Fair Housing laws are fairly complex since they extend to both buyers and renters, and have developed to become more inclusionary over the years. The Fair Housing Act (FHA) was first enacted in 1968 and then amended in 1988, when it extended to include protection for disabled persons and families.
To further understand Fair Housing laws, the following definitions and clarifications can help.
HUD, FHA and FHEO
You may have heard these acronyms in the past but not quite understood what they mean. To clarify, here is a breakdown of each department and their specific missions.
HUD stands for the Department of Housing and Urban Development, a cabinet within the executive branch of the government. Essentially, HUD was developed to help Americans access housing by promoting homeownership, setting discrimination policies and encouraging community development. HUD enforces housing laws and provides federal grants to those in need, while also offering mortgage support for qualifying citizens.
As previously noted, FHA stands for the Fair Housing Act of 1968. FHA ensures every American citizen has the right to rent, buy or secure financing for a home purchase, regardless of their race, color, national origin, religion, sex, disability or children.
FHEO is the Office of Fair Housing and Equal Opportunity within HUD. This program ensures all Americans have equal access to housing options, whether it is a sale or rental property, regardless of group affiliation. FHEO investigated complaints filed with HUD to determine whether reasonable cause exists for housing discrimination. Hearings are scheduled before a HUD administrative judge, but either party can elect for Federal Court litigation, requiring the Department of Justice to take over the matter as a civil action. Either option is subject for review in the U.S. Court of Appeals.
How Does It Work for Homeowners?
For hopeful homebuyers, HUD grants mortgage loans for families with less than exemplary credit, high debt or bankruptcy to ease the path to homeownership. Lenders who wouldn’t otherwise back a risky candidate are incentivized by HUD approval because FHA insurance lessens risk of debt. Essentially, HUD insures high-risk mortgages, as long as the applicant is serious about finding financial stability. However, those who fall into default under a HUD loan are backed by the American people and their tax rates.
For the public, FHA-backed loans give opportunities for those who’ve fallen into financial trouble, increasing the rate of homeownership within the U.S. The program is extremely popular – around one in five buyers seeks an FHA loan for financing. Typically, FHA loans have lower interest rates and flexible stipulations. And, down payments can be as little as 3.5 percent of the purchase price. For green energy advocates, HUD offers FHA Energy-Efficient mortgages to incorporate the cost of eco-friendly improvements.
Banks benefit from HUD loans by increasing the number of mortgages they represent. And, the insurance from the federal government gives them the opportunity to lend to riskier borrowers without putting themselves in jeopardy. Plus, FHA loans requirements and limits typically say borrowers’ front-end ratio must be less than 31 percent of gross income and back-end ratio must be less than 43 percent of gross income.
Renters also benefit from Tenants Rights. According to Fair Housing laws for rentals, landlords may not make statements that limit or prefer applicants based on race or religion. They also must not deny a rental unit is available or terminate a tenant due to discrimination. Landlords are not allowed to set different standards or refuse to rent to certain groups, or alter lease terms and conditions based on group affiliation.
- No landlord can advertise preference or discrimination against race or religious affiliation – even when those penchants are discreetly expressed (i.e. describing “primarily Jewish community” in the rental listing)
- Landlord cannot require proof of citizenship or immigration from one group of applicants over another. In California, it’s illegal to even ask for proof of citizenship even if requirements are standard for all applicants.
- Federal law provides minimum occupancy standards so tenants cannot be turned away based on number of children. Typically, two residents per bedroom is the standard allowance, unless the landlord can prove there are infrastructural limitations.
- Landlords cannot refuse you based on your age, unless you prove to be unstable or frequently forget to pay rent on time.
- Landlords cannot refuse anyone based on disability, including hearing or vision issues or disease. Recovering alcoholics and former drug addicts cannot be denied solely on their past, unless their addiction caused negative references or poor credit.
- You cannot be denied based on sex, and are protected under sexual harassment laws (i.e. if a landlord makes sexual requests as a requirement for approval).
Not all rentals are subject to FHA laws, including owner-occupied properties with less than four units and single-family homes rented without advertisements or representation (as long as the landlord owns/operates three homes or less). Housing operated by religious organizations and clubs are allowed to limit occupancy. Further, communities dedicated to senior housing do not break FHA laws. While these are the federal regulations, the laws might be different depending on where you rent since state fair housing laws exist.
Section 8 Vouchers
In addition, HUD supports rental assistance programs, including Section 8 housing vouchers. This program, formally called the Housing Choice Voucher Program, allows private landlords to offer apartments and home at market rate with the rest of the rent covered by a subsidy funded by HUD.
To qualify for Section 8, the household income must not exceed 50 percent of the median income for the county or metro. Public housing agencies (PHAs) administer the vouchers and are required to provide 75 percent of vouchers to applicants with incomes at or under 30 percent of the area’s median income. PHA requests information on income, assets and household size, then verifies individual statements with employers and banks.
After being approved, Section 8 renters are put on a waiting list and later issued a voucher. Families can select units below or above the payment standard, but must pay 30 percent of monthly adjusted gross income toward rent and utilities. But, when a family moves into a unit where rent exceeds the standard, the family is not required to pay more than 40 percent of adjusted monthly income.
HUD protects both homeowners and renters from discrimination, and offers programs to assist everyone in finding appropriate housing, regardless of race, religion or financial status, among other factors.
If you believe you have experience discrimination in your rental or home search, you can file a complaint with HUD online or call the Housing Discrimination Hotline at (800) 669-9777. Individuals can also report potential HUD fraud via the Hotline or file the complaint online.