Discriminatory practices are under the microscope. Real estate professionals need to navigate a number of anti-discrimination laws, and any missteps can lead to accusations of prejudice, along with expensive lawsuits and fines.
The Fair Housing Act and Other Rules
When real estate professionals think of anti-discrimination laws, they probably think of the Fair Housing Act (FHA). Under this federal law, it is illegal to discriminate against people in housing-related activities on the basis of race, color, national origin, religion, sex (including gender identity and sexual orientation), familial status or disability. According to the U.S. Department of Housing and Urban Development, various actions – including setting different terms, imposing different prices, using different qualification criteria or falsely denying that a house is available – can be considered discrimination.
The National Association of Realtors warns that real estate professionals must consider several laws in addition to the FHA. These laws include the Civil Rights Act of 1866, the American with Disability Act, the Equal Credit Opportunity Act and various state and local laws. In some areas, classes that are not protected under federal law may receive protections under local law.
How Discrimination Accusations Lead to Lawsuits
Lawsuits alleging discrimination can be the result of a single action or a pattern of practices.
- Victor Insurance tells the story of a new real estate agent who, based on guidance from his client, advertised a property with the note that no housing assistance would be accepted as payment. This is considered unlawful discrimination, and the state levied fines totaling $15,000 in response.
- In another case described by Victor Insurance, a real estate broker had to settle for $17,5000 over a discrimination claim. The client was from Colombia. A contract to buy a home under construction fell through due to an issue involving legal residency status, and the broker then refused to refund the commission, leading to the claim of discrimination.
- In 2021, the S. Department of Justice announced that it had settled a housing discrimination lawsuit against a real estate agency and rental agent. The Fair Housing Testing Program found that white testers were offered more discounts and given more opportunities to inspect units than African American testers.
- Newsday says that Redfin has agreed to pay $4 million to settle a lawsuit alleging that Redfin provided less service to buyers in nonwhite communities.
Protecting Your Company from Allegations
Due to the current political and social climate, awareness of discrimination is high, and any missteps – whether or not they’re intentional – may lead to claims of bias. Lawsuits alleging discrimination can result in expensive settlements and awards. Companies may also face mounting defense costs and a tarnished reputation.
Real estate professionals can take several steps to reduce their risk.
- Know the laws and how they’re enforced. Ignorance of the law is no defense. Even if you’re familiar with the basic requirements of the FHA, you may end up running afoul of the many nuances of the law, or of other laws on the books. Review of federal, state and local laws and verify that your company’s policies are compliant. Paying attention to court rulings can also help you understand how these laws are interpreted and where other housing professionals have gone wrong.
- Be consistent. If you treat people differently, you may be opening yourself up to claims of discrimination – even if that was not your intent. Be aware that testers may be used to verify that your practices are non-discriminatory. The Fair Housing Testing Program has people pose as prospective renters, borrowers or patrons in order to gather information that can be used to determine whether discriminatory practices are occurring. Other testing investigations may also take place. For example, Newsday conducted a three-year investigation using 25 trained testers and analyzing 5,763 house listings to uncover instances of discrimination.
- Understand that algorithms can discriminate. When computer programs use biased data, they can produce biased results. According to Bloomberg, the racial disparities of which Redfin has been accused have been linked to the software that the company uses. If your company uses algorithms to make decisions, make sure that this is not resulting in discriminatory practices.
- Document everything. Even if you are not doing anything wrong, a dissatisfied individual could claim that discrimination occurred. If an allegation is made against you, strong documentation can help you show that your decisions are based on non-discriminatory policies.
Solid liability insurance can also protect your company from the costs associated with real estate discrimination claims. RiskPoint provides comprehensive and competitive insurance for the real estate industry. Learn more.