Key takeaways
- The housing market has seen an increase in both fair housing complaints and penalties associated with violations of the Fair Housing Act.
- The Fair Housing Act of 1968 prohibits discrimination in housing for protected classes in all 50 states; recent changes have expanded the meaning of protected classes to include sexual orientation, gender identity, and disability.
- The Alabama Fair Housing Law prohibits discriminatory housing practices within the state.
Fair housing complaints are on the rise across the housing market. A 2023 Fair Housing Trend Report by the National Fair Housing Alliance (NFHA) revealed a record-breaking 33,007 complaints filed in 2022—a 5.74% increase in the number of complaints lodged in 2021. In Alabama, 368 complaints were filed in 2022—a number that the NFHA cautions grossly underestimates the actual number of violations, given that “most incidents of housing discrimination go undetected or unreported.”
Still, this record-setting number of complaints is noteworthy because it coincides with a rise in penalties for non-compliance. On February 15th, 2023, the U.S. Department of Housing and Urban Development (HUD) adjusted penalties for Fair Housing Act violations. Repeat offenders now face fines of up to $123,965 within seven years, up from the previous cap of $115,054.
Given these rising stakes, real estate investors—especially out-of-state investors—should be well-versed with the federal fair housing laws and state anti-discrimination statutes. Here, we’ll explore the federal Fair Housing Act (FHA) and discuss Alabama’s specific regulations outlined in Title 24 of the Code of Alabama.
The Fair Housing Act explained.
The Fair Housing Act was enacted in 1968 as part of the Civil Rights Act and remains the primary piece of federal legislation that protects individuals from discrimination when they are looking for housing assistance, renting or buying a home, or applying for a mortgage. Enforced by the Department of Housing and Urban Development (HUD), the Fair Housing Act prohibits unequal treatment by real estate service providers, including real estate companies, home insurance companies, lending institutions, mortgage institutions, developers, landlords, brokers, and agents.
Originally, the Fair Housing Act safeguarded people against discrimination based on four core classes—race, color, religion, and national origin. Since then, the Act has been expanded several times. In 1974, sex was added as a protected class; this class refers not only to biological sex but also to gender identity and sexual orientation. Further changes came in 1988 when familial status and disability were both added as protected classes.
The Federal Housing Act in practice
A granular look at a particular protected class—say, disability, for instance—can illustrate how the Fair Housing Act protects individuals in practice. To avoid disability discrimination, landlords must not deny housing solely based on an individual’s condition. Landlords may also be required to make reasonable modifications to their units—such as installing grab bars or allowing service animals—to accommodate tenants with disabilities. To be clear, physical impairments are not the only disabilities recognized under the Federal Housing Act; mental impairments and even some chronic addictions qualify as well.
The Fair Housing Act also extends beyond simply renting or buying a home. The Act applies to a large array of housing-related activities, including advertising and marketing, rental and purchase applications, setting lease terms, mortgage lending, and housing assistance.
Common examples of Fair Housing Act violations include refusing to rent or sell housing based on an individual’s race, color, religion, sex, familial status, national origin, or disability, imposing different rental terms or conditions based on a person’s membership in a protected class, making discriminatory statements or advertisements related to housing, and failing to provide reasonable accommodations for individuals with disabilities.
While the Fair Housing Act offers broad protection, some limited exemptions exist. Most notably, these include owner-occupied buildings with four or fewer units. Religious organizations, private clubs, and single-family homes sold or rented directly by the owner without an agent are also exempt from the Fair Housing Act.
Beyond the federal Fair Housing Act, out-of-state investors must also be aware of additional regulations that apply at the state and local levels.
Title 24 of the Code of Alabama
Subdivided into 11 chapters, Title 24 of the Code of Alabama concerns housing within the state. It establishes a framework for government involvement through authorities like the Alabama Housing Finance Authority, which facilitates financing for affordable housing programs.
For landlords and investors alike, one critical part of the statute is the Alabama Fair Housing Law, which is enshrined in Chapter 8 of Title 24.
Alabama’s state-specific fair housing laws: A closer look
While Chapter 8 of Title 24 generally doesn’t offer more protections than the federal Fair Housing Act, it details specific actions constituting unlawful discriminatory housing practices in Alabama. The following is a breakdown of some of the Alabama Fair Housing Law’s key provisions, which out-of-state investors must be keenly aware of.
Refusal to rent or sell
In Alabama, it is unlawful to deny housing based on protected classes (race, color, religion, sex, familial status, disability, or national origin) after a legitimate offer has been made. However, Alabama allows landlords to screen applicants based on factors like smoking status, credit score, pet policies, income, and rental history.
