Overview of Fair Housing Laws
Despite the fact that fair housing laws have been in place for years and several property owners have been prosecuted and punished for practicing discrimination in housing, the practice still exists among a small number of landlords. Sometimes discrimination is simply a result of a landlord not understanding—or having knowledge of—where their rights as property owners end and the rights of potential tenants begin. Hopefully this short fact sheet will help eliminate unnecessary misunderstandings and help landlords comply with local, state and federal fair housing laws.
If you practice discrimination, you will eventually be caught. The Fair Housing Center of Grand Rapids’ sole job in life is to discover and facilitate the prosecution of those who discriminate. In fair housing, you are assumed guilty until proven innocent. If caught discriminating, you will most likely be contacted and asked to discontinue the discriminating practice and rent to the applicants that have been discriminated against—if they choose to still rent your apartment. If you choose to disagree that you were discriminating and can’t provide substantial evidence to the contrary, you will most likely be prosecuted.
Penalties for Failing to Comply with the Laws
If you fail to comply with fair housing laws and are found guilty, you can expect one or more of the following:
- Pay money to the applicant for actual damages incurred
- Pay a civil penalty up to $50,000 for the first violation, up to $100,000 for any subsequent violation
- Face an injunction to stop the specific action of discrimination or provide relief (rent to the applicant in most cases)
- Pay for all legal fees and costs incurred by the offended party
What are the Laws?
The U. S. Civil Rights Act of 1968, the 1988 amendment to that Act, and the Americans with Disabilities Act of 1990 prohibit discrimination on the basis of race, color, religion, sex, national origin, handicap/disability, or familial status (families with children).
In the State of Michigan, under the Elliot-Larsen Civil Rights Act as amended, you may not discriminate on the basis of age or marital status—in addition to those protected classes above.
Each local government may have its own civil rights laws. Be careful to check with your local municipality to ensure that your residential income property management fact sheet is in compliance. The City of Grand Rapids, Kentwood, and Wyoming—in aggregate—add “lawful source of income,” weight, and height as protected classes.
In April 2016, HUD released new guidelines for screening criminals. In short, the guidelines disallow:
- considering arrest records alone when screening applicants;
- a blanket prohibition against individuals convicted of drug possession;
- a blanket prohibition of convicted criminals without a tailored policy that takes into consideration the nature and severity of the crime and how long the person has been out of jail, etc.
Who Can I Not Rent To?
Generally, you are legally free to choose among prospective tenants as long as your decisions are based on valid and objective business criteria (credit history, leasing history, etc.) and are not, or do not appear to be, “cover-ups” for discrimination against any of the protected classes mentioned in the previous section. However—in some limited cases—if you personally live in one of the units in the building where the tenants reside and the building has no more than two units, some exemptions may apply. Beware: a local fair housing ordinance may not allow these exemptions!
When Do These Laws Apply?
These fair housing laws generally apply when advertising for tenants, selecting tenants, and placing tenants. Here are some examples:
- You cannot place the following in an ad “great apartment for elderly, single person.” This would be discrimination based on age and familial status.
- You also can not choose your church parishioner over an otherwise equally qualified prospective tenant. This would be discrimination based on religion. (We’ll get into how you would choose between these two individuals later in this fact sheet.)
- You cannot place a family with two young children in a certain part of your property because you think it would be nice to have all the young families together. This would be steering—another form of familial discrimination.
There are simply too many other ways a landlord can intentionally or unintentionally discriminate. So…
Establish a Policy on Fair Housing and Use It Consistently—Every Time!
Every landlord—big or small—should have a policy stating that they do not discriminate based on all the applicable classes and a written policy on how they select tenants and the guidelines used. Give these policies and guidelines to every prospective tenant. There is nothing better than walking into court with proof that you do not discriminate and treat everyone exactly the same every time.
Tenant Selection Criteria
Selecting a qualified tenant can be tricky and time consuming. Established policies and criteria can make it easier. Get ready to select: Sit down and think about all the important things that you consider when selecting a tenant. Keep in mind these must be business reasons. Common examples of criteria used are:
- The applicant’s monthly take home pay must be equal to or greater than three times the monthly rent.
- The applicant may not have declared bankruptcy within the last three years.
- The applicant may not have any accounts currently in collection or being charged off—excluding medical bills.
