December 2021
HOT TOPIC ALERT
Source of Income as a Protected Class
When Congress first passed the Fair Housing Act in 1968, it barred discrimination in housing
and housing-related transactions because of a person’s personal characteristics in four protected
classes: race, color, religion, and national origin. The Act made it illegal to deny housing to a
person because of his/her personal characteristics in one of those categories. Discrimination
based on sex was prohibited in 1974. In 1988, disability and familial status were added as
protected categories. For the past twenty years, amending the Fair Housing Act to ban “source of
income discrimination" -- that is, making it illegal to refuse to rent or lend because of an
applicant’s lawful source of income, like spousal maintenance, disability payments, Housing
Choice Vouchers, veterans’ benefits, public assistance, and child support – has been proposed
and debated. While source of income (SOI) discrimination has failed to gain traction as a
protected class under federal law, at least 20 states and 89 localities have added SOI as a
protected class to their fair housing laws,
In this Hot Topic Alert, we provide a current snapshot of income-based fair housing issues and
policies on the federal, state, and local level that can affect homeowners and renters in their
communities. We provide an overview of the federal Fair Housing Act, and then summarize some
of the state and local policies that govern whether specific sources of income can be recognized as
protected under the Act. We also show how REALTORS® can influence fair housing and income
policies that affect the housing and rental markets in their communities.
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FAIR HOUSING PRINCIPLES
Title VIII of the Civil Rights Act of 1968, also known as the Fair Housing Act (the “Act”), makes
it unlawful to refuse to sell, rent to, or negotiate with any person because of that person's personal
characteristic that is considered a “protected class” or “protected category.” The Act lists seven
protected classes: race, color, national origin, religion, sex, familial status, and disability. “Familial
status” covers families with children under the age of 18, pregnant individuals, and any person in
the process of obtaining custody over a minor child (such as adoptive or foster parents).
Homebuyers and renters are protected from discrimination based on these prohibited
characteristics in buying or renting a home, obtaining a mortgage, and engaging in other housing-
related transactions.
The Act’s protections apply to nearly all housing in the United States, including the sale or rental
of homes, apartments, condominiums or cooperatives, and as well as lending practices for the
purchase of a home. Limited exemptions exist for buildings occupied by the owner in which there
are no more than four units, housing operated by religious organizations, private clubs that limit
membership, and housing for older persons.
The Act specifically prohibits the following actions based on any of the protected categories:
• Refusing to rent or sell housing;
• Refusing to negotiate for the rental or sale of housing;
• Making housing unavailable;
• Setting different terms, conditions, or privileges for the sale or rental of a dwelling;
• Falsely denying that housing is available for sale, inspection, or rental;
• Persuading or trying to persuade homeowners to sell or rent dwellings based on statements
about protected classes moving into the area;
• Evicting a tenant or a tenant’s guest;
• Harassing a person;
• Failing to make, or delaying, maintenance or repairs;
• Making a discriminatory statement; or
• Otherwise denying a dwelling.
The Act also prohibits discrimination in mortgage lending. Lenders cannot refuse to make a loan,
refuse to provide information about home loans, or use different requirements for buyers based on
a prohibited characteristic. Similarly, mortgage appraisals cannot be prepared in a discriminatory
way, such as by overstating a property value to disqualify a would-be buyer or by understating a
value because of the owner’s protected characteristic.
Persons with disabilities are also protected by the Act. Housing providers must make “reasonable
accommodations” so that disabled individuals can properly use and enjoy their housing.
Reasonable accommodations are modifications, exceptions, or adjustments to rules or policies.
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Those with disabilities also have the right to make any “reasonable modifications” necessary to
enjoy their homes or common areas. Such modifications are at the individual’s expense, and may
include widened doorways, installation of ramps, installation of grab bars in bathrooms, etc.
STATE AND LOCAL LAWS
The Fair Housing Act does not include “source of income” as a prohibited basis for discrimination.
