More than 50 years after the federal ban on housing discrimination, upholding the law’s spirit remains a challenge. Here’s how to be a fair housing leader.

Sandra Butler refused to let it slide when a seller she represented made what felt like a discriminatory comment. The seller thought the buyers, who had foreign-sounding names, were trying to negotiate for too many repairs. “I know how these people are, and they always want something for nothing,” Butler recalls the seller saying.

Butler is African-American. So was her client. And she didn’t want the seller to “think this conversation could be had because we look alike,” she says. Instead of flatly admonishing her client, Butler turned the conversation to fair housing law. “I said, ‘I don’t know the buyers or what they look like. I just know they are ready, willing, and able to purchase, and it’s our duty under the law to make your property available to them,’” says Butler, a sales associate with Sibcy Cline, REALTORS®, in Cincinnati. The deal ultimately fell apart over negotiation terms, but Butler was satisfied that she’d made her client more aware of a seller’s responsibility to abide by the federal Fair Housing Act, which prohibits inequitable treatment in the sale, rental, and financing of homes based on race, color, national origin, religion, sex, disability, and the presence of children.

Each April, REALTORS® celebrate Fair Housing Month to commemorate the law, which was passed in 1968 and amended in 1988. Yet more than 50 years after its passage, racial and religious tensions continue to dominate national conversations and stoke heated rhetoric in presidential politics. Is that tension having an effect on real estate sales? Apparently not. Housing discrimination is the exception today, according to a REALTOR® Magazine survey of National Association of REALTORS® members. Of the 2,300 respondents, more than 80% said they had not encountered housing discrimination in their market.

That’s great news. And yet, fair housing challenges remain. Violations—and government efforts to enforce the law—continue. Nearly 10% of respondents to the survey said they had encountered discrimination in their markets, 18% of those saying it happened within the past month or “earlier this year.”

Fair housing organizations receive about 25,000 to 30,000 complaints each year, according to the National Fair Housing Alliance, a coalition of privately run fair housing groups. Yet, testing suggests there are many more instances of discrimination—the NFHA estimates about 3.7 million annually. The U.S. Department of Housing and Urban Development has conducted thousands of tests in recent years, employing housing organizations to send testers out to view for-sale and rental properties as a means of determining whether landlords, lenders, agents, and others in the real estate community treat protected classes differently.

Cliff Long, CEO of the Birmingham Association of REALTORS® in Alabama, says discrimination in the rental process is the biggest issue in his market. When he was relocating to Birmingham three years ago, he experienced it firsthand. Long, who is African-American, says several landlords wanted him to produce financial records before they would show him rental units—a practice that fair housing groups say is often aimed at minorities only. Having just taken the top job at the association, Long decided not to file a complaint.

Nearly all respondents said if they encountered potential discriminatory language or actions, they’d likely address it the way Butler did—by engaging in some straight talk about the law with their client. Less than 3% of respondents to the survey said they’d file a complaint, and less than 1 percent said they’ve ever filed a fair housing complaint.

Putting Your Training to Work

As an NAR member, you’ve made a commitment to equal treatment—not just because it’s the law but as part of the REALTORS® Code of Ethics. NAR requires that members stay up to date on the Code, completing training at least every four years. In addition, states and localities often have their own fair housing laws, so state and local associations administer specific fair housing training for their members. Typically, licensees are required to take a two- or three-hour course every two to four years.

So there’s little doubt that when clients ask questions about quality of schools, local demographics, and neighborhood safety, you know to refer them to reliable information sources for answers rather than give your opinion. Resist the temptation to skirt the subject, says Mabel Guzman, CIPS, a sales associate at @properties in Chicago. You’re not teaching them anything by being coy. Be frank about why you can’t answer certain questions. Seize the opportunity to explain fair housing laws and why it would be illegal to offer your opinion.

Curiously, more than 30% of respondents to REALTOR® Magazine’s survey said they don’t talk about fair housing issues with buyers and sellers. Whether that’s because they don’t encounter discriminatory behavior or because they’re too uncomfortable to challenge that behavior is not clear. It can be tempting to overlook questions or statements from clients in order to avoid an awkward exchange that could affect your business relationship. Addressing such issues in a nonconfrontational way, with fair housing law as the framework, can help.