- The applicant may not have been evicted in the last seven years—for any reason.
- The applicant must be employed.
- No smokers.
- No pets.
Of course, there are lots of other legal criteria one could use to select the best tenant. Ask the RPOA office for a more detailed flyer concerning tenant selection criteria or click here to read the Tenant Screening Process & Guidelines.
Procedures for Selecting Tenants to Avoid Fair Housing Discrimination
The best way to comply with fair housing laws and avoid discrimination is to use consistent procedures and criteria.
First—and most importantly—accept all applications! There is never a reason to not accept an application. Even if the apartment has been rented, why not build up a file of potential tenants for when the property does become vacant?
Second, make sure you indicate the time and date that each application was completed and given to you.
Third, begin your elimination process by rejecting all applications that haven’t been completely filled out or have information that you know is incorrect. If you have the luxury of calling the prospect back to get corrected information, go ahead and do that too. Never accept an unsigned application. Why? Because your application should include authorization to run a credit report and to verify all information provided on the application. Without the signature–you can’t run a credit report.
Fourth, if the application makes it this far, order a credit report and compare it against your credit criteria. If they don’t meet your criteria for credit—make no exception! Making exceptions is where landlords can inadvertently look like they are discriminating. Don’t forget to verify employment.
Fifth, if the credit report looks good and the applicant does have the job that they say they do, next look at the rental history. Call the previous landlord. Were they evicted? Did they leave owing money? Did they damage the previous apartment? Did the police constantly get called to their unit? Would the previous landlord rent to them again? Make sure when calling the landlord that you are really speaking with the landlord. Do this by asking some other question that only the real landlord would know, like “the rent was $500/mo. for your unit, is that correct?” Compare their answers to what your prospective tenant wrote on the application.
Sixth, this is where you can get creative. Some landlords will note the cleanliness of the interior of the applicant’s car at the time of application as an indication of the tenant’s housekeeping skills. There are multiple legal ways of weeding out applications. Remember: all of these reasons must be based on real business reasons.
How Do I Choose Between Two Equally Qualified Applicants?
Let’s say you have a stack of acceptable applications that have met all your screening criteria. This is when you look back through the applications and start offering your unit to the applicant that applied first. Proceed down the stack until you find an applicant that still wants the apartment and can sign the lease and make payments as required. Set a time for the applicant to come in and sign the lease and make payment and remind them that “if they miss the appointment, the unit will be made available to the next qualified applicant.”
How About HUD Section 8 Applicants?
In the City of Grand Rapids, Wyoming and Kentwood landlords are required to include HUD Section 8 rent voucher payments as part of the applicant’s “lawful source of income” when determining eligibility. Simply add the amount that HUD has determined they will contribute towards the rent to the tenant’s monthly take home pay. Then apply your normal minimum income formula. Using our previous formula, here’s an example: You have an apartment that rents for $800 per month. Your applicant brings home $1,000 per month in wages. HUD has verified that they will pay for $533 of the rent. Add the wages and rent subsidy together for a total monthly income of $1,533. Now, determine if this “monthly income” is three times the monthly rent or $2,400. It is not. This applicant would not be eligible based upon your income criteria—even with the subsidy—because their total monthly income is not equal to or greater than three times the monthly rent.
The RPOA encourages all landlords to participate in the Section 8 program with eligible applicants.
Don’t Discriminate In Advertising
With the increasing popularity of advertising rentals online, many property owners have to be even more diligent in their efforts to avoid looking as if they are discriminating. First, no longer is there a newspaper staff person there to review ads before they go to print to ensure the property owner has not inadvertently said something that might be misconstrued. Second, the whole world is watching—it’s easy to slip up and have a fairing housing advocate find it on the web.
Be sure to be very careful in the wording of your ad to ensure that you are not discriminating.
- Memorize the protected classes—federal, state, and local.
- Set up and use consistent selection criteria.
- Repeat: Be consistent and never sway from your established fair housing policy.
For further information or if you’re just unsure…
If you’re still uncomfortable with fair housing issues, call the RPOA office for assistance or the one of the RPOA’s attorneys. The RPOA also offers courses that cover fair housing laws. Check the calendar for times and dates.
Disclosure: This Knowledge Base article is accurate as of the last update. Laws and policies are subject to change. If you have any questions, please call the office. Click here for contact information.