Fair Housing
A South Dakota apartment complex with a rule requiring prospective tenants to earn 3x the rent in income applies this rule to all applicants equally. A disproportionate number of minority applicants fail this requirement. This situation involves potential:
AIntentional discrimination (disparate treatment)
BDisparate impact discrimination if the income rule is not justified by business necessity✓ Correct
CNo discrimination since the rule is applied equally
DOnly ECOA violations, not Fair Housing Act violations
Explanation
A neutral policy with a disproportionate negative impact on a protected class can be challenged under the disparate impact theory of the Fair Housing Act, unless the rule is justified by legitimate business necessity.
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Key Terms to Know
Fair Housing Act
Federal law prohibiting discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, disability, and familial status.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
SteeringAn illegal practice where a real estate agent directs buyers toward or away from certain neighborhoods based on the buyer's race, religion, national origin, or other protected characteristics.
BlockbustingAn illegal practice of inducing homeowners to sell by claiming that the entry of minority groups will lower property values.
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