For instance, the Act does not bar discrimination against homeowners or renters if they obtain their
income primarily from spousal maintenance, child support, public assistance payments, and the
like. However, in recent years, a number of states and cities have expanded fair housing principles
to cover a housing applicant’s source of income. These laws and policies recognize that, while
wages are an obvious source of income, a housing applicant may receive other income, such as
Social Security or federal housing subsidies. As a result, in these jurisdictions housing providers,
including housing providers, are prohibited from refusing to provide housing to individuals solely
because they derive most, or all, of their income from sources other than wages. Many of these
state and local provisions prevent a rental property owner from rejecting an application based on
the source of the applicant’s income, so long as it is a lawful source. For example, in California,
no “person, bank, mortgage company or other financial institution that provides financial
assistance for the purchase, organization, or construction of any housing accommodation” may
discriminate against a person because of that person’s source of income.
As of April 2021, at least 20 state jurisdictions—California, Connecticut, Colorado, Delaware, the
District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North
Dakota, Oklahoma, Oregon, Rhode Island, Utah, Vermont, Virginia, Washington, and
Wisconsin—protect against discrimination based on an applicant’s source of income. In some
states, protection against source of income discrimination has been weakened by court decisions.
In Maine, the protection was weakened by a court decision that held that the prohibition against
source of income discrimination did not prohibit landlords from refusing to include the HUD
Housing Choice Voucher tenancy addendum in a lease, thereby refusing to accept a Housing
Choice Voucher as a source of payment. The Maine Human Rights Act has been amended to
address this issue, and effective October 17, 2021, it will be unlawful for a landlord to “[r]efuse to
participate in or comply with any federal, state or local requirements of a tenant-based rental
assistance program.” The Minnesota law against source of income discrimination was weakened
by a 2010 state Court of Appeals decision that held that participation in the Housing Choice
Voucher program is voluntary, so the refusal to participate is not discrimination.
Many counties and cities throughout the United States have enacted their own ordinances
protecting source of income. As a result, a municipality may have more rigorous anti-
discrimination rules than the state in which it is located. For example, until 2020, source of income
was not protected in Maryland, but it has been protected in Annapolis since 2009.
State protections against discrimination on the basis of source of income also vary in the level of
protection extended to both buyers and renters. In most states, source of income protects only
renters; however, protections are extended to buyers under a few state housing regulations. This
distinction is apparent when comparing Oregon protections against discriminatory housing
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practices to those set forth under the housing regulations in Maine. Oregon law protects against
refusing to “sell, lease or rent any real property to a purchaser” on the basis of source of income.
In contrast, Maine regulations provide that “unlawful housing discrimination” occurs when “any
person furnishing rental premises or public accommodations to refuse to rent or impose different
terms of tenancy to any individual who is a recipient of federal, state, or local public assistance.”
Given this diversity of regulation, it is vital that housing providers identify the specific laws that
apply to them, keeping in mind that local regulations may exist in the absence of, or in addition to,
state statutes.
State and local rules define “source of income” differently. Most jurisdictions that bar such
discrimination generally define the term to include money or a voucher paid to a housing applicant,
in whatever form that the applicant chooses to use for housing. However, exceptions do exist. For
example, in California, "source of income" is defined as “lawful, verifiable income paid directly
to a tenant or representative of a tenant,” including “federal, state, or local public assistance, and
federal, state, or local housing subsidies.” Connecticut, however, specifically lists “income derived
from Social Security, supplemental security income, housing assistance, child support, alimony or
public or state-administered general assistance” in the definition. In Philadelphia “source of
income” is defined as “any lawful source of income,” including, “but not limited to, earned income,
child support, alimony, insurance and pension proceeds; all forms of public assistance, including
Temporary Assistance for Needy Families (TANF); and housing assistance programs.” In
Chicago, though, “source of income” is defined more vaguely as the "lawful manner in which an
individual supports himself or herself and his or her dependents.” It is important for housing
providers to familiarize themselves with the definitions of “source of income” in their jurisdictions.