To prevent accusations of discrimination, landlords should establish and apply consistent tenant screening and selection criteria to every applicant. Notably, Alabama allows non-refundable application fees with no specified limit under state law.
Discrimination in terms and conditions
Chapter 9A of Title 35 of the Code of Alabama allows rental property owners to set the terms and conditions of the lease agreement, including the rent amount, lease duration, pet policies, and other provisions like security deposits and late fees. However, these conditions must be applied fairly and consistently to all tenants, regardless of race, color, religion, sex, national origin, disability, or familial status.
There are no rent control policies in Alabama, meaning that landlords may charge (and raise) rents by as much as they consider appropriate. However, landlords must offer equal lease terms to all tenants occupying similar units within the same building or complex.
Similarly, while there is no legal requirement for a specific amount of rent increase or notice period when raising rent on existing tenants, it’s considered best practice to provide between 30 and 60 days’ notice to all tenants before an increase.
There’s also no state-mandated grace period for late rent payments or specified late fees. Landlords can impose late fees as soon as the rent becomes due. But again, these late fees must be implemented consistently for all tenants. The same principle applies to security deposits, which are capped at one month’s rent with the option for an additional pet deposit.
Lets dive a little deeper into these protected classes and share some examples of fair housing violations. Atlas Rental Property just completed its annual Fair Housing training to ensure compliance. I would like to discuss some of the examples given for each criteria to help any owners or property managers seeking to avoid Fair Housing violations.
Disability
- If the request is seen as a Reasonable accommodation, owner must agree to
- The tenant must pay for and must remove once they vacant the property. The owner can also require that any work to the property must be completed by a licensed and bonded contractor
- IF the owner wishes to keep the changes to the property, the owner must reimburse the tenant
- Examples: wheel chair ramps, grab bars in the shower are all reasonable accommodations
- NOT a reasonable accommodation – crazy service animals (alligator)
- Also, PMs must be cautious of descriptions of properties. Do not use verbiage such as “this property is walking distance from a grocery store,” Walking distance can be seen as discriminatory
Occupancy
- Landlords can not limit the number of occupants that fall outside of fair housing guidelines
- Different from MLS and appraisers
- 2 ½ heart beats per room (children up to the age of 2 are the ½)
- Large spaces can be considered rooms regarding occupancy – even without closets and egress windows (large basement spaces, dens, etc)
- Can’t limit the number of occupants that meet this standard
Family
- Can not discriminate against children / families when renting
- Can not use verbiage such as “no children” but also can not say things like “no bikes and toys in yard” or “no children running in the parking lot” (no one should run in parking lot)
- Can not advertise “great for families, play ground close by” Only give directional information regarding a playground
- Example: FH complaint of a PM that steered a family with small children away from a house on a busy street because they didn’t want the children close to the road
- You can not define what a family is (goes into gender identity, etc)
- Several college ordinances state that no 3 people living together that are not related. Our attorney believes these to be short lived due to defining what family is or is not
Ethnicity
- Can not discriminate based on people of different ethnicity
- Example: the use of curry
Religion
- 246 salutations for Happy Holidays – stick to Happy Holidays
- Attorney advised us to steer clear of using Bible verses in email signatures
- In property descriptions, do not say, close to a church – even when giving directions
Eviction and termination
Landlords cannot end a lease or tenancy for reasons based on bias related to race, religion, or other protected classes. However, a landlord can legally evict a tenant in Alabama for non-payment of rent, lease violations, illegal activity, or upon the end of a fixed-term lease with proper notice. Notably, Alabama eviction notices are short, ranging from 7 to 14 days.
Advertising
Any advertising for the sale or rental of a dwelling cannot express any preference or limitation for or against protected classes. For instance, phrases like “adults only” or “no families with children” would be illegal under state law. It’s also illegal to mislead potential tenants by claiming a unit is unavailable when it’s actually vacant.
Disability
Landlords cannot deny housing or access to facilities or services due to a person’s disability or association with someone with a disability. Moreover, landlords cannot impose different terms because of a disability and must make reasonable modifications to accommodate the needs of tenants with disabilities.
Conclusion
Fair housing laws are meant to protect you as an investor so don’t be alarmed or walk away from this episode thinking this is a lot to digest! This is what property management companies like Atlas Rental Property are here for! I mentioned earlier that our team recently finalized our annual fair housing training which took over 2 days to complete and it’s a fascinating topic because as you can imagine, these situations are never the same. One of our attorney partners from the Huntsville area comes to our office and walks us through everything we need to know to help protect ourselves from these liabilities and ultimately we are better able to serve our tenants and investors because of this.
If you have any questions about today’s episode, feel free to send us a message at [email protected]. Thanks for tuning in with us again and as always, that’s on the house!