Preventing Fair Housing Claims During the Application Process
This month, we are going to discuss strategies to avoid fair housing trouble during the application process—beginning with initial contact and ending with approval or rejection of an application. Fair housing law prohibits communities from discriminating against prospects and applicants based on race and other protected characteristics. And each stage of the application process—showing units, filling out paperwork, performing credit checks, negotiating terms, and so on—has the potential to generate a fair housing complaint.
More than a quarter of the 10,154 housing discrimination complaints filed with HUD and local fair housing agencies alleged a discriminatory refusal to rent, according to HUD's most recent annual report on fair housing. More than half of the complaints involved alleged discriminatory terms, conditions, privileges, services, and facilities—a broad category that HUD says includes actions such as requiring African-American applicants to undergo credit checks, but not requiring white applicants to do the same. Accusations of misrepresenting the availability of units, steering, and discriminatory advertising add up to nearly 10 percent of complaints.
In this month's lesson, we'll give you seven rules to follow to help ward off fair housing trouble during the application process. Then, you can take the Coach's Quiz to see how much you have learned.
WHAT DOES THE LAW SAY?
The Fair Housing Act (FHA) prohibits housing discrimination based upon race, color, national origin, sex, familial status, disability, or religion. In addition, many state and local governments have expanded their fair housing laws to protect characteristics such as sexual orientation, marital status, ancestry, source of income, and age.
Under the FHA and accompanying HUD regulations, communities are prohibited from refusing to rent to prospects because of race, color, or other protected characteristics. That means you may not turn away prospects for discriminatory reasons.
Example: A California community recently paid $25,000 to settle a lawsuit in which it was accused of giving preference to female Caucasian tenants and refusing to rent to African-American males. The apartment owners allegedly ignored several telephone messages from an African-American single man when he responded to an advertisement for a studio apartment. After he showed up and submitted an application anyway, the owners allegedly ignored several more phone messages from the prospect, who was calling to ask the status of his application.
The prospect complained to a local fair housing group, which sent testers to the community. According to the lawsuit, two of the testers were single African-American males, who were treated the same way as the prospect. In contrast, the five white female testers all received active encouragement from one of the owners, according to the allegations. The resident manager reportedly made a special point of telling two of the female testers that 80 percent of his tenants were single women. In settling out of court, the owners did not admit liability.
In addition to banning overt discrimination, the law requires consistent treatment of all prospects, applicants, and residents. Communities must not impose different qualification criteria or application procedures—such as income standards, application requirements, application fees, credit analyses, or approval procedures—because of a protected characteristic, according to HUD regulations. Also, communities must not use different lease terms, such as those related to rental charges or security deposits, for discriminatory reasons. Consistency is key to preventing—and defending—fair housing complaints arising from claims of unequal treatment.
Example: A Georgia public housing authority (PHA) recently lost its bid to dismiss a racial discrimination claim filed by a convicted murderer who allegedly was denied housing. According to the complaint, the man, who was African-American, had been convicted of murder “for allegedly shooting a [C]aucasian man during a mutual combat altercation.” He had been released on parole and had no felony convictions, but the PHA rejected his application because of his criminal history, according to the PHA.
The man sued, accusing the PHA of treating him differently because his victim was white and he was African-American. He alleged that the PHA had rented units to at least two other African-American males who had “killed a man,” but that their victims were also African-American.
The PHA argued that being a convicted felon was not a protected class under the FHA and that it had a legitimate, nondiscriminatory reason to reject his application. But the court, in May 2008, refused to dismiss the case. To prove his FHA claim, the court noted, the man had to establish that race “played some role” in the actions of the housing authority. The court ruled that the man's allegations—that he was treated differently than were the two African-Americans whose murder victims were also African-American—made it inappropriate to dismiss the case at this stage of the proceedings [Parrott v. City of Union Point Hous. Auth., Georgia, May 2008].