A recent proposal in St. Louis County, Missouri provides insight into political debates around
protecting against source-of-income discrimination. In 2019, a county councilmember introduced
a bill that would require landlords in unincorporated areas of the county to participate in rental
subsidy programs and to add “lawful source of income” as a protected class. However, local news
reports found mixed support for the bill, with many individuals believing that it was a government
mandate to accept all renters, including those whose income “is derived from laundered cash
money, drug deals and the like”. Although the bill’s text limited the protections to only lawful
sources of income, and allowed housing providers to reject applicants based on criminal
background checks, the bill was eventually dropped due to the mixed response.
In 2017, a Minneapolis proposal to prohibit source-of-income discrimination met with more
success. Although news reports noted that landlords were skeptical, council members and
advocates argued that the new provision would prevent low-income housing from continuing to
be concentrated in the city’s poorest neighborhoods. For instance, in near-north Minneapolis, a
part of the city with a high concentration of lower-income residents, over 80% of the available
units accepted rental subsidy vouchers, compared to no available units in some of the city’s more
upscale districts. The Minneapolis City Council approved the ordinance by a unanimous vote on
March 24, 2017, and it went into effect on May 1, 2018. Clearly, striking the right balance—for
housing providers, tenants, local citizens—is no simple task.
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Even where source-of-income discrimination has been outlawed, enforcement has been difficult.
For example, although New Jersey prohibits source-of-income discrimination, an Urban Institute
study of the housing market in the Newark area found that 31% of landlords overall, and 38% of
landlords in low-poverty neighborhoods, refused to accept housing vouchers. A Suffolk University
study of housing discrimination in the Greater Boston area tested whether landlords would be
willing to show units to prospective tenants with Housing Choice Vouchers, or whether the
prospective tenants would be given an application for rental to complete. The study found
discrimination based on voucher status in 86% of the tests, even though Massachusetts prohibits
source-of-income discrimination.
IMPORTANT FEDERAL, STATE, AND LOCAL LEGISLATION
In the 1980’s and 1990’s, the federal government fundamentally changed its approach to housing.
Instead of focusing on building housing projects, the government shifted its focus to subsidizing
low-income individuals and families in the private rental market. The Housing Choice Voucher
Program (HCVP), more commonly known as “Section 8 vouchers,” authorized the Department of
Housing and Urban Development (HUD) to provide funds to local public housing agencies (PHAs)
to distribute to would-be tenants.
The value of a Housing Choice Voucher is based on a simple calculation. A Section 8 tenant pays
an amount of his or her monthly income towards rent that is the greater of: (1) 30% of their monthly
adjusted income, (2) 10% of their total monthly income, (3) welfare rent from a public agency,
and (4) minimum rent determined by the local PHA. The same is true of Section 8 housing
projects—housing developments built for Housing Choice Voucher tenants—except that, for
housing project vouchers, the benefit is attached to the unit itself, rather than to the tenant. In other
words, a voucher granted to the tenant does not depend on that person living in a specific unit.
Whether Housing Choice Vouchers are protected as a source of income depends on whether the
property is in a state, city, or county that includes such vouchers in its legal definition. Some state
and local governments protect Housing Choice Vouchers, and some do not. For example,
Minnesota’s fair housing law includes source of income as a protected class, but it does not define
Housing Choice Vouchers within that class. The state distinguished these vouchers from other
sources of income because participation in Housing Choice Voucher programs is voluntary.
However, even if a specific state does not protect Housing Choice Vouchers as a source of income,
a given city or local area may do so. In such situations, tenants using such vouchers cannot be
barred from renting on that basis. This means that the landlord can be compelled to enter into a
contract with HUD and the PHA.
For example, prior to 2013, source of income protections in Chicago extended to Housing Choice
Vouchers, while Cook County regulations (the county in which Chicago is located) excluded
Housing Choice Vouchers from source of income protections. Until Cook County changed its
source-of-income rule to prevent discrimination, Chicago was a regulatory island within Cook
County.
