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Home > Legal Research > HUD Resources

Introductory notes

The Department of Housing and Urban Development has recently made what some perceive as a significant shift in policy relating to fair housing. In a response to an inquiry from The Buyer's Agent franchise located in Memphis, Tennessee, HUD issued an opinion stating that buyer/brokers are not bound by the steering provisions of the federal Fair Housing Act. This, for example, would enable agents to comply if a white client asks to be shown properties only in white neighborhoods.

In a letter dated October 2, 1996 to Jill Levine, chief counsel for The Buyer's Agent, HUD Assistant Secretary for Fair Housing, Elizabeth Julian, said buyer agents would not violate the Fair Housing Act "merely by mutely accommodating the client's request to limit, on a protected class basis, the search for dwellings.

Julian stressed that agents would be in clear violation of the Act if the agent "took any action or made any statement that" led a client to believe properties in specific areas would not be available to them. In other words, you can't "steer" people, but they can request to be steered. Needless to say, the Buyer's Agent was pleased with the decision. In a recent press story, Tom Hathaway, president of the Buyers' Agent, praised the decision. He said, "This is the first ruling that in any way contradicts the standards that real estate agents have worked under for the last 20 years."

Early responses on this issue point to a diverse set of opinions among all sides involved. Clearly, this decision merits much discussion, and in the spirit of that type of discussion, please find below the letter from HUD in it's entirety. That which appears in brackets ([]) are footnotes and have been included in the body of the letter to facilitate reading on a computer screen. Please read the letter and then go to the National Fair Housing Advocate Discussion Forum and respond with your opinion. Hopefully, many different types of people will respond. If you are in real estate, what do you think about this? What about you fair housing advocates from across the country, what is your opinion? Do you work for a state or local commission, then jump on in! This is IMPORTANT! The whole point is to facilitate some complex and intense dialogue. State your opinions freely. This is the place for all to speak.


Initial HUD Buyer's Agent letter

U.S. Department of Housing and Urban Development
Office of the Assistant Secretary for Fair Housing and Equal Employment
Washington, D.C. 20410-2000

October 2, 1996

Jill D. Levine, Esq.
Legal Counsel The Buyer's Agent Inc.
2014 Exeter Road
Germantown, TN 38138

Dear Ms. Levine:

Thank you for your April 10, 1995 letter to Roberta Achtenberg, former Assistant Secretary for Fair Housing and Equal Opportunity, concerning the prohibition against steering prospective homebuyers on the basis of protected class, as it applies to buyer's agents, under the Fair Housing Act ("Act"). [The Act prohibits discrimination in housing based on race, color, sex, familial status, and handicap, as well as discrimination based on religion and national origin, the protected classes that your letter mentions specifically. See 42 U.S.C. Section 3604; 24 C.F.R. Part 100 (1995). Steering on the basis of a class protected under the Act violates subsection 804(a) of the Act, as it denies and otherwise makes dwellings unavailable on a prohibited basis. See note 3, infra. The Act also prohibits forms of discrimination other than steering on the same bases, e.g., subsection 804(b) of the Act, 42 U.S.C. Section 3604 (b), prohibits discrimination in the terms or conditions of the sale or rental of a dwelling or the provision of services or facilities in connection therewith; subsection 804(c) of the Act, 42 U.S.C. Section 3604(c), prohibits the making, printing or publishing of discriminatory notices, statements, and advertisements; and subsection 804 (d) of the Act, 42 U.S.C. Section 3604(d), prohibits misrepresenting the availability of a dwelling. While your letter's terms limit the matters it raises to steering only, this response addresses some matters not necessarily considered within that term.] 42 U.S.C. Sections 3601-19. Specifically, you inquired as to the duties of a buyer's agent when a client instructs the agent to limit the scope of a search for properties by requesting to inspect, or exclude from inspection, dwellings in a neighborhood which the client identifies with reference to a classification based on a protected class status. While there is nothing in the Act to exclude the actions of a buyer's agent from the Act's coverage, the Department of Housing and Urban Development ("HUD") concludes that, with the various provisos discussed more fully below, a buyer's agent would not violate the Act merely by mutely accommodating the client's request to limit, on a protected class basis, the search for dwellings.

