Even though it’s not always detectable, explicit and implicit discrimination keeps protected classes out of their desired homes.

Yes, systemic racism can exist in real estate too

Many Americans are awakening to systemic racism in light of the recent police killing of George Floyd and the corresponding civic unrest. Systemic racism doesn’t end at law enforcement – it can be present in real estate too.

Although not unheard of, real estate professionals rarely practice overt discrimination. Overt discrimination occurs when, based on race or other protected classification, real estate professionals refuse to:

  • show properties;
  • provide property information;
  • give consultations; or
  • accept rental/purchase applications.

Alternatively, implicit discrimination occurs when a real estate professional performs actions that are not openly discriminatory but produce discriminatory results. For example, an agent may show minority buyers fewer listings than non-minority buyers. Implicit discrimination also happens when agents steer minority buyers to neighborhoods consisting of the same protected class. Implicit discrimination may be unconscious, but it is still unlawful.

Property rights cannot be based on status

Regardless of race, all citizens of the United States have the right to purchase or rent real estate under the federal Civil Rights Act. [42 United States Code §1982]

Further, all individuals within the United States are given the same rights to make and enforce contracts (rental and lease agreements), sue, be sued, enjoy the full benefits of the law and be subject to the same punishments, penalties, taxes and licenses, regardless of race or legal status. [42 USC §1981]

The federal Civil Rights Act applies to race discrimination on the sale or rental of all types of real estate, both residential and commercial. Racially motivated activities in any real estate leasing transaction are prohibited.

Federal protection against racial discrimination given under the Civil Rights Act is a broad protection which applies to types of discrimination prohibited in all activities between individuals present in the country.

Blockbusting for exploitation

An agent, residential landlord or property manager may not induce or attempt to induce an individual to offer, or abstain from offering a dwelling to prevent the entry of certain classes of people into the neighborhood. This prohibited practice is known as blockbusting. [42 USC §3604(e)]

Blockbusting is also known as panic selling when the agent is attempting to induce a seller to list and sell their property due changes in the ethnic makeup of an area. For example, consider a licensee attempting to secure a listing to sell a residential property by telling the seller the neighborhood demographics are changing, and they need to sell now before the change occurs.

Further, a landlord’s or agent’s actual financial gain is not necessary to establish blockbusting conduct. The mere profit motivation is sufficient to establish blockbusting activity. [24 Code of Federal Regulations §100.85(b)]

Examples of blockbusting activities by a landlord or property manager include:

  • encouraging an owner-occupant to offer their home for sale or rent by insinuating that a neighborhood is undergoing or is about to undergo a change in the race, color, religion, sex, handicap, familial status or national origin of its residents; or
  • discouraging an owner-occupant from offering their home for sale or rent by claiming the entry of individuals of a particular race, color, religion, sex, familial status, handicap or national origin will result in undesirable consequences for the neighborhood or community, such as an increase in criminal activity or a decline in schools and other facilities. [24 CFR §100.85(c)]

One classic example of blockbusting happened in Palo Alto during the 1950s. Floyd Lowe, then president of the trade union California Association of Realtors® (CAR), ran racist ads warning of a “Negro invasion,” according to Richard Rothstein’s The Color of Law. This offensive strategy worked. It prompted a white flight from East Palo Alto, allowing agents to pick up these homes at a sub-market value and sell them to minority families at inflated prices for a neat profit. The practice is not only misguided and wrong, it is also illegal.

Failure to comply with the FFHA

While the federal Civil Rights Act provides general protection against all prohibited discriminatory activity, the Federal Fair Housing Act (FFHA) protections are specifically limited to dwellings, including rental housing. [42 USC §§3601 et seq.]

A dwelling includes any building or structure that is occupied, or designed to be occupied, as a residence by one or more families. A dwelling also includes vacant land offered for lease for residential dwelling purposes, such as a lot or space made available to hold a mobilehome unit. [42 USC §3602(b)]

The FFHA bars the use of any discriminatory actions a seller, landlord or property manager might take against a prospective buyer or tenant based on an individual’s:

  • race or color;
  • national origin;
  • religion;
  • sex;
  • familial status; or
  • handicap. [42 USC §3602]

Any individual who claims they have been injured by a prohibited discriminatory housing practice under the FFHA or believes they will be injured by such a practice is considered an aggrieved individual. [42 USC §3602(i)]

An aggrieved individual may file a complaint with the Secretary of Housing and Urban Development (HUD), within one year of the alleged discriminatory housing practice. HUD then attempts to resolve the dispute by having the parties enter into informal negotiations, called mediation. [42 USC §3610(a)]

If mediation is not successful, a judicial action may be initiated by HUD as a complaint to resolve the issue of discrimination. The dispute will then be resolved by an administrative law judge.

