Group of Owners, Brokers Settle Source-of-Income Discrimination Lawsuit

Twenty-three owners and apartment brokers recently agreed to enact reforms to resolve a lawsuit alleging they routinely turned away prospective tenants seeking to use federal vouchers to supplement their rent. Originally filed in March 2022, the lawsuit claimed that 88 owners and brokers in the city had repeatedly rejected tenants with Section 8 vouchers in possible violation of state and local housing laws.

The context: Source-of-income discrimination is the illegal practice by owners and brokers of refusing to rent to current or prospective tenants seeking to pay for a rental unit with housing vouchers, subsidies, or other forms of public assistance. Both New York State and New York City have enacted laws that prohibit discrimination based on source of income. In April 2019, New York State amended the New York State Human Rights Law to protect all New Yorkers from discrimination based on lawful source of income. This law applies to nearly all types of housing in New York State.

The law states that it is illegal for anyone to deny housing based on the type of lawful income an applicant receives. Source-of-income discrimination is often directed at those whose lawful income comes from sources other than a paycheck, including Social Security payments, any form of government assistance, or child support. For complaints filed at the state level, the New York State Attorney General’s Office investigates and enforces lawful source-of-income protections.

In New York City, source-of-income discrimination by housing providers with six or more units has been illegal in New York City since 2008. And as of Feb. 15, 2021, the law was expanded to make most New York City rental properties subject to the NYC Human Rights Law's source-of-income protections, regardless of the number of units in the property.

One level deeper: The lawsuit was filed by the Housing Rights Initiative (HRI) against 88 brokerage firms and landlords. HRI ran an investigation for a year and identified apartments that would’ve been affordable to a renter with a Section 8 housing voucher. Investigators who posed as prospective tenants recorded nearly 500 conversations with landlords and their brokers. When those otherwise qualified “testers” mentioned their Section 8 voucher, the owners and agents ended the conversation 48 percent of the time, according to HRI.

Under the cooperation agreement, the plaintiff, Compass, Inc., a real estate broker firm that rents out apartments in NYC, agreed to the following:

• Provide its agents a higher commission for renting apartments to voucher holders;
• Dedicate trained staff to assist agents with voucher holders’ paperwork;
• Conduct regular trainings for agents on the functioning of voucher programs;
• Recommit to its non-discrimination policy against voucher holders, including:
  • A prohibition against income requirements for recipients of forms of publicly funded rental assistance, other than those income requirements set by the housing voucher programs;
  • A prohibition against requiring that a prospective tenant’s voucher cover the entirety of the monthly rent, unless the voucher program prohibits the voucher holder from contributing to the rent; and
  • A prohibition against consideration of a prospective renter’s credit score if such renter’s Housing Choice Voucher, or the renter’s Housing Choice Voucher plus shelter allowance, covers the entirety of the monthly rent.
• Make it easier for its agents to ensure their advertising does not contain language that discriminates against voucher holders;
• Note the firm's non-discrimination policy on its website; and
• Update agent manuals and resource pages with its non-discrimination policies.

The settlement deal compels 22 other companies to make similar changes, such as setting aside units for voucher holders and maintaining records of inquiries from voucher holders. Under the terms of the deal, the companies admitted no wrongdoing.