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A housing provider cannot be required to accept a Housing Choice Voucher tenant if the unit rent
is higher than the acceptable rent for the program. A potential Housing Choice Voucher tenant still
may be rejected if he or she has not met the minimum standards set for all other tenants. These
standards may include a background check, a security deposit, credit checks, and even proof of
income, so long as the amount required is equal to the amount the tenant is required to pay.
For example, if rent is $1,000, but the tenant pays 30% of that rent with the rest covered by a
voucher, the landlord may request proof of income for the 30% paid by the tenant. In other words,
in a source of income jurisdiction, a Housing Choice Voucher tenant may be disqualified based on
his or her failure to provide proof of the minimum income required to rent a unit, but not because
of the source of that income.
States also continue to adopt new laws prohibiting source of income discrimination. In 2021,
Rhode Island enacted a Fair Housing Practices Act to recognize the right of all individuals in the
state to equal housing opportunities as a civil right. The Act defined a “lawful source of income”
to include any income or benefit derived from child support, alimony, or any federal, state, or local
public assistance program, including Housing Choice Vouchers. Owners and managers of housing
units are prohibited from making any direct or indirect inquiry, whether written or oral, concerning
the lawful source of income of any housing applicant. They also cannot issue any advertisements
specifying a preference for certain sources of income over others.
Similarly, Virginia amended its Fair Housing Law in 2020 to prohibit discrimination based on any
“source of funds,” which the law defines as any source that lawfully provides funds to either a
renter or buyer of housing. The law also bars denying any individual access to membership or
participation in a real estate listing service based on source of income. Any person that suffers
discrimination based on source of income can file a complaint with the Virginia Real Estate Board
and Virginia Fair Housing Board. The Board can then investigate the complaint and refer a charge
on behalf of the applicant to the state Attorney General.
SOURCE OF INCOME AND HOUSING PROVIDERS
If source of income is protected in a state or town, the logical next question for housing providers
is how to comply with the rules in their day-to-day operations. By following some simple
guidelines in different housing transactions, problems can be avoided. A few examples are
provided below. However, for a more thorough analysis of whether a given law or ordinance
protects source of income in a particular jurisdiction, REALTORS® can utilize the Appendix to
Expanding Choice: Practical Strategies For Building A Successful Housing Mobility Program, a
publication of the Poverty & Race Research Action Council. Local fair housing councils or
associations can also provide valuable information on source of income and other fair housing
laws.
Eviction Notices—The procedures for tenant eviction generally do not change dramatically in
jurisdictions where source of income is protected. So long as the housing provider is consistent
with regular rules for eviction, no changes should be required.
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For example, in California, the law requires that landlords provide a 60-day notice to a resident if
the landlord elects to terminate a tenancy and the resident has lived in the unit for one year or
longer. If the resident has lived in the unit for less than one year, the owner must provide at least
30 days’ notice before terminating the tenancy. This timeframe does not change for landlords
wishing to evict a tenant sheltered by source of income protections. Landlords are subject to strict
reasons for eviction, such as a tenant’s failure to pay rent or the illegal use of a rental unit. These
regulations remain the same for all tenants, regardless of whether the tenants fall under a protected
class or whether they have protected income sources.
In short, so long as the landlord utilizes a standard method for eviction of all tenants, no changes
will be necessary to accommodate those falling under the scope of source of income as a protected
class.
Security Deposits—Security deposit processes may be impacted where source of income is a
protected class. While it is typical for a landlord to receive a monetary security deposit equal to
the first and last months’ rent, it is possible that source of income regulations may result in other
forms of security to be accepted, such as car titles or a right to receive future payments. Federal
law is generally silent on non-pet security deposits, but the local PHA may only require the tenant
to pay their share of the last month’s rent, 30% of the tenant’s monthly income or $50, whichever
is greater. Therefore, the landlord cannot require the tenant to pay the full amount of the rent as
part of a security deposit.
For example, one Connecticut court held that a landlord discriminated against a prospective tenant
when he refused to accept a security deposit guarantee from a social services agent instead of cash.
The guarantee from a social services agent qualified as a lawful source of income under state law;
therefore, the tenant was allowed to use it as a security deposit.