HUD's final rule implementing the Act broadly defines "broker" or "agent' to include "any person authorized to perform an action on behalf of another person regarding any matter related to the sale or rental of dwellings, including offers, solicitations or contracts and the administration of matters regarding such offers, solicitations or contracts or any residential real estate-related transactions." 24 C.F.R. Section 100.20 (1995) (definition of "broker" or "agent"). See also 24 C.F.R. Subtitle B, ch.1, Subch. A, App. 1 at 934 (1995) (definition of "broker" or "agent"). Buyer's agents easily fit within this definition, e.g., they are authorized to perform actions on behalf of buyers regarding matters relating to the sale and rental of dwellings, such as making offers, etc. Accordingly, this definition includes brokers or agents, whether authorized to act on behalf of a seller or a buyer. [An agency's reasonable interpretation of its own regulations is entitled to substantial deference. Martin v. OSHRC, 499 U.S. 144, 150 (1991); Lynn v. Payne, 476 U.S. 926, 939 (1986); and Ehlert v. United States, 402 U.S. 99, 105 (1971).] See also Steptoe v. Beverly Area Planning Ass'n, 674 F. Supp. 1313, 1319-20 (N.D. Ill. 1987) (Act covers persons or entities which "directly provide housing or those that are integrally involved in the sale or financing of real estate" provided that "the discriminatory action directly affect(s) the availability of housing.")

There are no administrative or judicial opinions respecting the Act of which we are aware in which a buyer's agent was a party or which specifically address the duties of buyer's agents under the Act. Without distinguishing between buyers' and sellers' agents, however, courts have interpreted subsection 804(a) of the Act, 42 U.S.C. Section 3604(a), to prohibit "real estate agents" from engaging in steering practices. [Subsection 804(a) of the Act provides that it is unlawful to "refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin." 42 U.S.C. Section 3604(a). Paragraph 804(f) (1) of the Act contains prohibitions against discrimination based on handicap that are analogous. 42 U.S.C. Section 3604(f)(1). Steering, which constitutes different treatment of prospective buyers based on their protected class, results in making housing "unavailable" to some of them based on their protected class status. Village of Bellwood v. Dwivedi, 895 F.2d 1521, 1528 (7th Cir. 1990).] See Dwivedi, 895 F2d at 1529-30 (evidence that sellers' agents, without prompting from prospective buyers, showed white homeseekers dwellings primarily in white suburbs, while showing black homeseekers dwellings primarily in integrated suburbs established prima facie case of steering; and Zuch v. Ussey, 394 F. Supp. 1028, 1048 (E.D. Mich. 1975) (real estate agent violates subsection 804(a) of the Act when he or she "actively undertakes an effort to influence housing choice of a prospective home buyer on a racial basis"), affd, 574 F.2d 1168 (6th Cir. 1997). While those cases involved sellers' brokers and agents, given HUD's definition of the terms "broker" and "agent," HUD believes the teachings of those cases also apply to buyer's agents.

Consequently, HUD concludes that a buyer's agent would engage in steering in violation of subsection 804(a), when, without any stated preference or instruction from a buyer client, the agent took any action or made any statement that, based on, e.g., the protected class of residents of a particular neighborhood, renders, or tends to render, dwellings in that neighborhood unavailable to the prospective buyers. On the other hand, when prospective buyers, on their own initiative, explicitly inform their agent of a preference or a dispreference for particular neighborhoods with reference to a classification based on a protected class status, the agent would not make housing unavailable and, thus, would not violate subsection 804(a), merely by accommodating the clients' stated preference or dispreference. See Dwivedi, 895 F2d at 1530 ("(Act) does not place on individual brokers the duty to solve the collective-action problem that results when brokers serving (but not encouraging) the preferences of individual customers cumulatively affect the overall racial pattern in housing."). Such accommodation by the buyer's agent, however, is strictly limited to accommodating the client's self-initiated preference, and may not include any actions or statements that might encourage the client to have or to express such a preference. For example, if a buyer were on his/her own initiative to state to his/her agent a preference for living or not living in a neighborhood based on a protected class, the buyer's agent would violate the Act if, e.g., he/she openly voiced approval of the buyer's protected class preference/dispreference. Zuch, 394 F. Supp. At 1048. And an agent might well incur liability by inducing a buyer to state such a preference. For example, if a white buyer had not expressed a self-initiated preference for a particular neighborhood based on race and an agent said, "If you want to live in a predominately white neighborhood, you must ask me to show you dwellings in such neighborhoods only, because I cannot do that without your request," the agent would violate the Act. See id. At 1047 (real estate agent's language "intended to influence the choice of a prospective property buyer on a racial basis" violates Act). See also United States v. Robbins, 1974 P-H EOH Paragraph 13, 655 at 14,264 (S.D. Fla. 1974).

