Avoiding Rental Discrimination as a Real Estate Investor

by | BiggerPockets.com

The number one thing a real estate investor never wants to be accused of is rental discrimination.  Well, that may not be the number one thing a real estate investor never wants, but it is pretty high on the list!  In the United States, we’ve long had laws that seek to prevent discrimination and protect individuals from its harmful effects.  For the owner of a rental property, avoiding discrimination seems like it should be a relatively easy task.  You may tell yourself  that it’s as easy as treating everyone alike.

The truth of the matter, though, is that you can be discriminatory without even realizing it.  Knowledge is your best ally when it comes to steering clear of potentially devastating lawsuits and blows to your reputation as an investor.  If you know precisely what to do and not do, you should have no trouble avoiding rental discrimination.

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What You Need to Know About Rental Discrimination

What is the definition of discrimination?  One definition, according to Merriam-Webster is, “the ability to understand that one thing is different from another thing.”  Discrimination in this regard is not necessarily bad.  Maybe you favor one color shirt or television show over another.  Discrimination regarding the inanimate is all personal preference.  It’s acceptable.

Another definition, however, is decidedly negative: “the practice of unfairly treating a person or group of people differently from other people or groups of people.”  For the real estate investor, the most dangerous times for discrimination are found in the tenant screening process or in the sales process of your property.  For today, we are going to focus on the rental screening issue.  While screening is a very necessary step to insure you’re getting good tenants, both overt and unconscious discrimination can happen along the way.  There are questions you can’t ask during the process, similar to in a job interview.  There are actions you cannot take and issues that you have to address immediately in order to avoid even being accused of discrimination.

In the rental industry, there is also a dangerous practice known as steering that can be both intentional and unintentional discrimination.  Steering is guiding an applicant to a location, property or place where you think they would be better suited based on their age, sex, gender, nationality, race, disability or familial status.  Sometimes these are based on good intentions, for instance, referring a family with children on the ground floor of an apartment complex nearest to the playground instead of offering all available units to them.  However, all potential tenants have the right to be informed of all available units and then make the decision themselves on which they want to see and consider.

You cannot advertise or imply preferences, either.

Related: Landlords Beware: Discrimination can cost you Millions!

Fair-Housing Act 101

The Fair-Housing Act is the federal law that protect tenants from discrimination by landlords and investors.  Seven classes and qualities of individuals are defined as being illegal to discriminate against. These factors are:

  • Race

  • Skin Color

  • Sex

  • National Origin

  • Religion

  • Disability

  • Familial Status

As a real estate investor, you cannot deny or choose to rent to people because they are or are not something in any of these categories. That is easy and most of us get it without having to be told.  That seems very natural for most people.  But, you also cannot ask questions regarding any of these classifications or categories and descriptions.  They have no basis for determining whether or not someone is qualified to rent from you.  That is where many get into trouble.  Whether they even consider these factors or not, you cannot even ask them for information purposes.

In some states, other classes are protected by local laws and may include:

  • Sexual Preference

  • Gender Identity

  • Occupation

  • Source of Income

  • Educational Status

  • Medical Status

  • Physical Body Size

Discrimination can be found in small places – for instance, asking for the name of a tenant’s spouse on the application rather than just having room to list all adults.  What is scary for many real estate investors is that we may very well be doing things with no intent of discrimination at all, and yet someone else can feel discriminated against and raise issues with the process.

Related: 3 Key Tips For Screening Tenants

Avoiding Discrimination Lawsuits

Number one: never ask about any of the classes protected by the Fair-Housing Act. Don’t ask if someone is married or where they are from.  When asked about a rental, provide the same information in the same manner to everyone. You can even make a script to help keep you on track.

Keep your application forms neutral and simple.   Even if you know a property is out of tenants’ price range (but remember you may not be able to ask about jobs and sources of income), you have to at least put it on the table for their consideration.   You may be trying to save everyone’s time by presenting what you consider to be affordable, but it could qualify as discrimination.  It may not qualify as discrimination and they may not even feel discriminated against.  This is all about keeping your processes as safe and as far from discrimination as possible.

Keep a list of criteria for people to meet in order to rent from you that don’t have anything to do with the protected classes under local and federal laws.  Write it down and keep it handy.  Use these in screening and cover your other worries in the rental agreement.  You also need to document everything you or your people do.  Keep close tabs on your team members who represent you and train, train, train on not being discriminatory.

