LEGAL CORNER: Violating the Fair Housing Laws: ‘Steering’ Away From Discriminatory Behavior
John Dolgetta, Esq. | December 2019
A recent article in Newsday, “Long Island Divided” (See https://bit.ly/357OA3L), has shed a critical light on the discriminatory practices, which at times were blatant and at other times more subtle, that were taking place in the real estate industry. While the investigation focused on the real estate market in Long Island, the behavior uncovered by Newsday, undoubtedly takes place every day throughout New York and the United States. The extensive three-year investigation conducted by Newsday and its resulting report, while producing disheartening results, should be used as an important resource by real estate professionals to learn about the illegal discriminatory behavior that exists. It should be utilized as a tool to teach real estate professionals the way they should interact with each other and with the general public.
It is imperative that the industry use this report not only to root out and eradicate such unlawful behavior, but to educate all real estate professionals on the fair housing laws and the discrimination taking place in the industry. Buyers and sellers depend upon real estate agents to be invaluable resources of information pertaining to the availability of housing in particular areas and neighborhoods. Consumers rely on agents to be objective, well-informed, ethical, and above all, in compliance with all laws.
Ultimately, and unquestionably, an agent is the fiduciary of the buyer and seller, and must at all times adhere to the highest moral, ethical, and legal standards. An agent must at all times be wary about what information is provided to a customer or client about a specific area or real estate market and how that agent interacts with others. When an agent tells a client that a certain neighborhood or area is “great” or a school district is the “best,” that agent may be engaging in illegal behavior known as “steering,” and whether it is intentional or not, agents must be aware of the dangers associated with such remarks.
‘Steering’ is Illegal under the Fair Housing Laws
The Federal Fair Housing Act makes it illegal for an agent “…to make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, or discrimination.” (See 42 U.S.C. § 3604(c)). Of course, discrimination is not limited to the aforementioned protected classes. New York State has several additional “protected classes”, such as age, creed, sexual orientation, national origin, marital status, domestic violence victim status, disability, military status, gender identity and source of income. New York City also includes citizenship as a protected class. The above list of protected classes is not exhaustive, and the law is ever-changing. Brokers and agents must keep up with all of the changes in the law and must at all times be familiar with all federal, state and local laws.
According to the National Association of Realtors “[s]teering under the Fair Housing Act is the process of influencing a buyer’s choice of communities based upon the buyer’s race, color, religion, gender, disability, familial status, or national origin.” (See https://bit.ly/36ndBIf). Many of the agents in the Newsday report engaged in just such behavior. Many of the choices made by agents with regard to communities, schools, and neighborhoods were clearly based upon and influenced by racial and socio-economic factors. And, while some of the behavior uncovered may have occurred subconsciously, much of the discriminatory behavior that was engaged in was clearly on a conscious level.
NAR Offers Resources on Fair Housing
One resource NAR provides is a Fair Housing Declaration (see https://bit.ly/348ye9y), which NAR recommends should be posted conspicuously in all offices and associations. The Fair Housing Declaration highlights the following important principles that all real estate agents should adhere to:
“I agree to:
- Provide equal professional service without regard to the race, color, religion, gender (sex), disability (handicap), familial status, national origin, sexual orientation or gender identity of any prospective client, customer, or of the residents of any community.
- Keep informed about fair housing law and practices, improving my clients’ and customers’ opportunities and my business.
- Develop advertising that indicates that everyone is welcome and no one is excluded; expanding my client’s and customer’s opportunities to see, buy, or lease property.
- Inform my clients and customers about their rights and responsibilities under the fair housing laws by providing brochures and other information.
- Document my efforts to provide professional service, which will assist me in becoming a more responsive and successful REALTOR®.
- Refuse to tolerate non-compliance.
- Learn about those who are different from me, and celebrate those differences.
- Take a positive approach to fair housing practices and aspire to follow the spirit as well as the letter of the law.
- Develop and implement fair housing practices for my firm to carry out the spirit of this declaration.”
All Realtors should pledge to follow the above principles and should review them frequently. One key principle provides that all Realtors should “inform clients and customers about their rights and responsibilities under the fair housing laws by providing brochures and other information.” Focusing on this one basic principle at the initial meeting and disclosing information relating to fair housing issues and related concerns to prospective clients and customers, will certainly help to reduce the likelihood of discriminatory behavior by speaking about it upfront.