Similarly, an agent's refusal, based on a client's protected class, e.g., race, to show the client homes in neighborhoods of a particular racial composition which the client specifies, would violate subsection 804(a) of the Act. For example, if a black couple were to tell their agent, "We want to live in a predominately white neighborhood," or "We will not buy a home unless it's in a predominately black neighborhood," the agent would make housing unavailable to the client in violation of subsection 804(a) of the Act were he/she to refuse to show them dwellings in the neighborhoods of the type the clients specified. [A plaintiff may establish a prima facie case of steering by producing evidence that a seller's agent, without prompting from buyers, showed whites dwellings in primarily white neighborhoods and blacks dwellings in primarily black neighborhoods. The agent however, may rebut that showing with evidence of a noninvidious reason for the pattern of apparent steering, e.g., customer-stated preference for neighborhoods of customer's own race. Dwivedi, 895 F2d at 1531. For this reason, it may be advisable for agents to document such noninvidious reasons, e.g., a prospective buyer's statement of preference for a particular neighborhood or neighborhoods on a protected class basis.]

Your specific inquiry included a buyer's agent's duties under the Act when a client states that he/she is an Orthodox Jew, does not drive a car on the Sabbath, and would therefore like to live very close to a synagogue. By honoring the client's request by showing the client dwellings only in neighborhoods that met the client's description, the agent would not "make unavailable or deny" a dwelling to the prospective buyer on any protected class basis. Accordingly, the agent's accommodation of the client's request, e.g., by excluding from the housing search neighborhoods that do not satisfy the client's requirement of a nearby synagogue and by showing the client dwellings only in those which do, would not violate subsection 804(a) of the Act. If, on the other hand, the client had mentioned to the agent that he/she was an Orthodox Jew, but had not requested to be shown dwellings only in predominately Jewish neighborhoods, the agent would violate subsection 804(a) by, on his/her own accord, showing the client dwellings only in predominately Jewish neighborhoods, thus making dwellings in other neighborhoods unavailable to the client.

You also inquired specifically as to a buyer's agent's duties under the Act when the prospective buyer says to the agent, "I would like to live in an Asian neighborhood." As in the preceding example, the agent, in honoring the client's request by eliminating from the search all non-Asian neighborhoods and by showing the client dwellings only in those which meet the client's requirement, would not "make unavailable or deny" a dwelling on any basis and, therefore, would not violate subsection 804(a) of the Act. In other words, if a white buyer said to his/her agent, "I want to live in a white neighborhood," or "Don't show me any houses where a lot of minorities live," the agent would not violate the Act if he/she acted upon his/her client's instruction. On the other hand, the agent would violate the Act if he/she said, "I don't blame you for wanting to live in a white neighborhood," "I would never do that (i.e., show a white homebuyer houses where a lot of minorities live)," or something similar that indicated the agent shared or encouraged the buyer's preference/dispreference.

In sum, the Act does not interfere with an agent's delivery of services, as long as agents themselves do not indicate their own discriminatory preferences/dispreferences or, without instructions from their clients, limit the scope of the search, or otherwise make dwellings unavailable to them. In merely obeying a client's request to limit the scope of the search based on protected class status, however, the agent would not make housing unavailable to the client and, thus, would not violate the Act.

I hope the information provided is helpful.

Sincerely,

Elizabeth K. Julian Assistant Secretary


Second HUD Buyer's Agent Letter

Jill D. Levine, Esq.
Legal Counsel
The Buyer's AgentSM Inc.
2014 Exeter Road
Germantown, TN 38138

Dear Ms. Levine:

This is in response to your letter of October 28, 1996 thanking me for
my reply to your earlier letter. To prevent misunderstanding of HUD's
position on your issues, I'd like to take this opportunity to make clear what
the letter did and did not say.