Payments— If a tenant pays his or her rent late in a jurisdiction that protects source of income
from discrimination, landlords may demand payment and/or initiate eviction proceedings, so long
as the process for handling late payments remains consistent for all tenants. However, if the PHA
is late in paying the landlord, he or she has no recourse. In other words, a landlord may not evict a
tenant who has paid his or her share of the rent on time, even if the PHA has not paid the remainder
on time.
For example, under Oregon state regulations, source of income protections extend to all “sales,
rentals, mortgage lending, building and construction, home insurance appraisals and inspections,
land use regulations, zoning, as well as neighbor-on-neighbor harassment.”
REALTOR® ASSOCIATION INVOLVEMENT ON FAIR HOUSING
In April 2021, NAR commemorated Fair Housing Month by holding a series of events, including
an online event discussing the future of fair housing and a headline speech by HUD Secretary
Marcia Fudge. NAR also hosted a virtual event discussing efforts to close the racial gap in home
ownership and to make fair lending and access to credit more equitable. As part of Fair Housing
Month, NAR spotlighted a series of relevant books and videos, including “A Matter of Place,” a
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documentary that describes instances of present-day discrimination in New York City based on
race, sexual orientation, disability, and source of income.
NAR also supports additional funding for HUD’s fair housing enforcement and education efforts,
including HUD grant programs that help state and local organizations uncover hidden
discrimination in the housing process.
Local REALTORS® and REALTOR® associations have also been active on fair housing issues.
For instance, the Birmingham Association of REALTORS® partnered with the city of
Birmingham to hold a Fair Housing Summit that spotlighted diversity in real estate and increased
access to home ownership. The conference included experts from the local city council, HUD, and
other real estate associations. A core focus of the conference was the effect of economic issues and
the COVID-19 pandemic on real estate and home ownership, especially for minorities and others
communities that have had difficulties in home ownership. The Birmingham Association also
partnered with local housing authorities to launch a Home Ownership Initiative that provides
resources to low-to-moderate income families so that they can secure the necessary credit and
other resources to purchase their own homes.
In Bellingham, Washington, the local REALTOR® association supported a “Bellingham for
Everyone” campaign that encouraged increased diversity in housing types and affordability. The
campaign conducted a series of free virtual public education events on issues such as zoning and
sustainable urban growth. The campaign has also focused on dispelling myths surrounding
affordable housing projects and multi-family housing. As a result of the campaign, local leaders
are currently considering a sales tax to benefit affordable housing projects in the area.
REALTORS® in Columbus, Ohio created a Fair Housing Task Force to educate the community
about cultural bias and challenges in the housing market. The Task Force also worked with other
organizations to set up two events. First, a Cost of Poverty Experience workshop offered
participants a chance to experience the housing challenges of low-income individuals in the
community and how they are affected by limited housing choices and housing insecurity. Second,
a mock trial dramatization of a recent local legal case spotlighted issues involving drinking water
access and discrimination.
By continuing to advocate for these and other priorities, individual REALTORS® and state and
local REALTOR® Associations can help improve their own communities and ensure increased
equal access to housing, regardless of an individual’s source of income.
REALTOR® ASSOCIATION FAIR HOUSING RESOURCES
NAR has a Fair Housing Action Plan, also called the ACT! Initiative, that emphasizes
Accountability, Culture Change, and Training to ensure REALTORS® and local associations
contribute to protecting fair housing rights. Under the Plan, NAR is committed to working closely
with state associations to ensure that state laws include effective fair housing requirements. NAR
has also created additional robust fair housing education to assist REALTORS®.
In June 2020, NAR released Bias Override, a video that helps REALTORS® identify and combat
implicit bias in real estate transactions that may result in fair housing violations. NAR will launch
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implicit bias classroom training for CE credit in 2022. In November 2020, NAR also launched an
online simulation training where real estate agents work to sell homes in the fictional town of
Fairhaven, while confronting typical discriminatory situations that occur in the homebuying
process. Learners also experience discrimination from the point of view of the client. Also in
November 2020, NAR’s Board of Directors approved amendments to the REALTOR® Code of
Ethics to cover hate speech and conduct.