The law also bans communities from making units unavailable or otherwise restricting prospects' housing choices for discriminatory reasons. According to HUD regulations, such unlawful steering practices include:
n Discouraging prospects from renting a unit because of a protected characteristic of the prospect or the people living in the community;
Exaggerating drawbacks or failing to inform any person about desirable features of a unit or the community; and
Assigning applicants to a particular section of a community or floor of a building because of race, color, religion, sex, handicap, familial status, or national origin.
In addition, fair housing law bans providing inaccurate or untrue information about the availability of units for discriminatory reasons. Such prohibited conduct includes indicating, through words or conduct, that an available unit has been rented, or limiting information about suitably priced available units, because of a prospect's race or other protected characteristic.
Example: A Chicago couple is in legal hot water for allegedly discouraging families with children from renting a one-bedroom unit. HUD recently charged the couple, the owners of a suburban Chicago community, with housing discrimination after a fair housing agency sent testers in response to a complaint it had received about the owners.
According to the allegations, testers posing as single mothers with one child were told that the unit available was very small and suitable only for one person, and they were not offered the opportunity to view the unit. Further, the testers who posed as single or married prospects with no children said that they were treated differently: They were never told that the unit was too small for two adults, and had received an opportunity to view the unit. In fact, the owners allegedly told one tester who posed as a single renter, “We want to make sure we have a quiet environment; no children, no smoking, and no pets” [HUD v. Giarelli, March 2008].
7 RULES TO PREVENT FAIR HOUSING CLAIMS DURING THE APPLICATION PROCESS
Rule #1: Establish a Written Policy for Processing Applications
Many fair housing complaints arise from misunderstandings between prospects and staff members about a community's policies for processing applications. Your community should develop a written policy that describes your application procedures and screening criteria. The written policy will help prevent claims from prospects who don't understand your policies. It also will demonstrate that your community maintains fair and reasonable standards, and support your efforts to ensure that your staff is applying the policies consistently.
Communities ought to have a written standard to inform applicants of the application process, according to fair housing trainer Carl York, vice president of Sentinel Real Estate Corp. The policy should describe the criteria that your community uses to select residents, including credit and rental history requirements, and the procedures to be followed. For example, York says, the policy should indicate whether your community uses an independent screening service, and how information about credit, income, employment background, and other screening criteria is obtained and used to determine when applicants are accepted. It also should describe how applicants are notified about approval or rejection of applications, and if an application is rejected, the reasons why and the source of that information.
To ensure that everyone knows about your policy and follows the process consistently, fair housing experts recommend that you:
Distribute the policy to your leasing staff;
Post the policy in your leasing office;
Give a copy to all prospects; and
Attach a copy to the rental application.
It's a good idea to require all prospects to sign a statement that they have seen or been given a copy of your policy. Keep the signed statements as proof that the prospect received notice of your policies.
COACH'S TIP: Make sure your policy reflects any state or local fair housing requirements. Check with your attorney about the law affecting your community—and ask him to review your screening criteria to ensure your policy complies with federal, state, and local requirements. In addition, ask him to keep you apprised of any state and local developments so you can keep your policy up to date.
Rule #2: Use a Standard Application Process
After developing your policy, establish a standard application process—from first contact through application approval or rejection—to ensure that all prospects and applicants are treated fairly and consistently.
When processing applications, apply your screening criteria to all applicants, and don't make exceptions for people you know or who seem trustworthy. If you do, you are providing ammunition to an accusation that your community holds others to stricter standards because they are members of a class protected by fair housing law. For example, suppose an owner rents a unit to a white friend without first performing a credit check according to community policy. Then the owner rejects the application of a Hispanic prospect who fails to meet community credit requirements. That applicant may accuse the owner of holding Hispanic applicants to higher credit standards than white applicants.
York recommends creating a checklist for the entire process and distributing it to your leasing staff. The checklist will help ensure that everyone is given the same information and that leasing agents are following the process consistently. It also may provide documentation, if needed, to defend your community against accusations of unfair treatment.
