and Indiana regardless of the size or configuration of the apartment unit, the size of the unit’s bedrooms or other living areas, the age of the children, or any other factor. Based on fair housing testing, a couple with three children could not rent a two-bedroom unit, even though such units were available for rent. According to the complaint, this is an unreasonable policy that both excludes and limits the number of families with children at the property and is more restrictive than the occupancy limitations stated by local applicable law, which allows more than two persons per bedroom in a number of apartments. 

In the current climate, communities should review their occupancy standards as soon as possible to avoid fair housing trouble. It may take some time to complete a full review, but in the meantime, you could take an interim step—adopting what’s known as the “2+1” standard—that is, two persons per bedroom plus one person per unit. That would allow three people in a one-bedroom unit, five people in a two-bedroom unit, seven people per three-bedroom unit, and so on. It may not solve all your problems, but it may make it less likely for you to draw the attention of fair housing advocates looking for the next test case.

Rule #2: Check Your State and Local Codes

Find out about applicable state and local codes, since some codes include an occupancy provision. Depending on where you’re located, state or local occupancy standards may be based on a minimum square footage per person or minimum square footage per bedroom per person. Federal fair housing law generally defers to reasonable state and local restrictions on occupancy, so if your occupancy policy conforms to the codes, it will be difficult for your policy to be challenged.

In the Keating memo, state and local law is listed among the factors that HUD will consider to determine whether a community’s occupancy standards are reasonable. The memo provides that a community is not immune to a fair housing complaint just because its occupancy standards are based on state or local requirements. However, the memo states that HUD will consider such government requirements as “a special circumstance tending to indicate that the housing provider’s occupancy policies are reasonable.”

It may take some legwork to determine just what state or local occupancy codes apply to your community. Any given property may be subject to one or more different codes that have something to say on occupancy, including fire codes, building codes, zoning codes, and property maintenance codes, to name a few. If it’s based on a national standard, you’ll also have to find out which version of the code has been adopted in your state or local area, since it may not reflect updates to the code since then. Because of differences in state and local laws, it may be necessary to consult an attorney familiar with the laws where your community is located for help in reviewing your occupancy standards.

Coach’s Tip: If you operate communities in more than one state, or in several locations within a state, it’s advisable to review all the applicable state or local laws that may apply to each community. It may be difficult to come up with a standard policy for all your communities, but to avoid fair housing problems, it may make sense to start with the least restrictive one—and then make adjustments, where necessary, based on size or layout for particular units or floor plans.

Rule #3: Set Limits on the Number of People—But Not the Number of Children

Occupancy standards can come under fire when they’re used to intentionally discriminate against families with children. That can happen when the occupancy standards specifically restrict the number of children—as opposed to the number of people—who may live in units of certain sizes. According to the Keating memo, “an occupancy policy which limits the number of children per unit is less likely to be reasonable than one which limits the number of people per unit.” Telling people that children aren’t allowed in one-bedroom units, for example, could lead to a discrimination claim based on familial status.

EXAMPLE: In June 2018, HUD filed charges against a Mobile, Ala.-based management company accusing it of violating the FHA after it refused to rent a single-family, three-bedroom house to a woman with three young children. The woman had filed a complaint to HUD alleging that she was denied housing because she had more than two minor children. Tests conducted by a local housing advocacy group found that the management company refused to rent to testers who claimed to have more than two minor children. HUD’s charge on behalf of the woman alleges that the management company’s rental policies discriminate against families with children by limiting the number of children to two or fewer, even when rental homes have three or more bedrooms and are large enough to accommodate families with more than two children.

Even when applying a neutral occupancy policy, such as HUD’s two-person/bedroom standard, it’s important to avoid any suggestion that you’re using your occupancy standards as an excuse to cover up illegal discrimination against families with children. Here are some red flags, identified in the Keating memo, that could be used against you:

  • Making discriminatory statements;
  • Adopting discriminatory rules governing common areas;
  • Taking other steps to discourage children from living there;
  • Enforcing the occupancy policy only against families with children; and
  • Having a history of marketing the community as “adults only.”

Another red flag: Limiting the total number of units that the community is willing to rent to families with children. In a community with all two-bedroom units, the memo states that it may be reasonable to adopt a policy allowing four people per unit, but the community could face a fair housing claim if the landlord refused to rent to a family of four—consisting of two adults and two children—because 20 of its 30 units are currently occupied by families with children.

Similarly, it’s important not to impose any special requirements or conditions on tenants with custody of children. So, it’s unlawful to locate families with children in a single area or portion of a complex or limit access to recreational services provided to other tenants because of the presence of children.

Rule #4: Consider the Age of Child When Calculating Occupancy

Be careful about how you apply your occupancy standards when dealing with families with babies and other very young children. HUD’s Keating memo says that the age of the children involved in a particular case may make it unreasonable for a community to limit occupancy based on the two-people/bedroom standard. As an example, the memo states that it may be reasonable to deny a one-bedroom unit to an adult couple with a teenager, but not to a couple with an infant who want to occupy a one-bedroom unit when both the bedroom and unit are large.