The reply to your letter was an attempt to answer your narrowly
articulated questions in a helpful and accurate manner. However, it is
important you understand the answers to the hypothetical situations you
posed reflect an interpretation of the law as it applies only in those specific
circumstances. The letter does not represent HUD policy or guidance on
the general issues.

The answer to your specific questions regarding the legal import of the
accommodation of buyer stated preferences was given after extensive
examination of the issue by the Office of General Counsel and the Office of
Fair Housing and Equal Opportunity. While under a strict 804(a) analysis
such accommodation may, under a limited set of facts, not violate that
provision of the Act, I do not endorse that sort of accommodation as good
policy, nor as keeping within the spirit of the Fair Housing Act.

You express concern that the "exclusive buyer agent who wants to
practice real estate ethically and legally" has been hampered by laws that
have been designed and interpreted from the viewpoint that the real estate
agent always represents the seller. Please understand that I think the ethical
obligations are the same, and I do not believe that accommodating a buyer
who indicates preference for housing on a racial basis constitutes ethical
conduct.

In fact, the National Association of Realtors, in a training manual
recommends "that a buyer's agent include language in his or her buyer's
representation agreement indicating a commitment to equal housing
opportunity and a statement that the agent has no duty to disclose
information regarding race or other protected classes."

Based on these concerns, as well as responses from the real estate
industry, fair housing advocates, and other concerned parties, I have asked
legal counsel to further consider the implications of such an accommodation
from the standpoint of 804(b) and (c) of the Fair Housing Act. Further, I
have referred your letter and HUD's response to the Department of Justice,
Civil Rights Division, for review.

I want to emphasize that there is nothing in the Fair Housing Act that
requires an agent to accommodate an expressed desire to limit housing
search based on race. Therefore, doing so reflects a conscious decision by
the broker. The proof that an individual buyer, without encouragement or
solicitation, insisted on such a limitation as a condition of the agent
receiving the buyer's business would be fact intensive and require extensive
investigation involving not only the agent but the buyer. Moreover, the
investigation would necessarily require inquiry into the agent's practices (in
what manner do they maintain and make available location records based on
race as part of their service?) and any independent judgements that the
agent might have made in accommodating the request (what racial
composition caused a particularly neighborhood determined to be
appropriate for inclusion/exclusion from the search?).

In short, from the standpoint of legally prudent, as well as ethical,
considerations, I would strongly advise against any agent or broker putting
themselves in that position by accommodating a request that a housing
search be limited based on race, or other protected-class terms. The fact
that Section 804(a) of the Fair Housing Act may, under limited
circumstances, not prohibit such accommodation does not make it right,
does not make it ethical, and it is not the policy of the Department of
Housing and Urban Development to endorse such conduct.

Finally, I would point out that your hypothetical questions focused on
an individual act of a buyer and a broker's response. It did not assume any
action on the part of the real estate broker, agency, or other entity to solicit
or encourage buyers to express locational preferences in racial terms. I
mention that because of your statement that "THE BUYER'S AGENTSM
and THE BUYER'S BROKER INSTITUTE train hundreds of exclusive
buyer brokers each year." To the extent that you intend to use my earlier
letter to help them conduct their professional duties in a legal and ethical
manner, you should also share this letter with them.

Thank you for your interest in fair housing and equal opportunity.

Sincerely,

Elizabeth K. Julian
Assistant Secretary


Aurie Pennick's response to the HUD Buyer Agent letters

November 8, 1996

Elizabeth K. Julian
Assistant Secretary
U.S. Department of Housing and Urban Development
Office of the Assistant Secretary for Fair Housing and Equal Opportunity
Washington, D.C. 20410-2000

Dear Ms. Julian:

Your letter to Jill D. Levine, Legal Counsel, The Buyer's Agent of October 2, 1996 regarding agent responses to racial or religious preferences expressed by buyers was received with shock and dismay by fair housing advocates and many real estate professionals.

To indicate that the legal responsibilities of a real estate agent working for a buyer are different than those of the seller's agent, with regard to fair housing requirements is unhelpful, illogical, and even dangerous, especially coming from the executive office of the highest enforcement authority of the Fair Housing Act.

