Chapter 5: "Knowing the Fair Housing Laws for Selling Real Estate
Redlining
Redlining is discrimination in the lending of mortgage money based on location. This happens when a lending institution determines that for various reasons it will no longer make loans in a particular area. It figuratively or literally draws a red line around a particular neighborhood on a map and refuses to make loans on properties in that neighborhood regardless of the personal income qualifications of the borrower.
HUD issued guidelines that must be followed in real estate advertising. These guidelines cover primary areas of possible discrimination:
Advertising that uses certain words, phrases, pictures, or other visual representations that are discriminatory. Using certain types of media as a means of discrimination. For example, advertising in media only available to or likely to be seen by targeted groups (protected classes) or in reverse not seen by those groups such as a local newspaper that is read by a White ethnic group. HUD provides fairly specific information about what language is and is not acceptable in real estate advertising. For exam purposes and for real-world applications, remember that the use of certain words or phrases is prohibited even when your intent is not to discriminate. The categories of the prohibited language with some examples include: Code words, catchwords, or catchphrases: These prohibited words may be a little more subtle or regional in nature. Obvious phrases like "integrated neighborhood" cannot be used. Words like "exclusive," although more subtle, may convey a racially exclusive or ethnically exclusive message and therefore are to be avoided. Color: No use of words describing color as it relates to race or ethnicity is permitted. For example, "White" or "Black." Familial status: The term "familial status" generally refers to the presence or absence of children in the family. Although marital status is not a protected federal class, HUD guidelines prohibit advertising that states or implies "married couple only" or other similar language. Handicap: "Property not suitable for a handicapped person" or any language that suggests an exclusion like that is forbidden. Inclusive words like "Apartment is handicapped accessible" are acceptable. National origin: The use of words that describe national origin like Italian, Mexican, and so on are prohibited. Race: No use of racially descriptive words, such as Asian or Caucasian, for example, is permitted. Religion: Words describing religions, like Catholic, Christian, non-Christian, and so on, is prohibited. Sex or gender: This category tends to be a problem more with rental housing than housing that's for sale. Any gender-preference words are prohibited. An exception is made for people who want to share an apartment or house with a roommate of the same sex. So you can advertise for a female roommate to share an apartment, but you can't advertise for only a male tenant for a rental apartment in an apartment house you own.
Blockbusting
Blockbusting generally is defined as encouraging people to sell their homes because of the entry or potential entry into the community or neighborhood of a particular group of people. The group usually tends to be different in some aspect, such as race, color, or country of origin. The fear that blockbusting generates is the possible loss of property value, and the idea behind it is to induce panic selling and generate listings of houses to sell or bargains for developers. The prohibition of blockbusting is particularly aimed at members of the real estate industry, because agents benefit from panic selling by getting new listings, but investors who use blockbusting techniques for profit may also be guilty of discrimination.
The 1866 Civil Rights Act
In 1866, right after the end of the Civil War, the United States Congress passed the Civil Rights Act of 1866. This law essentially prohibits discrimination in the purchase, sale, lease or conveyance of real property (real estate and personal property) on the basis of race or color. The language of the act is clear insofar as it basically says that without any exception whatsoever, all citizens shall have the same rights regarding property regardless of race. The other unique thing about this act is that enforcement is accomplished by taking the case directly to federal court. Although the act itself is important, an almost equally important 1968 court case that involved the act resulted in a landmark decision in fair housing law that you should remember. The case, Jones versus Alfred H. Mayer Company, essentially affirmed the fact that the 1866 act prohibited any discrimination on the basis of race by private individuals and the government with no exceptions. This case was filed shortly after the enactment of the Fair Housing Act of 1968 (see the next section). The lack of any exceptions to the 1866 Act is important, because more recent fair housing laws actually include exceptions. Because it was enacted first and still remains on the books, the 1866 act is deemed valid even today, having been affirmed in the Jones versus Mayer case as superseding later laws with respect to exceptions regarding discrimination on the basis of race. Because of that, no exceptions exist with respect to racial discrimination in housing. For more, see "Bending the Rules: Understanding Exceptions to the Law," later in this chapter.
