National Housing Law Project Housing Law Bulletin

The Fair Housing Act and Discrimination Against Welfare Recipients

In a recent decision, the Ninth Circuit Court of Appeal opened up the possibility that the Fair Housing Act¹ prohibits discrimination against welfare recipients. The case was decided only on an appeal from an order granting a motion to dismiss, so the merits of the claim are unresolved. Nonetheless, the decision leaves room for hope.

The case is Gilligan v. Jamco Development Corp., __ F.3d ___ (9th Cir. Mar. 5, 1997) (1997 U.S. App. Lexis 3787). The plaintiffs were a married couple with two children who attempted to apply for a unit at Verdugo Gardens Apartments. However, the apartment complex had a policy of not taking applications from families who receive Aid to Families with Dependent Children (AFDC). The manager refused to accept the plaintiffs' application or to allow them to look at any apartments. The plaintiffs knew that there was a vacant apartment there at the time. Testers then confirmed both the apartment's policy of excluding AFDC recipients and the availability of an apartment at the time the plaintiffs applied.

The plaintiffs sued the owner and manager of the apartments on the ground that the no-AFDC policy violated the Fair Housing Act's prohibition of discrimination against families with children. The complaint presented two theories, first, that the policy was a pretext for excluding children and, second, that the policy had the effect of discriminating against families with children.

The District Court granted the defendants' motion to dismiss the complaint on the ground that the plaintiffs had to allege that they were financially qualified to rent the apartment in order to state a valid claim for relief. Despite plaintiffs' amendments to the complaint, the District Court continued to grant the dismissal motions on the ground that plaintiffs had not alleged that they had enough money to pay the rent. It was irrelevant to the court that the landlord's policy applied across the board, regardless of the applicant's financial circumstances.

The Court of Appeals reversed the District Court's dismissal of the complaint, reasoning that the plaintiffs were members of a class - families with children - protected by the Fair Housing Act, and that the defendants' policy applied only to that class. In the appellate court's view, the Federal Rules of Civil Procedure do not require any more details to be stated in the complaint. That was considered particularly true in this case, because the Supreme Court has stated that the Fair Housing Act must be generously construed to carry out its policy.

The defendants had argued that Title VII's McDonnell Douglas² test for a prima facie case of disparate treatment should apply to Fair Housing Act cases and therefore that plaintiffs had to allege that they were financially qualified to rent the apartment. The court rejected that argument on two grounds. The first was that being qualified for the apartment (or for a job in the Title VII context) was not relevant at the pleading stage, even if it might be relevant at trial or on a motion for summary judgment. If discovery or further investigation were to uncover direct evidence of intentional discrimination against families with children, the "qualified to rent" part of the McDonnell Douglas test would not have to be met because no shifting of burdens would be involved. In addition, in this case, since the information about the standards for being financially qualified to rent the apartment were solely in the landlord's possession, it would be unreasonable to require plaintiffs to allege them at the outset. Finally, being denied the right even to apply could violate the Fair Housing Act and, for that violation, financial qualification to rent the apartment would be irrelevant.

The court's second ground for rejecting the argument that plaintiffs had to allege that they were financially qualified was that, under the disparate impact claim, being financially qualified was not part of the prima facie case. For a disparate impact claim, a plaintiff needs to prove only that the seemingly neutral policy has a disproportionate impact upon a protected class. Then the burden shifts to the defendant to prove that the policy is justified by business necessity. In this case, families with children are more adversely affected by the exclusion of AFDC families than families without children, because no families without children are adversely affected. Ability to pay the rent would be relevant only to the affirmative defense that the policy was necessary for business reasons.

¹42 U.S.C.A. §§ 3600 et seq. (West 1994).

¹McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).