Real Estate Exam: Federal Fair Housing Act, Protected Classes, Discrimination

The Federal Fair Housing Act, originally enacted as Title VIII of the Civil Rights Act of 1968, prohibits discrimination in the sale, rental, financing, and advertising of housing based on protected classes. The law covers most residential transactions and applies to real estate agents, lenders, landlords, homeowners associations, and insurance companies. Discriminatory practices include refusing to sell or rent, setting different terms or conditions, falsely denying availability, blockbusting, steering, and redlining.

The seven federal protected classes under the Fair Housing Act are race, color, religion, national origin, sex, familial status, and disability. Race and color were protected under the original 1968 Act. Sex was added in 1974. Familial status and disability were added by the Fair Housing Amendments Act of 1988. Familial status protects families with children under 18, pregnant women, and anyone in the process of securing custody. Many state and local laws add additional protected classes such as sexual orientation, gender identity, age, marital status, source of income, and veteran status.

Steering is the practice of directing homebuyers toward or away from certain neighborhoods based on their protected class characteristics, such as race, religion, or national origin. Examples include showing minority buyers homes only in predominantly minority neighborhoods, suggesting a family with children avoid a certain area, or recommending neighborhoods based on the buyer's ethnicity. Steering violates the Fair Housing Act even if the agent believes they are acting in the buyer's best interest.

Blockbusting, also called panic selling, is the illegal practice of inducing homeowners to sell their properties by suggesting that members of a protected class are moving into the neighborhood and will cause property values to decline. An agent might tell homeowners that a minority family is buying nearby and they should sell quickly before prices drop. This practice exploits racial fear for profit and violates the Fair Housing Act. Blockbusting was historically used to destabilize integrated neighborhoods and profit from the resulting panic sales and racial turnover.

Redlining is the discriminatory practice of denying or limiting financial services, insurance, or mortgage lending to residents of specific geographic areas based on the racial or ethnic composition of those neighborhoods. The term originated from maps where lenders literally drew red lines around minority neighborhoods deemed too risky for investment. Redlining violates the Fair Housing Act, the Equal Credit Opportunity Act, and the Community Reinvestment Act.

The Fair Housing Act has three narrow exemptions. First, the single-family home exemption allows owners who own no more than three single-family homes to sell or rent without a broker and without discriminatory advertising. Second, the Mrs. Murphy exemption allows owners of small rental properties with four or fewer units where the owner lives in one unit to discriminate in tenant selection. Third, religious organizations and private clubs may limit housing they own to their members. No exemption applies if discriminatory advertising is used.

The Americans with Disabilities Act, or ADA, primarily covers commercial facilities and public accommodations rather than private housing. However, the Fair Housing Amendments Act of 1988 addresses disability in housing by requiring that multifamily buildings with four or more units built after March 1991 include accessible design features such as accessible entrances, doors wide enough for wheelchairs, accessible routes, reinforced bathroom walls for grab bars, and accessible kitchens and bathrooms.

A reasonable modification is a physical change to a dwelling or common area that a tenant with a disability is permitted to make at their own expense, such as installing grab bars, widening doorways, or building a ramp. A reasonable accommodation is a change in rules, policies, practices, or services that allows a person with a disability equal opportunity to use and enjoy their housing, such as waiving a no-pets policy for a service animal or providing a reserved parking space near the entrance. Landlords must allow both unless they would impose an undue financial or administrative burden.

The Housing for Older Persons Act, or HOPA, creates an exemption from the Fair Housing Act's familial status protections for qualifying senior housing communities. To qualify, a community must meet one of two standards: it is specifically designated for and solely occupied by persons 62 years of age or older, or at least 80 percent of its units are occupied by at least one person 55 years of age or older and the community publishes and follows policies demonstrating intent to be senior housing.

The Fair Housing Act prohibits advertising that indicates a preference, limitation, or discrimination based on any protected class. Prohibited language includes phrases like "perfect for young couples," "Christian neighborhood," "no children," "English speakers only," or "ideal for singles." Even descriptions of the neighborhood rather than the property can violate the law if they signal a preference based on protected characteristics. HUD guidelines specify that advertising should describe the property, not the desired occupant. Using human models in advertising should reflect diversity.