Protected Classes
Protected classes are groups legally shielded from discrimination in housing under federal, state, and local laws, primarily the Fair Housing Act, ensuring equal access to housing opportunities.
Key Takeaways
- Protected classes are groups legally shielded from housing discrimination under federal, state, and local laws.
- The federal Fair Housing Act protects against discrimination based on race, color, religion, national origin, sex, familial status, and disability.
- State and local laws often expand these protections to include additional characteristics like sexual orientation or source of income.
- Investors must apply consistent, objective criteria in all housing-related activities to avoid legal violations and ensure fair practices.
- Violations of fair housing laws can result in significant fines, legal fees, and damage to an investor's reputation.
What Are Protected Classes?
Protected classes refer to specific groups of people who are legally shielded from discrimination in housing-related activities. The primary federal law establishing these protections is the Fair Housing Act of 1968, which prohibits discrimination in the sale, rental, and financing of housing based on certain characteristics. Understanding these classes is crucial for real estate investors to ensure compliance and avoid legal penalties.
Key Protected Classes Under Federal Law
The Fair Housing Act federally protects seven classes:
- Race: Discrimination based on a person's racial background.
- Color: Discrimination based on skin color.
- Religion: Discrimination based on religious beliefs or practices.
- National Origin: Discrimination based on a person's country of birth or ancestry.
- Sex: Discrimination based on gender, including sexual harassment and gender identity.
- Familial Status: Discrimination against families with children under 18, pregnant women, or those in the process of adopting.
- Disability: Discrimination against individuals with physical or mental impairments that substantially limit one or more major life activities. This includes requiring reasonable accommodations or modifications.
State and Local Protections
Beyond federal law, many states and local jurisdictions have expanded protected classes to include additional characteristics. These can vary widely but often include sexual orientation, gender identity, marital status, age, source of income, veteran status, and even political affiliation. Investors must be aware of the specific laws in their operating areas.
Practical Implications for Real Estate Investors
For real estate investors, understanding protected classes is not just about legal compliance; it's about ethical business practices and risk management. Violations can lead to significant fines, legal fees, and reputational damage. Investors must apply consistent criteria to all applicants and tenants, from advertising and screening to lease terms and eviction procedures.
Avoiding Discrimination in Practice
- Standardize Processes: Use the same application forms, screening criteria, and lease agreements for all prospective tenants.
- Objective Criteria: Base decisions solely on objective, non-discriminatory factors like credit score, income, and rental history.
- Consistent Communication: Ensure all communication, whether verbal or written, avoids any language that could be perceived as discriminatory.
- Fair Advertising: Avoid advertisements that explicitly or implicitly exclude protected classes.
Real-World Example: Navigating a Rental Application
An investor owns a duplex in a city with federal, state, and local protected classes including sexual orientation and source of income. A prospective tenant applies, is a single mother with two young children (familial status), uses a housing voucher (source of income), and identifies as LGBTQ+ (sexual orientation).
- The investor must evaluate the application based solely on objective criteria like credit score, income-to-rent ratio (considering the voucher), and rental history.
- Denying the application based on her children, voucher, or sexual orientation would be a violation of fair housing laws.
- The investor should ensure all decisions are documented and justifiable by non-discriminatory factors.
Frequently Asked Questions
What is the primary federal law that defines protected classes?
The primary federal law defining protected classes in housing is the Fair Housing Act of 1968. This landmark legislation prohibits discrimination in the sale, rental, and financing of housing based on race, color, religion, national origin, sex, familial status, and disability.
Can state or local laws add more protected classes beyond federal mandates?
Yes, absolutely. While the Fair Housing Act sets the federal baseline, many states and local jurisdictions have enacted their own fair housing laws that expand upon these protections. These additional protected classes can include characteristics such as sexual orientation, gender identity, marital status, age, source of income, and veteran status. Investors must always comply with the most protective laws applicable to their property's location.
What are common examples of discriminatory practices investors should avoid?
Common discriminatory practices include refusing to rent or sell to a protected class, offering different terms or conditions, falsely denying availability, or advertising in a way that excludes certain groups. For example, an investor cannot refuse to rent to a family with children (familial status) or charge a higher security deposit due to a tenant's race. Any action based on a protected characteristic rather than objective criteria is a violation.
How does the "Mrs. Murphy" exemption apply to protected classes?
The "Mrs. Murphy" exemption is a narrow exception to the Fair Housing Act. It applies to owner-occupied buildings with four or fewer units, where the owner lives in one of the units and does not use a real estate agent or discriminatory advertising. Under this exemption, the owner may be exempt from certain provisions of the Fair Housing Act, but it does not apply to race or color discrimination. This exemption is often misunderstood and does not apply to most real estate investors.