The Challenges Ahead

When you’re working with first-time buyers, particularly from new immigrant populations, you may need to actively educate your clients about fair housing law. Immigrants are an increasing target for discrimination in real estate, contends Lisa Rice, NFHA executive vice president, and many are unfamiliar with their rights under the law. “If no one is mean or disrespectful,” she says, “it’s not the first thing on your mind that maybe that house wasn’t made available to you because you were being discriminated against. Trained real estate practitioners can recognize discrimination and be part of how we bring awareness to the public.” The Alliance expects to see a rise in national origin–related cases in the coming years, Rice says.

As a Muslim woman living in the South, Firdaus Rahman, CRS, GRI, a sales associate at RE/MAX Partners in Mobile, Ala., admits she’s worried that Islamophobia—a hot-button issue in the 2016 presidential race—is becoming more acceptable and leads to unfair treatment. Rahman has been teaching fair housing and diversity courses through the Alabama Real Estate Commission since 2002, but the curriculum doesn’t go deeply into religion. She says the training needs an overhaul to reflect new issues surfacing in the field.

“You have to understand where people from different cultures are coming from,” Rahman says, adding that sensitivity to certain holidays and holy days is an important part of working with clients.

Also, because some cultures don’t participate in banking and savings in ways that are customary in the U.S., landlords, lenders, and real estate practitioners may have to educate their clients about U.S. customs or even adjust their expectations. “When immigration reform begins, we’re going to need a lot of education,” Long says. “You can bet fair housing is going to be front and center, and we’re going to be in a bad position if we’re not ready to tackle this issue. I’d like to play a proactive role rather than a reactive role.”

Brokers can take the lead on that front and establish relationships with local fair housing organizations to get a better look at the issues facing local markets. After the NFHA filed discrimination lawsuits against several brokerages nationwide in 2007, including one in the Detroit area, Michigan REALTORS® partnered with fair housing groups around the state to bring regulators and practitioners together. The association developed a program to allow brokers to be voluntarily tested by fair housing groups for informational purposes, hoping it would foster more collaboration on training in the industry. “Part of the testing was about demystifying our relationship with fair housing centers,” says Brian Westrin, the association’s director of legal affairs. “There was a lot of unknown there about whether brokers could reach out and bring fair housing centers into their office for education.”

Addressing the Affordability Barrier

One of the underlying goals of fair housing law has been ending segregated housing patterns in the United States, but census data show the law has fallen short. So last year, President Barack Obama announced a new rule requiring local governments that receive federal housing funds to report how they use those funds to foster more integrated communities.

Lack of affordable housing can perpetuate segregation when it prevents protected classes from moving up the housing ladder. It’s a problem facing cities across the country, but none more acutely than San Francisco, where the median price was $940,000 in the fourth quarter of 2015. That’s why REALTORS® there have banded together to come up with solutions to the growing affordability crisis.

The real estate industry in San Francisco relies heavily on all-cash buyers—many from Asia—which pushes up prices and leaves other groups at a disadvantage, says Eugene Pak, president of the San Francisco Association of REALTORS® and sales manager at Climb Real Estate. One of SFAR’s primary goals this year is to work with local officials on a program to fast-track the permitting process for residential developments that will deliver a certain percentage of affordable units. It currently takes eight to 15 years to build a large development because of the intense permitting process, Pak says. “We don’t only care about the needs of our millionaire clients,” he adds. “We believe in housing for all.”

The country has come a long way over the past half-century when racial steering and disparate lending practices were common. And REALTORS® are on the forefront. But in an increasingly diverse country—where taking the first step toward buying or even renting can be a daunting task—you have an opportunity to do more: Teach your neighbors about what fairness in the real estate transaction looks like and empower those who’ve faced prejudice to challenge unequal treatment. Are you making the most of your platform?

©National Association of REALTORS®
Reprinted with permission

Industry vulnerabilities to these types of scams are under intensifying scrutiny. Federal agencies are passing new measures to combat the risks.

The Financial Crimes Enforcement Network(link is external) (FinCEN) is taking extra steps to prevent the growing number of money laundering schemes involving real estate. The latest updates to antilaundering rules do not involve extra legal requirements for real estate professionals, but you can play a role in helping to mitigate risks, says Matt Troiani, senior counsel and director of legal affairs at the National Association of REALTORS®, in the latest “Window to the Law” video. “It is still important for real estate agents to know the rules in order to mitigate money laundering risk,” he adds.

NAR recently published voluntary guidelines that real estate pros can follow to help curb money laundering.

Money laundering vulnerabilities in the real estate industry have come under growing scrutiny. Many of these cases involve property purchased by people who try to conceal their identity or the source of their funds. In an anti-laundering crackdown, FinCEN has created new reporting rules for title companies aimed at lifting the veil of secrecy surrounding certain real estate transactions.

