Avoid Fair Housing Fears When Rejecting Unqualified Applicants

Many owners and managers are afraid to reject applicants who are protected by fair housing laws—even if those applicants aren’t qualified to live at their site. Owners and managers worry that if an applicant accuses them of discrimination, they’ll be stuck paying steep fines and penalties.

However, fair housing laws require you only to treat everyone the same. Generally, you don’t have to give special treatment to members of protected classes. If you remain unbiased in rejecting everyone who doesn’t meet your criteria, and keep thorough records, you should have no trouble beating a fair housing claim by an unqualified applicant you rejected.

The Fair Housing Act makes it illegal to treat prospects and residents differently because of their race, color, religion, sex, disability, familial status, or national origin. The following are four situations in which you should reject applicants without fearing a discrimination lawsuit.

Situation #1: Applicant Doesn’t Meet Eligibility Requirements

If you determine that an applicant for a low-income unit at your tax credit site isn’t eligible, you must reject her. Owners can’t claim credits for any units leased to unqualified households. Although it’s illegal to reject an applicant because she belongs to a protected class, it’s legally acceptable to reject members of protected classes for valid, nondiscriminatory reasons.

For example, if a woman applies to rent a low-income unit at your tax credit site and you discover that she’s an ineligible, full-time student, you must reject her because giving her a unit would violate the student rule. Rejecting the woman isn’t discriminatory. Although discriminating against female heads of households is illegal, you’re rejecting her not because she’s a woman but because she doesn’t meet tax credit eligibility requirements.

Situation #2: Applicant Has Bad Credit

You won’t violate fair housing laws if you reject an applicant who has bad credit. It’s illegal if you reject, for instance, only disabled or Muslim applicants who have bad credit. But if you check every applicant’s credit and reject all applicants who have bad credit, you’re not discriminating against members of any protected class.

Situation #3: Applicant Has Insufficient Income

Rejecting applicants because they don’t have enough money to pay the rent isn’t discriminatory as long as you adopt nondiscriminatory criteria and reject all applicants whose incomes are insufficient.

Situation #4: Applicant Wouldn’t Be a Responsible Resident

You shouldn’t fear a fair housing lawsuit if you reject an applicant because her application indicates that she wouldn’t make a responsible resident at your site. As long as you reject all applicants who wouldn’t make responsible residents, and apply nondiscriminatory criteria in determining this, you’re not violating fair housing laws.

Applicants who wouldn’t make responsible residents are those who don’t meet the selection criteria for your site, don’t pass your criminal background check, or have bad landlord references.

Practical Pointer: Federal law requires that you give each applicant a letter explaining the reason for the denial and an opportunity to rebut the findings.

Keep Applicant Records for Three Years

Be sure to keep rental records and credit reports of applicants whose applications you reject, as well as those of applicants you accept. If you don’t and an applicant claims that you discriminated against her, you’ll have no way to prove that you applied your usual rental criteria and that the applicant wasn’t qualified.

For the most part, fair housing claims are filed as administrative complaints with HUD. These complaints must be filed within one year of the alleged incident. Fair housing complaints that are filed in federal court and most state courts must be filed within two years of the incident. So to be on the safe side, keep rejected applications for three years from the time the records were created.