Discrimination and Fair Housing issues, both real and alleged, can take many forms. It is, or should be, a topic of concern for all real estate professionals. The topic is prevalent in today’s news with stories of racial bias in property appraisals resulting in inappropriately low valuations for Black and minority owned properties. Concerns of bias and discrimination are not unique to the appraisal profession and have roots in real estate that go back decades. Few local or federal laws were in place to allow equal access to home ownership or funding for many decades. The Fair Housing Administration was established in 1934 but did little to create greater opportunity for home ownership. Its guidelines relied on local ordinances and real estate boards to determine how loans would be made, all but formalizing the red‐lining of minority neighborhoods and communities. The consequences of red ‐ lining were enormous, affecting public housing policy and even relocation of neighborhoods for highways and other government projects.
In 1968, the federal government enacted the Fair Housing Act, though initially with no enforcement capabilities. The Act prohibits discrimination in most housing due to race, color, national origin, religion, sex, familial status and disability, and a substantial list of prohibitions is noted. More can be found about the Fair Housing Act at
https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview.
It would be easy to assume that only the most egregious instances of discrimination and bias exist in the real estate industry today. While those are the events that make the headlines, such as the recent appraisal bias allegations, real estate agents continue to be sued or receive complaints due to actions that seem far less severe. In fact, E & O claims alleging Fair Housing Discrimination are on the rise. Many of these allegations (remember that a Claim and lawsuit is only an allegation of wrong‐doing) do not result from clear or deliberate acts of bias or discrimination – though those unfortunately exist in abundance. Many allegations seem more benign, less intentional, but still trigger serious consequences. Some professional services create more risk, including property management, leasing, eviction and “cash for keys”. Many other complaints are triggered by careless comments and assumptions, and even attempts to be helpful. Examples include describing a neighborhood as “family friendly” to a single buyer; telling a handicapped person that they would be unhappy in a multi‐level home; providing erroneous information on the acceptance of service animals on a property; failure to provide documents and communications in a person’s native language; failure to, or creating the appearance of, limited availability or opportunity to buyers of color, sexual orientation, etc. As in so many circumstances that result in problems for agents, moving away from verifiable fact and information about a property, and venturing into opinion and conjecture is both avoidable and potentially catastrophic.
Most Errors & Omissions policies for real estate firms offer Fair Housing and Discrimination coverage, though it is typically a separate and specifically‐defined coverage with liability limits that can be different (less) from the policy’s main liability coverage. To trigger a Fair Housing Claim, the allegation must allege a violation of some federal, state or local regulation or law related to equal housing opportunity, Civil Rights violation or the Fair Housing Act. Because Fair Housing coverage and resulting Claims are limited in both policy language and liability protection, a clever Plaintiff attorney would also most likely bring suit against some other aspect of the agent’s actions and policy coverage. A conscientious agent would be wise, and considerate, to avoid this double jeopardy.
For more helpful information from our partners at Landy Insurance, click HERE.