FinCEN’s Geographic Targeting Order, which expires at the end of April but is expected to be renewed, requires title companies to report the identities of owners of legal entities like LLCs and corporations that purchase residential real estate—even without external financing. Cash purchases for properties worth $300,000 or higher must be reported, though in some areas of the country, the threshold is lower.

FinCEN also recently issued the “Beneficial Ownership Rule,” which takes effect Jan. 1, 2024. Under this rule, all domestic and foreign entities formed or registered to do business in the U.S. will be required to provide FinCEN with the identities of any purchasers with 25% or more ownership interest in the property, Troiani explains. Business entities include most LLCs and corporations, although some exceptions are made for regulated entities, like banks and insurance companies.

“FinCEN’s collection of beneficial ownership information is a solution to stopping the formation of anonymous shell companies for illicit gains by enhancing transparency,” NAR President Kenny Parcell said in a February letter(link is external) to the agency.

You should be well-versed in these updates and know the requirements of each rule, even though there aren’t extra reporting obligations on your end, Troiani says. For example, the beneficial ownership rule requires the collection of data like the owners’ legal or trade names, the business street address, the jurisdiction in which the company was formed or registered, and a taxpayer identification number.

©National Association of REALTORS®
Reprinted with permission

Service animal case points up the importance of clear communication between housing providers and tenants.

Editor’s Note: After publication of this story, we discovered an update in the court proceedings. On March 30, 2023, the 9th Circuit District Court awarded $14,800 in damages to the plaintiff, Ashley McClendon, finding that the defendant reasonably should have known of McClendon’s disability based on the communications between the defendant and co-applicant [McClendon v. Bresler, 20 CV 7758(link is external) (C.D. Cal. Mar. 30, 2023)].

McClendon v. Bresler, 2022 WL 17958633, (9th Cir. Dec. 27, 2022)

The use of service animals has been one of the most contentious fair housing issues in recent years, mainly because of the growing use of animals in emotional-support situations. One case—involving a housing provider who said he didn’t allow dogs, regardless of whether they were service animals—was recently sent back to district court by the U.S. Court of Appeals for the Ninth Circuit. At issue: whether language by an applicant that implies a disability constitutes the requisite evidence to make a housing provider aware the applicant actually has a disability.

The case: In July 2020, Ashley McClendon and Sarah Gailey applied to rent Peter Bresler’s property. Bresler’s rental advertisement included a “no dogs” policy. Nonetheless, Gailey asked for permission to bring McClendon’s support animal, a 50-pound terrier mix named Tinkerbell. In an email, Bresler said the dog’s size was a problem.

Although communications between Bresler and Gailey didn’t detail McClendon’s mental and physical impairments, Gailey said Tinkerbell was a “verified support animal.” Her emails also referenced the Americans with Disabilities Act and noted the animal’s presence would be a “reasonable accommodation.” After Bresler denied the application, McClendon sued under the Fair Housing Act and California’s Fair Employment and Housing Act, alleging disability discrimination and negligence.

The U.S. District Court for the Central District of California initially awarded summary judgment to Bresler, noting the email correspondence didn’t indicate Bresler was aware McClendon had a disability. The court found descriptions of the dog as a registered and verified support animal merely amounted to assumption. McClendon appealed.

The ruling: The Ninth Circuit overturned the lower court ruling, noting that a prospective tenant “who requests accommodation[s] for a service animal need not affirmatively identify his or her disability to trigger [Fair Housing Act] protection.” Statements like “I have a therapy animal” or “I have an assistance dog” should reasonably alert a housing provider, the court said. The suit has been remanded to the district court for a ruling on whether Bresler should have known of McClendon’s disability status. The appeals court highlighted the applicants’ use of phrases such as “reasonable accommodation,” “discrimination” and “service dog” as potential evidence. The appeals court also reversed the judgment dismissing negligence claims. In the pending case, the plaintiff will have to prove Bresler reasonably should have known of her disability; a reasonable accommodation is necessary for her to enjoy the rental; and the defendant refused to accommodate her.

The takeaway: Discrimination based on disability status includes refusing to make reasonable accommodations so all tenants have equal opportunity to use the rental, so:

• Avoid blanket policies that could discriminate against those with protected characteristics.
• Pay attention to phrases like “reasonable accommodation” or references to the Americans with Disabilities Act, which could trigger duties to accommodate.
• Make sure to reasonably accommodate a prospective tenant.

