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Cooperative lawsuit illustrates risks of ‘unintentional’ discrimination

Cooperative housing associations are unique in that the members screen and select new residents to the community. While housing cooperatives do have a certain degree of latitude in deciding who will be allowed to join the community, it is important to remember that cooperatives are still required to follow the anti-discrimination policies outlined in the Fair Housing Act.

The FHA covers both intentional acts of discrimination and less-nefarious acts of “de facto” or “unintentional” discrimination. Discrimination in this latter category often occurs when a cooperative doesn’t necessarily have discriminatory policies in place, but instead treats applicants differently or applies rules inconsistently.

An example of how unintentional discrimination can occur can be found in a lawsuit recently filed by the Fair Housing Justice Center against a housing cooperative in the Bronx. The FHJC claimed that the co-op discriminated against prospective buyers on the basis of race.

Black and white buyers treated differently

The FHJC became aware of the cooperative’s potentially discriminatory actions when it noticed a newspaper article describing the co-op as not being “open to just anyone.” In particular, the co-op required people interested in buying properties to provide three references from current residents.

The FHJC decided to test this process to see how it was applied in real life. First, it sent a white woman out to inquire about buying a property. The person showing the properties described the cooperative as being mostly Irish, German and Italian, with some Puerto Ricans, but “not many.” When the prospective buyer asked about the reference policy and said that she did not know anyone who lived in the co-op, the shower referred to the policy as a “technicality” and said she could help the woman get the needed references.

Next, the FHJC sent out a black couple to make a similar inquiry. When they said that they did not know anyone living in the community who could make a reference, the shower (who was the same person who talked to the white woman) indicated that there was no way the couple could get in without references. She also described the community as being like “Archie Bunker territory,” referring to a notoriously bigoted sitcom character from the 1970s

Avoiding discrimination claims

As a result of their testers’ experiences, the FHJC brought a fair housing lawsuit against the co-op. In its defense, the co-op claimed that the woman who showed properties to the testers was not an agent of the cooperative and that the three-reference policy serves legitimate purposes. However, at a recent hearing, a judge determined that there was sufficient evidence for the case to move forward.

The case illustrates some important points for cooperative housing associations to keep in mind. Most importantly, co-ops need to ensure that rules regarding prospective applicants are applied fairly and consistently. In addition, cooperatives should be sure that anybody who is showing properties on their behalf understands the co-op’s rules and how they apply. Cooperatives that run into problems with allegations of discrimination — or that want to better tailor their policies to help them avoid these claims in the first place – would be wise to consult with an experienced housing cooperative attorney for advice.