Which of the following is a possible penalty for violating the Fair Housing Act?

Legal

What is the Fair Housing Act and what does it cover?

Title VIII of the Civil Rights Act of 1968 (the Fair Housing Act), prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing related transactions, because of race, color, religion, sex (including gender identity and sexual orientation), familial status, national origin, and disability. 

In "Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions", the U.S. Department of Housing and Urban Development ("HUD") urges housing providers to exercise caution when implementing criminal history policies or practices used to make housing decisions.

Why is fair housing so important for REALTORS®?

The Fair Housing Act generally prohibits five different types of discrimination in the sale and rental of housing: 

• To refuse to sell or rent, or to otherwise make unavailable, a dwelling because of a person’s membership in a protected class  
• Discrimination in the terms, conditions or privileges of a sale or rental of housing, or in the provision of services in connection with same  
• Use of advertising that expresses a preference for or against certain persons because of their membership in a particular protected class  
• Representations that a dwelling is not available for sale or rent, when in fact the dwelling is available  
• Attempts to induce a person to sell or rent a dwelling by referring to the prospective entry of persons of a particular race, color, sex, religion, national origin, handicap or familial status  

In addition to prohibiting specific practices involving the sale or rental of dwellings, the Fair Housing Act also prohibits redlining, including discrimination in financing and insuring of housing, as well as discrimination in access to other services, organizations, or facilities that relate to the business of selling or renting dwellings. To learn more about how real estate professionals can comply with the Fair Housing Act, download this free chapter of Real Estate Brokerage Essentials. 

What are the penalties for violating the Fair Housing Act?

Noncompliance with fair housing laws is a risk that responsible real estate professionals simply cannot assume as a cost of doing business. A person who believes they are a victim of a discriminatory housing practice may bring an action directly in federal court and recover actual and punitive damages, as well as reasonable attorney fees and costs. In addition, an aggrieved person may file a complaint with HUD, which may bring an administrative proceeding against the respondent. As of April 15, 2021, a person may be assessed a civil penalty of up to $21,663 for their first violation of the Fair Housing Act. The maximum penalty increases to $54,157 for a person who violated the Fair Housing Act in the previous five years, and violating the Fair Housing Act two or more times in the previous seven years brings a maximum fine of $108,315. Monetary damages, attorney fees and costs, and civil penalties are in addition to the significant reputational damage that a real estate professional can suffer for engaging in discriminatory practices.  

Where can I learn more about complying with the Fair Housing Act?  

NAR offers a myriad of resources, including the Fairhaven simulation training, specific tips for avoiding discriminatory practices, and a collection of articles, websites and more.  

Can denying housing based on criminal history violate the Fair Housing Act?  

With disparate impact, it is possible that making housing decisions based on an applicant’s criminal background may violate the Fair Housing Act 

What does the Fair Housing Act say about criminal history?

HUD's guidance comes on the heels of the Supreme Court's 2015 decision, which held disparate impact claims are cognizable under the Fair Housing Act.1 While persons with criminal records are not a protected class under the Act, HUD stresses that criminal history-based barriers to housing have a statistically disproportionate impact on minorities, which are a protected class under the Act, and as such, creating arbitrary or blanket criminal-based policies or restrictions could violate the Fair Housing Act ("FHA" or "Act"). To be clear, HUD's guidance does not preclude housing providers from crafting criminal history-based policies or practices, but the guidance makes evident that housing providers should create thoughtful policies and practices that are tailored to serve a substantial, legitimate, and nondiscriminatory interest of the housing provider, such as resident safety or the protection of property.

HUD includes context for its guidance, and offers statistical evidence that the United States minority population experiences arrest and incarceration at rates disproportionate to their share of their population. For instance, HUD asserts that in 2014, African Americans were incarcerated at a rate nearly three times their proportion of the general population.

In the context of criminal history policies or practices, disparate impact liability is determined using a burden-shifting framework that first requires a plaintiff or HUD to prove that the criminal history policy or practice has a discriminatory effect, meaning the policy or practice results in a disparate impact on a group of persons because of their race, national origin or other protected characteristic under the Act. In this step of the process, evidence must be provided that demonstrates that the criminal history policy or practice actually or predictably results in a disparate impact. If successful, the burden then shifts to the housing provider to show that the policy or practice in question is justified. Here, the housing provider must show that the policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest of the housing provider, and further, that the policy or practice actually achieves that interest. Finally, if a housing provider is successful, the burden shifts back to the Plaintiff or HUD to prove that the housing provider's interest could be served by another practice that has a less discriminatory effect.

The determination of whether a criminal history-based policy or practice has a disparate impact in violation of the Act is ultimately a fact and case-specific inquiry. However, HUD's guidance provides insight into how to create a legally defensible policy that does not violate or frustrate the FHA's prohibition on the discrimination in the sale, rental or financing of dwellings or in other housing-related activities. We recommend review of HUD's guidance, but have distilled that guidance to assist in reviewing existing criminal history-based policies or practices or in the creation of a new one.

1 Texas Dep't of Hous. & Cmty Affairs v. Inclusive Cmtys Project, Inc., 135 S.Ct. 2507 (2015).

2 42 U.S.C. 3607(b)(4).