Learn about HUD’s 2020 guidance on assistance animals in this Window to the Law video.

©National Association of REALTORS®
Reprinted with permission

It’s an opportunity to explain to your clients what your role is in the transaction and how they’ll benefit from your services.

Real estate agents don’t always ask their clients to sign a buyer representation agreement—but there are plenty of reasons they should, according to the National Association of REALTORS®’ latest “Window to the Law” video. Such an agreement is a legally binding document that details the agent-client relationship, such as the services you’ll provide, agency relationship and compensation. It protects both the agent and the buyer and helps avoid misunderstandings, explains Deanne Rymarowicz, associate counsel at the National Association of REALTORS®.

“While jurisdictions vary in what is required in terms of written agreements when it comes to compensation, most states require that any exclusive brokerage or agency relationship be in writing. And about half of states require written disclosure of an agency relationship in order for the real estate professional to be paid for the services,” says Rymarowicz, urging agents to check with their state REALTOR® association to make sure they’re in compliance.

The buyer agreement can be a talking point with clients about the value you bring to the transaction. Some clients may be skeptical at first when asked to sign an agreement, which is an opportunity to provide clarity about your services and build trust. Review the agreement as you explain your duties and obligations to your clients and reinforce that you’re a professional who follows a Code of Ethics.

For more guidance on conversations about compensation, NAR has a website—competition.realtor—to help agents articulate their value.

“A signed agreement may be helpful in the event of a procuring cause dispute or, in rare instances, a legal dispute with a buyer,” Rymarowicz says. She points to a recent case in Montana in which the court leaned on the buyer representation agreement in its ruling that a broker did not have an obligation to disclose available zoning information.

“Buyer representation agreements are a win-win proposition for both real estate professionals and consumers,” Rymarowicz says. “They assist in building trust and a mutually beneficial relationship by promoting transparency through upfront conversations, providing clarity regarding services consumers can expect to receive and how their real estate professional will be compensated.”

©National Association of REALTORS®
Reprinted with permission

Real estate professionals experimenting with content creation through artificial intelligence should keep the Code in mind as case law evolves.

Although copyright law is rooted in human authorship going back to a Supreme Court decision from the 1880s, various cases involving fast-moving artificial intelligence technology are challenging that rule of law today, Chloe Hecht, senior counsel at the National Association of REALTORS®, said at the Risk Management Issues Committee meeting during the REALTORS® Legislative Meetings(link is external) in Washington, D.C.

Hecht shared a few cases that illustrate the murky legal issues involving AI-generated works.

Plaintiff Stephen Thaler, for example, is suing the U.S. Copyright Office (in Thaler v. Perlmutter) because it denied him copyright for an image produced by his AI system, the Creativity Machine. He claims it was a work made for hire between himself and the AI generator. Despite various denials by the Copyright Office, “Thaler argues that human authorship isn’t required and, therefore, his work should be entitled to protection,” Hecht said.

Thaler has indicated he will appeal his case to the Supreme Court if necessary, she added. 

In another case, an artist and author wrote text for a graphic novel and created images using AI. The Copyright Office granted her protection initially but limited the registration to the text and arrangement of the images when it learned they were AI-generated. “But the author maintains she didn’t just input a prompt,” Hecht elaborated. “She took the image and asked AI to change and tweak it until it reflected what she wanted.”

Finally, Hecht described a case involving stock image giant Getty Images, which this year sued an AI company, Stability AI Inc., for using 12 million Getty images and their accompanying metadata to “train” its system. “That’s a sticking point for creators,” Hecht said of the technology. Someone developing AI uses others’ work to train their system, which lets AI generate new work based on those originals.

The cases leave a lot of unanswered questions for real estate practitioners and others seeking to use this evolving technology. Nonetheless, the Code of Ethics offers guidance, Hecht said, citing Articles 2 and 12.

Article 2 holds that “REALTORS® shall avoid exaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction.” Article 12 says, “REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing and other representations.”

As an example, Hecht noted, “using AI to remove a structural crack from a wall violates those two Articles, but removing a hose and bucket accidentally caught in a picture is different.”

In addition, she offered three takeaways for using AI as safely as possible:

1. Always review AI-generated content for accuracy.
2. Don’t use AI to create a work you want to be able to protect.
3. Don’t assume any third-party content was created by AI and, therefore, available for your use. Always get permission in writing for the way you want to use the work, and save that documentation.

©National Association of REALTORS®
Reprinted with permission