COACH'S TIP: When meeting with prospects, leasing agents should explain the application process—from screening through approval. Review the application with prospects and explain your community's requirements in terms of fees, deposits, and references. Ask every prospect to provide these items, and explain that applications can't be processed without them.
Rule #3: Use the Same Forms for All Prospects and Applicants
Develop a set of forms related to the application process—such as phone logs, guest cards, and application forms—and train your staff to use them for all prospects and applicants.
For example, create a phone log to record all telephone inquiries. At a minimum, the log should reflect the date and time of the call, the name of the prospect, the type of unit desired, the proposed move-in day, whether an appointment was established, and how the conversation was resolved.
Guest cards provide a record of every prospect visiting your leasing center. It should contain the prospect's name, the date and time of the call, and what the prospect is looking for—the number of bedrooms requested, number of occupants, desired move-in date, and any special requests. It also should detail the following:
Whether you offered the prospect an application and other materials, and whether he accepted it;
Whether you showed the prospect any units, and if so, which units you showed;
Whether weather conditions may have affected the number or location of units shown;
Whether the prospect submitted an application; and
If the prospect didn't accept an application or otherwise expressed disinterest in continuing the process, the reasons why.
When it comes to applications and lease forms, your options run the gamut, from standard preprinted forms to software programs, York notes. Standardized preprinted forms may be available from state realty boards or local apartment associations. If state or local laws in your area limit the questions that you may ask of applicants, or extend fair housing protections beyond those covered under federal law, it's a good idea to ask your local attorney to review a standardized form before using it, to ensure that it's up to date and complies with the law in your area.
Communities also may use software programs for application and lease forms. For example, York says, many communities across the country use Blue Moon Software, which is affiliated with the National Apartment Association in 40 states. Communities must be members of the National Apartment Association, pay an annual licensing fee, and pay fees for access to the copyrighted forms.
Rule #4: Train Staff to Treat All Prospects Professionally
To avoid fair housing trouble, remember that first impressions count. Starting with the first contact, train your staff to treat every prospect in the same professional manner. Of course, your community should outlaw discriminatory remarks, but even a brusque response on the phone or during an office visit could lead a prospect to believe that he is not welcome in a community. Even if not based on fact, the perception of a discriminatory attitude may lead to misunderstandings that culminate in costly fair housing litigation.
Train your staff to be polite and friendly over the telephone. York recommends developing a written telephone guide so that everyone who answers the phone:
Records the type of unit sought, the number of occupants, expected move-in date, whether there will be any pets, and whether there are any special requests;
Gets the prospect's contact information; and
Offers to set up an appointment.
Having written guidelines makes good sense to fulfill both business and record-keeping objectives.
Develop similar guidelines for handling Internet contacts, York advises. As fair housing investigations turn their attention toward online advertising, it has become important to provide consistent responses to Internet inquiries.
Train your staff to treat all prospects in the same professional manner during office visits. Ensure consistent treatment by asking for the same information from all prospects. And maintain a consistently courteous demeanor: If someone thinks that you are behaving differently with some people than you are with others, it could lead to a fair housing complaint.
COACH'S TIP: Fair housing advocates are increasingly focusing on claims of linguistic profiling—discrimination against a person based on how his voice sounds. Training your leasing staff to treat all phone prospects in a standard, nondiscriminatory manner will help prevent the impression that a prospect is being treated differently from others because of the way his voice sounds. If contact information is provided, it's also important to document that you have followed up with all prospects—regardless of the way their voice sounds—consistently.
Rule #5: Treat Prospects Consistently While Showing Units
To avoid comments or actions that could be viewed as unlawful steering, pay particular attention to how prospects are treated while being shown available units. Steering refers to directing, guiding, or encouraging people, based on an illegally discriminatory reason, to rent only certain units at a community or to seek alternate living options. Steering is illegal because it fosters segregation. You must let prospects make their own decisions about where to live.
Ask all prospects what they are looking for, and offer to show them all available units that meet their requirements. If a family with children wants to see your available two-bedroom units, for example, showing them units only on the first floor—but not on upper levels—would amount to unlawful discrimination based on familial status.