Knowing the federal protected classes
Since the adoption of the 1968 Federal Fair Housing Act, the history of federal fair housing legislation has been one of extending nondiscrimination protection to more and more groups. The following is a summary of the legislative actions, when they were added, and the classes they protect. You can expect questions on the state exam about the protected classes and when they were added, and you may see questions that are like case studies. 1866 Civil Rights Act: Protects against racial discrimination 1968 Federal Fair Housing Act: Protects race, color, religion, and national origin. 1974 Housing and Community Development Act: Protects against sex (gender) bias. 1988 Fair Housing Amendments Act: Protects the handicapped and familial status (presence of children). Take note that handicaps include persons with AIDS as well as alcoholics (but not drug addiction) in addition to conditions like visual, hearing, and physical handicaps and mental disability. (For more about laws related to the disabled, see "Extra Coverage: Protecting the Disabled from Discrimination," later in this chapter.)
Steering
Steering is guiding, encouraging, or inducing people in some way to move to or stay away from a certain area or neighborhood, and it's illegal. Overt steering is easy to understand and avoid. Subtle forms of steering in the name of being helpful, like saying, "This is a good neighborhood," or "You wouldn't be happy here," also should be avoided. Participating in what I call self-steering is equally prohibited. What I mean, for example, is that a couple that asks to be shown houses "only in White neighborhoods" can't be accommodated.
Understanding the Exceptions
fThe 1968 Federal Fair Housing Act was written with certain exceptions, or cases in which people, in a sense, can discriminate in housing issues. In addition to remembering the exceptions themselves for test purposes, you need to remember these two important factors with respect to these exceptions: Even if an exception is legal for an individual (such as the owner of a single-family home selling her house), a real estate agent is not permitted to participate in the exception. Real estate agents are held to a higher standard in fair housing matters. Discriminatory advertising may not be used; again, even when the exception itself is legal. The owner of a single-family home can't use discriminatory advertising in selling her house, even though she could discriminate in the ultimate sale itself. Don't forget that regardless of exemptions permitted by the 1968 Federal Fair Housing Act, the 1866 Civil Rights Act permits no exceptions with respect to race. The exceptions in the 1988 Law are as follows. Age: An exemption is provided to housing protections afforded to age and familial (children) classes that's intended for older people. Housing may be restricted to people 62 years of age or older or 55 years of age or older in cases where at least one occupant per unit is 55 and at least 80 percent of the units are occupied by people ages 55 or older. In these cases children may be excluded. Owner-occupied housing: Multifamily housing of two to four units, where one of the units is owner-occupied, is exempt from fair housing laws. Private clubs: An organization that restricts its membership may provide restricted housing to its members, as long as it doesn't offer housing to the general public. Public-law occupancy standards: Local maximum occupancy standards aren't superseded in their application by the Fair Housing Act. For example, if a local law provides a maximum occupancy of two people per bedroom and you rent out a studio apartment in a building you own, you can't be forced to rent the apartment to a couple with a child. Religious organizations: Housing sponsored by a religious organization may be restricted to members of that particular religious organization, provided the religion doesn't discriminate in its membership policies. Single-family housing: The sale or rental of a single-family house is exempted from the rules of the Fair Housing Act if the owner doesn't own more than three units at one time, and neither a broker nor discriminatory advertising is used. If such a property is sold, no more than one house can be sold during every two-year period.
The 1968 Fair Housing Act
"The Fair Housing Act of 1968 is more technically known as Title VIII (read "Title Eight") of the Civil Rights Act of 1968. This act, the first in the 20th century, prohibited certain actions that were viewed as discriminatory with respect to housing and specifically defined groups, called protected classes, to which it applied. Unlike the 1866 Civil Rights Act (see the previous section), it included specific exceptions. Together with the 1866 Civil Rights Act, the Housing and Community Development Act of 1974, and the Fair Housing Amendments Act of 1988, which added even more protected classes to the list, the 1968 act forms the basis of fair housing standards as they apply to real estate agents throughout the United States. The 1968 act is enforced by the Department of Housing and Urban Development (HUD). These laws are best understood when they're broken down into what you can't do (prohibited acts), who you can't do it to (protected classes), and exceptions to the law. Presenting them this way enables me to cover this material within the context of what I discuss in the rest of this chapter. Check out "Don't Do It: Avoiding Discriminatory Actions," "Feeling Safe: Identifying Who's Protected," and "Bending the Rules: Understanding Exceptions to the Law" for more details. The current protected classes under the federal law can be remembered with the acronym FRESH CORN, which stands for: Familial Race Equal Sex Handicap Color Opportunity Race National origin