NAR explains that “[s]teering occurs when an agent limits the housing options available to a buyer by directing prospective homebuyers interested in equivalent properties to different neighborhoods or communities or even different parts of the same development according to the buyer’s race or other characteristics protected under the Fair Housing Act.” However, if a clear and unambiguous discussion occurs at the start of the professional relationship about fair housing laws, including, but not limited to, topics such as steering, and about the agents’ and brokers’ commitment to strict adherence of these laws, it will only serve to solidify the fair and consistent provision of housing choices and real estate brokerage services to clients. NAR’s principle also goes one step further, and recommends that agents and brokers provide the clients and customers with brochures and other written materials elaborating on fair housing.
Education is Critical!
The Newsday article also revealed a major element in the real estate industry that needs to be addressed: education. New York State requires individuals to take a 75-hour salesperson course before they are permitted to take (and pass) the requisite exam in order to become licensed as real estate salespersons. Once licensed, the Department of State requires that every agent complete 22.5 hours of continuing education every two years, three hours of which include mandatory fair housing education. While many in the industry may feel that the above requirements are sufficient, and while, at the same time, many others believe they are at times “too much,” one thing is true—no matter what the minimum requirements are, they should never be seen as being enough. Brokers and agents should not view the above requirements as a maximum, but rather as a minimum. They should certainly endeavor to take as many continuing education courses, legal update courses and general education seminars as possible, even if these courses do not confer on the individual any continuing education credits or the agent has already fulfilled the mandatory 22.5-hours.
One important step brokerage firms can take, is to offer their agents additional in-house annual or semi-annual training and education. The Newsday report pointed out that educators at local associations did not provide the full three hours of continuing education and the courses were severely lacking in substance. In some instances, only approximately 30 minutes of fair housing was covered when three hours are mandated. Again, this report should be used to a tool to improve the course materials and curriculums offered to agents at every level, whether it is at the association or provided by the brokerage firm. Education must not be seen as something that someone else or some other entity is going to deal with —it is everyone’s responsibility. Agents, as well as brokers, need to be constantly exposed to education events on fair housing, discrimination, and other legal and industry related updates.
Agents Should Provide Information, Not Recommendations
Real estate agents should provide a client or customer with objective information about a particular area and not personal opinions of what the agent believes the buyer would want to hear. An agent should never recommend one school over another or provide any specific information relating to a school’s make-up, grades or quality. As the Newsday report uncovered, agents should refrain at all times from conducting searches of homes based on crime rates, racial make-up, or ethnicity, and avoid “steering” clients to certain neighborhoods based on any protected class. Agents and brokers must recommend that clients research publicly available information or data and engage in their own personal research or conduct research on the internet.
It is not uncommon for clients to request information regarding the demographics of a particular area or neighborhood. One could provide them with the link to the Census Bureau website (see https://bit.ly/35eh3Vz) which provides information on racial, ethnic and income breakdowns. An agent or broker should never provide a personal opinion which is intended to or simply has the effect, whether intended or not, of “steering” a client to one neighborhood over another. When an agent conducts a search of a property on the multiple listing service, it should be based on what the client desires, not what the agent thinks the client desires. Again, it is important to have the discussion about fair housing laws and the issues surrounding fair housing at the very beginning of the relationship. If the client knows what the parameters are, it is less likely an agent will engage in discriminatory and unlawful behavior.
Agents need to also stand firm when clients demand that they provide them with their own personal opinions relating to particular areas. NAR points out that “[i]f buyers persist in asking questions that could result in a charge of steering against you, be polite but firm in telling them: ‘I’m sorry, but I can’t provide that information. Fair housing laws prevent me from steering people away from or toward a certain neighborhood based on race, color, or other protected categories.” (See https://bit.ly/2YEdmpH). Ultimately, it may require an agent to withdraw from representing a particular client.
Very Real and Severe Penalties
The U.S. Department of Housing and Urban Development (HUD) published new inflation-adjusted civil penalty amounts (see https://bit.ly/38zWO6X) for violations of the FHA. The new penalties apply to any violations of the Fair Housing Act that occur on or after April 15, 2019. First-time violators of the FHA can be assessed a civil penalty of up to $21,039. If an individual has had a prior Fair Housing Act violation within the previous five years, he or she could be fined up to $52,596. Any person who had violated the Act two or more times in the previous seven years could be fined up to $105,194. These amounts are in addition to actual damages and attorney’s fees and costs that may be awarded to someone who has experienced housing discrimination.
The Newsday article brought to light widespread and severe violations of the fair housing laws, and it is imperative that real estate professionals seize this moment to restart the monumental movement that started many decades ago, but which has regressed rather than advanced, the eradication of discrimination. There must be a change in the entire culture and education must start early and should be reinforced often.