Similarly, don't make discouraging comments about certain units because of your personal opinion, based on a prospect's protected characteristic, about what the prospect may want. Although you may show prospects units that you believe are well suited to their needs, and point out each unit's advantages and disadvantages, it's unlawful to put pressure on prospects to rent certain units based on illegally discriminatory reasons. When showing units to the family looking for a two-bedroom unit, for example, you may point out a particular unit's proximity to the playground. But you risk triggering a fair housing complaint if you express your personal opinion that the unit is better than other available units because it's closer to the playground.
COACH'S TIP: Be wary if a prospect asks you discriminatory questions during a tour, York says. No matter how delicately a question may be phrased, it's risky to answer questions about the kind of people who live in your community or in the adjacent units. Instead, when faced with an inappropriate question, develop a standard response that affirms your community's commitment to fair housing law. And make a note on the guest card about the prospect's inappropriate question and how you responded. It's also a good idea to train your leasing consultants to inform a manager about the conversation.
Rule #6: Take Care When Rejecting Applications
Your community has the right to reject applications when they do not meet your community's screening criteria. For example, you do not have to approve applications for prospects who can't demonstrate an ability to pay the rent—even if they are members of a protected class. However, if you have a legitimate reason for rejecting an application, it's important to take steps to ensure that the process is performed consistently and in a respectful manner. If you don't, you risk triggering an accusation that your stated reason for rejecting the application was merely an excuse to cover up the real reason—unlawful housing discrimination.
York recommends that communities develop a policy to ensure that they use the same process to notify applicants of the rejection—and the reason why—within a reasonable time. Communities should check with their local attorney about any required time limits, but it's preferable to notify the applicant within 72 hours. You may decide to make an initial telephone call, informing the applicant of the decision in a businesslike manner, but always follow it up with a letter.
A standard form letter can help ensure that your correspondence is consistent and complete. You may wish to attach a written checklist, with the reasons for the rejection checked off. In the letter, be specific about the reasons why the application was not approved. Identify which of your screening criteria the applicant did not meet. If the applicant did not earn enough money or had a bad credit history, say so, and provide the name and contact information of the credit agency or screening company you used.
COACH'S TIP: If your decision is related to a prospect's credit history report, you must comply with the Fair Credit Reporting Act (FCRA), which imposes specific requirements about notifying the prospect of that fact and providing information about the credit reporting agency. It's a good idea to consult your attorney to ensure that your community complies with the FCRA's requirements.
Rule #7: Maintain Good Records of the Application Process
Good record-keeping is important to responses if, despite your best efforts, your community is accused of violating fair housing law during the application process. The records demonstrate that your community has established legitimate, nondiscriminatory policies and procedures, and that it has applied them consistently to all prospects and applicants.
Retain records of all contacts, says York, even if they don't result in the rental of a unit or follow up on initial inquiries. Keep copies of phone logs, guest cards, unit availability records, application forms and supporting documents, screening results, and any other document related to the application process.
It's also important to keep good records to document when and how your community keeps track of available units. There is a risk of a discrimination claim any time a prospect is told that there are no units available within a community. And it's hard to defend against such claims if it turns out that the information was faulty—or if a prospect is turned away on the same day as another prospect was told that a unit was available. To ensure accurate, consistent responses to inquiries about available units, establish a process to document when units become available, and make sure everyone on your staff has up-to-date information.
COACH'S TIP: At a minimum, you should retain the records for at least two years. The statute of limitations varies, however, so you should save records for as long as you can do so efficiently. The further back you can go, the greater your protection from discrimination claims in the future, so check with your attorney before discarding old records.
Fair Credit Reporting Act: 15 USC §1681 et seq.
Fair Housing Act: 42 USC §3601 et seq.
Carl York: Vice President, Sentinel Real Estate Corp., 8495 Scenic View Dr., Ste. 106, Fishers, IN 46038; (317) 570-6724; York@sentinelcorp.com.