EXAMPLE: In May 2018, the owner and manager of a California apartment complex agreed to pay $20,000 to resolve allegations of discrimination against families with children by prohibiting children from living at the complex and enforcing a two-person occupancy limit on a one-bedroom apartment. According to the complaint filed by the California Department of Fair Employment and Housing, a husband and wife with a newborn were asked to move out of the apartment because “children weren’t allowed” and that they had exceeded the “two persons” limit for their one-bedroom. In addition to the monetary settlement, the owners and property managers have agreed to change their policies to allow children tenants, revise overly restrictive occupancy standards, undergo fair housing training, and develop and distribute anti-discrimination and fair housing policies.

EXAMPLE: In August 2018, HUD charged the owners of an apartment complex in Sioux Falls, S.D., and their property management company with housing discrimination for refusing to let a couple and their newborn baby stay in their one-bedroom apartment because of the owner’s occupancy policies. Shortly after the new baby arrived, the mother asked representatives of the property management company how long the two adults and new baby could stay in their one-bedroom apartment and were informed that because there were now three people occupying the apartment, they would have to move to a two-bedroom unit. The owners and property managers assert that their policy (two-person-per-bedroom) is required by the Sioux City occupancy code; however, HUD’s charge alleges that the city code is more flexible than the owners’ policy and allows that other areas beside bedrooms may be considered for sleeping and occupancy purposes. The couple and their baby were denied the opportunity to remain in their unit, and moved to another complex. The case is awaiting trial.

When it’s a current resident who adds a baby to the household, communities often give the family a certain period of time—such as the end of the lease term—to move to a larger unit. Consider holding off for at least a year—regardless of when the lease term ends—when a child under the age of 1 (or even 2) joins the family, whether through birth, adoption, or some other means. Often the triggering event in discrimination claims occurs when the family’s happy news of having a baby is greeted with an eviction notice because the baby pushed the family over the occupancy limit for their current unit.

Coach’s Tip: Even if you don’t think it’s appropriate, you may not require male and female children, regardless of their age, to have separate bedrooms. Similarly, you may not require adults and children of either gender to have separate bedrooms.

Rule #5: Consider the Physical Limitations of Building Systems

When reviewing your occupancy policies, the physical limitations of the building itself may provide a substantial, legitimate, nondiscriminatory reason for keeping a lid on the number of people allowed to live in the building.

In addition to the size of the bedrooms and overall size and configuration of the unit, the Keating memo states that HUD may examine other limiting factors identified by the community, such as the capacity of the septic, sewer, or other building systems. That means that HUD will consider the age or capacity of the building and other physical limitations, along with the size of the bedrooms and overall size and configuration of the unit, to determine whether the community’s occupancy standards are reasonable.

Consider the age and condition of the building, along with the age and condition of building systems, including water and sewage capacity, power supply, heating and cooling systems, and the like. Determine the original capacity of these systems and whether there’s been any change since then, either an upgrade to increase capacity, or deterioration that would decrease capacity.

Rule #6: Document the Reasons for Your Policy to Demonstrate Compliance

The point of reviewing your occupancy standards is to ensure that they don’t have an unreasonable discriminatory effect on families with children. Whether it’s based on HUD’s two-person/bedroom rule, or some other criteria, you should be prepared to show that you have substantial, legitimate, nondiscriminatory business reasons for your occupancy policy.

Review your floor plans and the configurations of the units, bearing in mind the following factors listed in the Keating memo as important to determine whether the general two-person/bedroom standard would be reasonable under the circumstances.

Size of bedrooms and unit. According to the Keating memo, the size of the bedroom could make it reasonable to allow more or fewer than two people per bedroom. The memo offered two examples involving a family of five who wanted to rent a two-bedroom unit. In the first case, the community could face a discrimination charge if it refused to allow the family to live in an apartment with two large bedrooms and a spacious living area, but not if the family wanted to rent a small two-bedroom mobile home.

The size of the bedrooms could also be a factor in determining whether it’s reasonable to allow fewer than two people per bedroom. If, for example, a mobile home was advertised as a two-bedroom unit, but one bedroom is extremely small, depending on all the facts, the memo stated that it may be reasonable to limit occupancy of the home to two people.

Configuration of unit. Under some circumstances, fair housing law may require a community to allow more than two people per bedroom based on the configuration of a unit. To illustrate, the Keating memo offered two situations where a family of five, consisting of two adults and three children, wanted to live in a two-bedroom unit. In the first example, the community could face a discrimination claim if it applied a two-person/bedroom standard to a unit that had two bedrooms plus a den or study. In the second, a discrimination claim might not be justified, depending on other factors, if the family was turned away from a two-bedroom unit that didn’t have a study or a den.

Based on these examples, it’s important to look at your floor plans to determine whether there’s another room or area not designated as a bedroom—such as an office, den, alcove, or loft—that may be counted as a sleeping area. Depending on its size or shape, it’s a good idea to adjust your occupancy standards to add one or more people allowed to live in the unit to avoid accusations that your occupancy standards are too restrictive.

Andrea Brescia is a New Jersey-based editor who writes for housing-related publications and organizations.

Coach Source

Theresa L. Kitay, Esq.: Attorney at Law, Oak Island, NC; The Fair Housing Institute, Inc.; www.fairhousinginstitute.com.

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November 2018 Coach's Quiz