This is the third episode in our new video series covering Implicit Bias principles, and provides a sneak peek into the new course requirements that will apply to real estate agents and brokers with licenses expiring on or after January 1, 2023.

This episode analyzes California prohibitions against explicit and implicit discrimination.

California prohibitions against discrimination

California prohibits discrimination in the sale or rental of housing accommodations based on an individual’s race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, familial status, marital status, disability, genetic information, national origin, source of income, veteran or military status, ancestry, citizenship, primary language, or immigration status. [Calif. Civil Code §§51 et. seq.; Calif. Government Code §12955; DRE Reg. §2780 and §2781]

This list of protected individuals under state law is more extensive than all others.

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, whether it was done explicitly or implicitly. An individual who has been the victim of discriminatory housing practices may recover their money losses. [Gov C §12955(m)]

Fair Employment and Housing Act (FEHA)

The Department of Fair Employment and Housing (Department)

is the California government agency which enforces anti-discrimination law. [Gov C §§12901, 12903, 12930, 12935]

Any individual who feels they have been discriminated against may file a complaint with the Department. The Department investigates the complaint to determine any wrongful conduct.  When grounds exist, the Department then seeks to resolve the situation through discussions with the individual against whom the complaint is made. [Gov C §12980]

When the Department believes a discriminatory practice has occurred, it will first attempt to reach a resolution through the Department’s mandatory dispute resolution division. The dispute resolution is provided without charge to either party. When the dispute cannot be effectively resolved, the Department will file a civil action on behalf of the individual who was discriminated against in the county where the discriminatory conduct is alleged to have occurred. [Gov C §12981]

California’s Unruh Civil Rights Act

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 Housing Financial Discrimination Act of 1977 (The Holden Act)

To achieve a healthy state economy, all residential housing for sale needs to be available to any homebuyer who is creditworthy and qualifies for purchase-assist financing. [Calif. Health and Safety Code §35801(b)]

An efficient real estate market requires the value of housing to be immune from fluctuations caused by lenders who arbitrarily deny financing to qualified homeowners, whether explicitly or implicitly. Thus, the California Housing Financial Discrimination Act of 1977, known as the Holden Act, prohibits discriminatory lending practices.

The goal of anti-discrimination law in home financing is to:

  • increase the availability of housing to creditworthy buyers; and
  • increase lending in communities where lenders have made conventional home mortgages unavailable. [Health & S C §35802]

Under the California Housing Financial Discrimination Act, lenders need to make financing available to qualified creditworthy mortgage applicants to:

  • buy, build, repair, improve or refinance an existing mortgage on a one-to-four unit, owner-occupied residence; or
  • improve one-to-four unit residences which are not owner-occupied. [Health & S C §35805(d)]

Lenders violate public policy when they indicate a discriminatory preference by denying or approving financing to creditworthy mortgage applicants based on the applicant’s protected status. [Health & S C §35811]

In a community which is composed mainly of residents of a certain race, color, religion or other protected class, a lender may not:

  • refuse to fund a mortgage based on the demographics of that community; or
  • appraise real estate in that community at a lower value than comparable real estate in communities predominantly composed of non-minority residents. [Health & S C §§35810, 35812]

Failure to provide financing in certain communities is called redlining

. Redlining is specifically targeted for correction by the law since it adversely affects the health, welfare and safety of California residents. [Health & S C §35801(e)(4)]

Lenders who deny mortgage applications based on the characteristics of the community discourages homeownership in that community. Thus, redlining leads to a decline in the quality and quantity of housing in areas where financing is generally unavailable, perpetuating segregated housing patterns. [Health & S C §35801]

However, a lender can consider neighborhood conditions when making a mortgage under certain circumstances. When doing so, the lender is required to demonstrate a mortgage denial is based on neighborhood conditions which render the mortgage unsafe and unsound as a matter of good business practice. [Health & S C §35810(a)]

The California-specific prohibitions and requirements under the Housing Financial Discrimination Act apply to all institutions which make, arrange or buy mortgages funded to buy, build, repair, improve or refinance one-to-four unit, owner-occupied housing.

This includes mortgage loan originators (MLOs) or lenders offering consumer mortgage services, whether endorsed by the California Department of Real Estate (DRE) or licensed by the Department of Financial Protection and Innovation. [Health & S C §35805]

DRE regulation of discrimination

The DRE also enforces numerous regulations prohibiting discriminatory practices by real estate brokers and agents. A broker or agent found guilty of engaging in discriminatory business practices may be disciplined by the DRE. [California Department of Real Estate Regulation §2780]

DRE prohibited discriminatory practices include situations in which a broker or agent discriminates against anyone based on race, color, sex, religion, ancestry, disability, marital status or national origin.

Prohibited practices include any situation in which a broker, while acting as an agent, discriminates against anyone based on race, color, sex, religion, ancestry, disability, marital status or national origin. Examples of discriminatory practices include:

  • refusing to negotiate for the sale or rental of real estate;
  • refusing to show property or provide information, or steering clients away from specific properties;
  • refusing to accept a listing;
  • publishing or distributing advertisements that indicate a discriminatory preference;
  • any discrimination in the course of providing property management services;
  • agreeing with a client to discriminate when selling or leasing the client’s property, such as agreeing not to show the property to members of particular minority groups;
  • attempting to discourage the sale or rental of real estate based on representations of the race, sex, disability, etc. of other inhabitants in an area; and
  • encouraging or permitting employees to engage in discriminatory practices.

Blatant discriminatory practices are not as common now as they once were. However, the DRE’s focus now has shifted to more subtle forms of discrimination — implicit discrimination. Implicit discriminatory practices are not openly discriminatory, but result in discriminatory effects. Therefore, implicit discrimination is more challenging to spot, though no less deleterious to the California housing market.

A broker has a duty to advise their agents and employees of all anti-discrimination rules, including DRE regulations, the Unruh Civil Rights Act, the California Fair Employment and Housing Act, and the FFHA. [DRE Reg. §2725(f)]

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.

Editor’s note – firsttuesday was one of the first schools to submit the new education to the California Department of Real Estate (DRE) in April 2022.

The new education has been “pre-approved” by the DRE as of July 2022, though schools are unable to formally enroll students until fall of 2022.

When the DRE advises firsttuesday we can release the new courses for completion, the new education will be posted to accounts of firsttuesday students who need the education prior to October 2022.

Rest assured – all this is at no additional cost for firsttuesday students.