Over the past year, NAR’s federal advocacy agenda championed increased funding for fair housing
enforcement. NAR also actively engages in policy advocacy to make homeownership more
accessible, including increasing housing supply to make housing more affordable, down payment
assistance for first-time buyers, alternative credit scoring, and student loan debt relief through the
tax code. NAR also supports efforts to close the racial homeownership and wealth gaps through
its membership in the Black Homeownership Collaborative.
These advocacy efforts operate in conjunction with NAR’s Fair Housing grants, which support
state and local REALTOR® associations’ activities that create or improve systems, programs, and
policies that uphold fair housing laws and strengthen REALTORS’ commitment to providing
equal professional service to all. These grants come in two different flavors. Level 1 grants have
a maximum award of $1,500, and can be used to hold educational activities, such as a class,
workshop, or guest speaker. Level 2 Grants have a maximum award of $5,000. These grants
support activities that address fair housing issues in a community. Activities should involve a
partnership with an organization that furthers the fair housing mission. Local REALTOR®
associations can receive up to one Level 1 Grant and up to one Level 2 Grant per year.
In addition to the activities for members, NAR is also providing resources for public outreach, to
emphasize to the public that fair housing is an important part of a REALTOR’S® professional
conduct. The “That’s Who We R” advertising campaign was expanded in 2020 to add consumer-
focused fair housing materials. NAR also provides resources to support Fair Housing Month
efforts each April. These resources include a poster, social media assets, and a proclamation for a
local government body.
FAIR HOUSING PARTNERS
NAR is joined by multiple partners in advocating for increased fair housing opportunities and
decreased discrimination.
One such partner is the National Association of Real Estate Brokers (NAREB), which was founded
in 1947 by African American real estate brokers. NAREB is committed to equal housing
opportunities and to remove de facto segregation and institutional racism. Similarly, the Asian
Real Estate Association of America (AREAA) is dedicated to promoting sustainable home
ownership and housing opportunities in Asian American communities. Other organizations, such
as the National Association of Hispanic Real Estate Professionals (NAHREP) and the Women’s
Council of REALTORS®, are also focused on increased equality in real estate.
Since many members in these organizations are REALTORS®, they often work together to
advance shared goals. For example, in 2003, NAREB, AREAA, NAHREP, and other
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organizations signed a memorandum with HUD to work together to promote fair housing and
reduce homeownership inequality among various racial and ethnic groups.
CONCLUSION
Housing is a necessity for all people, but differences in housing options, especially for those that
have non-wage sources of income, are often overlooked. Many state and local governments have
taken on this challenge by outlawing discrimination based on an individual’s source of income.
Local REALTORS® and REALTOR® Associations have a key role to play in ensuring broad and
equitable access to housing. Fair housing opportunities help create more economic opportunity for
individuals and families and improve local neighborhoods and communities.
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ADDITIONAL STATE & LOCAL RESOURCES
White Papers: Comprehensive reports prepared for NAR on issues directly
impacting the real estate industry. Examples include: Rental Restrictions, Land
Banks, Sales Tax on Services, State & Local Taxation, Building Codes, Hydraulic
Fracturing, Foreclosure Property Maintenance, Climate Change, Private Transfer
Fees.
Growth Management Fact Book: Analysis of issues related to land use and modern
growth management topics include density — rate of growth, public facilities and
infrastructure, protection of natural resources, preservation of community character,
and affordable housing.
All available on REALTOR® Party webpage
under the State & Local Issues tab.
Hot Topic Alerts are prepared for NAR by Legal Research Center, Inc.
To review NAR’s other Hot Topic Alerts, text HOT TOPIC to 30644 to sign up
for REALTOR® Party Mobile Alerts and a link will be sent directly to your mobile
device. All Hot Topic Alerts can also be found on the REALTOR® Party webpage.
Questions or concerns contact Melissa Horn
Email: [email protected]
Phone: 202-383-1026