At the end of the day, try to treat everyone with equal consideration and courtesy.  Keep records and be intentional with your neutrality.  It’ll be beneficial for you, your investments and your reputation.

What steps do you take to avoid rental discrimination?

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.


  1. Do not forget. Have a set rental criteria, based on income, credit score, rental history and criminal record. Present it to incoming tenants. The criteria should be the same, whether you see/met the tenants are not.

  2. I see this subject come up A LOT in the forums. It seems some people are using leases with very discriminatory clauses in them. Great and very timely review, Chris.

  3. As a Realtor in Huntley IL, we have found that we need to treat rental applicants the same as buyers as far as Human Rights. This even includes menacing sure you have w rotten list of trades and services you recommend that has at least three choices of each service. Be sure you use the same list and use it for everyone so it will not appear that you are discriminating by using a separate list or no list for any protected class.

  4. Abel Vazquez on

    Wow I never thought that screening can become so sensitive when it comes to choosing a possible tenant. I will be using this article as a guide when screening tenants. You can never be to careful. Great article Chris.

  5. Here’s an aspect of housing discrimination that I haven’t seen addressed elsewhere:

    Rental ads will often specify “young professionals”, which smacks not only of age discrimination but familial status preferences.

    If for any reason there is only one breadwinner in a household, even if that breadwinner has adequate credit/income, such applicants can nonetheless find themselves on the losing end of a rental search. The irony is that if that very same breadwinning spouse or partner were single and not expected to have the help of a working partner/spouse, no such rejection would occur. As best I can tell, it’s only because landlords/tenants can and do demand income verification on ALL adult tenants that Fair Housing laws have become functionally irrelevant.

    Here’s why:

    It is common that those with health and disability problems are also low income. Requiring all tenants over the age of 18 to undergo what amounts largely to income verification forces the issue as to whether it becomes necessary to disclose confidential health/disability information.

    From the looks of it, neglecting to disclose a disability as a reason why a spouse/partner has little or no income outside the home leaves landlords and property mangers only with a perfectly LEGAL basis to reject such applicants in that one of the primary tenants may appear financially incapable of carrying rent.

    Would it help to explain that unemployment/low-income status of a spouse/partner is a result of a *disability* in that once such a matter is known the landlord/property manager is effectively on “notice” that a rejection could be construed as housing discrimination?

    You see, in the first scenario I described failure to prove adequate income on the part of a spouse/partner may result in a rejected rental application, whereas in the second scenario a landlord or property manager who passes over a tenant with a disabled partner/spouse has run afoul of the law.

    The problem with this approach is loss of privacy. Should a prospective tenant, even if he/she isn’t the one who will be covering rent, disclose health/disability problems to prevent the absence of a secondary income from becoming a deal breaker?

    These questions matter in light of the following recommendation, found on a website that bills itself as a landlord protection agency:

    “Some landlord’s simply ask for the tenant’s weekly (or monthly income) and assume that if the rent is no more than 30 percent (it used to be 25 percent) of the monthly income, then the prospect can afford the apartment. But that’s not enough; life is more complicated today. Does the prospect have other obligations? An ex-wife collecting alimony, a big car loan, an elderly parent that requires support, etc.? How many dependents does the prospect have? Does the spouse work? Is there another source of income?”

    It looks from the above that having good credit and meeting the income requirement to pay rent on a single income is not enough. What’s more, couples who embrace a traditional marriage/family structure are likely to find themselves at a similar disadvantage when it comes to finding rental housing.

    We are in a culture now where the admission that one has an elderly parent or a prior divorce is grounds for rejecting an applicant, credit/income verification not withstanding! Belonging to a household where one individual is the breadwinner — even for religious reasons, let alone a disability! — do in fact become grounds for being passed over, even if no “protected” status is openly discussed (or known) to the landlord/property manager.

    This is all perfectly legal, apparently, because adequate credit and/or income qualifications that go beyond the usual 3x the rent are no longer enough.

    In attempting to obtain social histories that go well beyond a typical scope of a rental application, landlords and property managers can effectively screen out traditional marriages/families AND the disabled in one fell swoop, all on a don’t-ask, don’t tell basis! Similarly, even though age is a factor that landlords are not supposed to discriminate upon that doesn’t mean that somebody else’s age won’t ultimately play a role in getting your rental app rejected — having an old-aged parent may suffice!

    What, if anything, is being done about the use of income and “social factors” to discriminate against people who otherwise would enjoy protection under Fair Housing/ADA law?

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