Any party to the complaint may elect to have the claims decided in a civil action before a court of law in lieu of using an administrative law judge. [42 USC §3612(a)]

When a real estate broker subjected to a judicial action is found guilty of discriminatory housing practices, HUD is to notify the DRE and recommend disciplinary action. [42 USC §3612(g)(5)]

When a court determines discriminatory housing practices have taken place, actual and punitive amounts of money awards may be granted. Also, an order may be issued preventing the landlord or broker from engaging in any future discriminatory housing practice. [42 USC §3613(c)(1)]

California prohibitions against discrimination

California prohibits discrimination in the sale or rental of housing accommodations based on an individual’s race, color, religion, sex, sexual orientation, gender identity, genetic information, marital status, national origin, ancestry, familial status, source of income or disability. This list of protected individuals is more extensive than all others. [Calif. Government Code §12955]

Discriminatory activities and conduct include:

  • making a written or oral inquiry into the race, sex, disability, etc. of any individual seeking to rent housing;
  • ads or notices for rental of housing which state or infer preferences or limitations based on any of the prohibited discrimination factors;
  • a broker refusing to represent an individual in a real estate transaction based on any prohibited factor; and
  • any other practice that denies housing to a member of a protected class. [Gov C §12955]

The denial of housing based on the landlord or broker’s perception that a prospective buyer or tenant has any of the protected characteristics is absolutely prohibited. An individual who has been the victim of discriminatory housing practices may recover their money losses. [Gov C §12955(m)]

Further, California’s Unruh Civil Rights Act, another anti-discrimination law, prohibits discrimination by a business establishment based on numerous status classifications, including: an individual’s sex, race, color, religion, ancestry, national origin, disability or medical condition. [Calif. Civil Code §§51; 51.2; 51.3]

However, age restriction is a legitimate discrimination as long as the restriction is in a project that qualifies as a senior citizen housing development.

The Unruh Civil Rights Act applies to anyone in the business of providing housing. Brokers, developers, apartment owners, condominium owners and single family residential owners renting or selling are considered to be in the business of providing housing.

As business establishments, landlords may not boycott, blacklist, refuse to lease or rent because of the race, creed, religion, color, national origin, sex, disability or medical condition of an individual’s, or that individual’s business partners, members, stockholders, directors, officers, managers, agents, employees, business associates or customers. [CC §51.5]

The Department of Real Estate (DRE) also has regulations prohibiting discriminatory practices by real estate brokers acting on behalf of a client. A broker or their agent engaging in discriminatory business practices may be disciplined by the DRE.

A broker has a duty to advise their agents and employees of anti-discrimination rules, including DRE regulations, the Unruh Civil Rights Act, and the FFHA.

The broker, in addition to being responsible for their own conduct, owes the public a duty to ensure their employees follow anti-discrimination regulations when acting as agents on the broker’s behalf.

How real estate professionals can avoid discrimination

The obvious answer is: “don’t discriminate.” For some people, this is easier said than done, since not everyone knows how to implement anti-discrimination practices.

Ways to avoid discrimination in your practice include:

  • Asking all potential buyers and renters the same questions. For example, property managers can and should ask prospective renters about factors that impact their building (e.g., if the applicant has pets or a waterbed). Never ask if a prospect belongs to a protected class, such as religion or sexual orientation.
  • Keeping records of client interactions. These records may help you recognize any prejudices you might hold and prove your innocence in the event of a lawsuit.
  • Never assuming what the client wants. No matter what protected class a client belongs to, agents need to treat all their clients with the same high standard of due diligence. For example, if an agent has a religious client, they should not refer them only to neighborhoods with a high religious population. The client may not prefer that, and even if the agent’s actions are well intended, they are still treating the client differently based on what the agent erroneously believes the client wants.

Systemic racism affects more than one system, and real estate is one of them. Racial housing discrimination is not just morally and ethically reprehensible – it’s also bad business.