Although an examination line-by-line of Title VIII may not reveal a specific violation in complying with a particular "racial or religious neighborhood" request, surely twenty-eight years of administrative, judicial, not to mention advocacy experience by HUD and others reveals that there is an "effects test" which must apply to these situations. As a practical matter, your advice places agents and their buyers at considerable risk. Accounting for the various provisos placed around buyer preferences related to race or religion, deciding whether an agent acted "mutely" or in a prompting manner to limit choice, puts the transaction on a very "slippery slope." Furthermore, it's troubling that your response lends credence to the notion that racial and religious preferences are fiduciary matters.

This message could and should have been avoided.

In the examples presented to you by Ms. Levine (which, by the way fair housing advocates and real estate agents encounter frequently) the responses consistent with the intent of the Fair Housing Act should have been:

  1. To the Orthodox Jew who must live within walking distance to a synagogue:

    "I'm sure we can accommodate your housing needs. Here is a list of as many houses of worship as I could find in this community taken from the yellow pages. It includes, I believe, every synagogue. I will be happy to show you any listing which meets your requirements. You select the synagogue(s), I'll see what listings are available near the one(s) you select."
  2. To the buyer who would like to live in an Asian neighborhood.

    "I'm sorry Mr. X and /or Ms. Y but this office is not permitted to market-list or sell- property on a racial basis. We can do one of two things. We can proceed with a qualifying interview and I can provide you with listings which meet your other stated needs. You then can accept or reject them as you see fit. Or, you can determine the area in which you wish to live, give me boundaries, communities or neighborhoods and then we can see what is available to meet your needs. For your information the Fair Housing Act, passed in 1968, is intended to discourage the buying and selling of real estate on the basis of race, color, religion, sex, national origin, familial status and handicap. The choice of where you wish to live is yours, but I cannot facilitate your search if it requires any potentially discriminatory practice or procedure."

For many years now the real estate industry has been instructing its licensees that these are the appropriate and legal answers to these types of questions. Many licensees, including buyers agents have become comfortable with them and understand their fair housing implications.

As we know you are aware, the Fair Housing Act is greater than the sum of its parts. When it is weakened in anyway, particularly by HUD, it threatens the nation's enforcement capacity as a whole.

On behalf of the thousands of victims of racial injustice in housing, the many fair housing advocates that work daily to eliminate housing discrimination and the many real estate agents working to comply with the letter and spirit of the Fair Housing Act we urge you to immediately issue a retraction letter.

Sincerely,

 

Aurie A. Pennick
President

AAP/alm

cc:  Henry Cisneros
     Nelson Diaz

HUD final Buyer's Agent letter (response to Aurie Pennick)

U.S. Department of Housing and Urban Development
Office of the Assistant Secretary for Fair Housing and Equal Employment
Washington, D.C. 20410-2000

December 3, 1996

Ms. Aurie Pennick
Leadership Council for Metropolitan Open Communities
401 South State Street, Suite 860
Chicago, IL 60605

Dear Aurie:

Thank you for your letter concerning the "buyer's agent" issue. Of course, I share your concern that real estate agents who accommodate a buyer's direction to limit a search for housing on the basis of race are not acting in the spirit of the Fair Housing Act, and I agree that the Act, taken in its entirety, ought to prohibit such conduct. My conversations with numerous real estate professionals over the past month indicate they do not intend to alter their position that it is both legally prudent and ethically responsible to refuse to accommodate a buyer's request to conduct a housing search based on race, a position which I, of course, support. They have also expressed a desire to make clear that such conduct is prohibited by the Fair Housing Act.

However, I take your criticisms to heart about the message that the letter sent. While my second letter (which was being faxed to Ms. Levine as yours came in, by the way) was an attempt to address my own concerns in that regard, I have determined that this issue cannot be effectively addressed by responding piecemeal to hypothetical inquiries. In light of the obvious "slippery slope" down which my letter has apparently invited some to slide, and my agreement with you that my letter sent the "wrong message," I have decided to rescind the October 2, 1996 letter, as you requested, and develop comprehensive guidance that will address the issue more broadly, with specific attention to Section 805 of the Fair Housing Act which speaks more directly to the responsibility of real estate professionals engaging in residential real estate-related transactions.

I truly regret that my earlier letter, which tried to limit the application of the legal conclusion reached, has been interpreted to do so much harm, and it is my intention to rectify that as much as legally possible. I appreciate your comments, as always.

Sincerely,

 

Elizabeth K. Julian
Assistant Secretary

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