Sparked by some Grade A investigative reporting by the NYC daily periodical, Newsday, the New York State Senate (“NYS Senate”) launched an investigation last year into unfair housing practices and held hearings that culminated last week with the release of its “Final Investigative Report.” If you haven’t read the Newsday report, you can do that here.

“Long Island Divided,” published in November 2019, investigated unfair housing practices in one of our country’s most segregated suburbs; it is also home base for one out of five agents in the entire state. The investigation focused on 12 of the largest real estate companies (by agents employed) who represented more than half of Long Island’s home sellers in 2017. Sadly, Newsday uncovered some disturbingly unequal and discriminatory selling practices among buyers’ agents active in the territory over a three-year period.

As a result, the NYS Senate formed a committee (“The Committee”) that held hearings with various real estate professionals, academics, and industry experts in April and September of last year. Rob has written a number of pieces on those; if you read just one, read “The Terrible, Horrible, No Good, Very Bad Day for REALTORS in the New York Senate.”

The Committee’s report states that the Newsday investigation sent a clear message, and one that is unsurprising to a large segment of the U.S. population: we have not nearly reached the lofty goals of the fair housing laws. Housing discrimination remains rampant, and the practices of many real estate professionals are perpetuating the segregation of our metropolitan areas. “[M]any of Long Island’s dominant real estate brokerage firms participate in behaviors that help to solidify racial and ethnic segregation on Long Island,” the report says, “including imposing unequal conditions and steering potential homebuyers toward certain communities depending on their perceived race or ethnicity” (p. 2).

In general, the NYS Senate accepted the results of Newsday’s investigative journalism as fact and the two hearings last year (including witness testimony, subpoenaed documents, etc.) as sufficient evidence of racial discrimination to put the screws to residential brokers in New York. As a result, the Committee’s report recommends a number of reforms, in six categories, to enforce some new regulations adopted last year as well as new bills slated for legislative vote this year.

The NYS Senate’s Findings and Recommendations

So that you don’t have to read all 97 pages of the report, the following are the Committee’s recommendations and the reasons why it made them:

1. Develop a New York State Fair Housing Strategy

This one is general and brief, but the gist is a call to action to eradicate residential segregation from NYS and its harmful consequences for people of color. I’m sure many of you are asking, “Why didn’t you have one already?!” Yeah. We are, too.

2. More Proactive Enforcement of Fair Housing Laws

New Regulations Adopted Last Year

19 NYCRR 175.29 – Notification of Fair Housing Laws. Requires real estate brokers to ensure that each licensed real estate agent associated with such broker provides to a prospective purchaser, tenant, seller, or landlord upon first substantive contact the Fair Housing and Anti-Discrimination Disclosure, furnished by the Department of State. The party that provides the disclosure notice must obtain a signed acknowledgement from the prospective client and retain such signed notice for no less than three years.

19 NYCRR 175.29 – Posting of Fair Housing Laws. Requires the new Fair Housing and Anti-Discrimination Notice to be displayed in the window of each office operated by a real estate broker, on all websites operated by real estate licensees, and at each open house.

Recommendation 1: Investigate and Enforce Fair Housing Laws Through Testing.

If you’re going to ensure that peoples’ rights under law are protected, they’re going to need to know what those rights are. Furthermore, those whose responsibility it is to respect those rights in the course of business, need to be clear on what those rights are. That said, the Committee recognized that a complaint and review process will not go far enough, because,

If victims of housing discrimination are unaware that their fair housing rights are being violated, complaints will not be filed. Without complaints, no enforcement action will occur, and the unlawful practices will continue (p. 64).

Therefore, the Committee recommends that the legislature pass a new bill directing the NYS Attorney General to conduct annual fair housing testing like that performed by the Newsday investigative journalists.

Yes, this means something like “secret shoppers” sent by nonprofits to conduct the same Newsday-style paired testing.

Recommendation 2: Increase Funding to Support Fair Housing Efforts

Currently, only Federal funds are used to enforce the fair housing regulations in the State; to conduct more housing tests like those Recommendation 1 prescribes, the State will need funds to contract with nonprofits who do this work. Believing that brokers and agents should be responsible for that oversight, the Committee is recommending a bill to place a surcharge on broker and agents’ licenses, designating that the funds be used for statewide fair housing testing efforts.

We’re pretty sure we can hear the cursing from ethically-behaving NYS agents and brokers all the way out here in Vegas.

Recommendation 3: Mandate Statewide Collection of Demographic Data

The Committee is recommending statewide collection of data on demographics of prospective homebuyers and renters and the outcomes of their interactions with brokers and agents, ostensibly so that it can use statistical analysis to identify where discriminatory practices may be occurring. The report compares this to the Home Mortgage Disclosure Act which requires this of mortgage lenders. The details of that are wrapped into the proposed bill under Recommendation 1.

The MLS is not set up to handle that. If it’s not going to be entered there, where is this data going to live?

3. Licensing & Renewal Training Requirements

Recommendation 1: Enhance the Training Required for Licensed Real Estate Agents and Brokers

The current 75 hours of required instruction for new licensees in NYS is less time than many other states require. It is recommending an increase to the instruction by 2 hours by increasing the fair housing training from four to six hours. It is also urging the Department of State to reevaluate the necessary experience points required to become a broker. Two different Senate bills are recommended that would enhance the training requirements and incorporate implicit bias training.

Recommendation 2: Ensure Effective Curriculum and Quality of Training Instruction

The Committee found the quality of the curriculum and instruction for residential real estate licensees on fair housing regulations “staggeringly inadequate,” with the result that, among other things, there is widespread misunderstanding among real estate agents about what housing discrimination even means (p. 70-74). In this lengthy section of the report, the Committee chose to call out individual agents (subpoenaed to the September hearing) and their companies by name for the inadequacy (and sometimes ridiculousness) of their responses to the Committee’s questions. It even block-quoted numerous responses from those individuals, forever memorializing that person and their statement on at least one server hosted by the State of New York.

Recommendation 3: Ensure Quality of Course Instructors

Although this one could have been combined with Recommendation 2, the Committee chose to spell it out individually.

The content of training courses, reviewed by fair housing experts, was often inaccurate, incomplete or confusing, and lacking in quantity and quality. According to fair housing experts consulted by Newsday, only one of the six classes reviewed included the required three hours of fair housing law instruction. In two classes, conducted by the same instructor, experts unanimously concluded that the instruction lacked basic information necessary to ensure agents understand and adhere to fair housing laws (p. 70)

The members were clearly horrified by some of the stories they heard:

Additionally, the experts noted that when the instructors made statements regarding racial and religious bias, the instructor warned students not to use offensive language, but then repeated offensive terms in anecdotes–reinforcing stereotypes rather than dispelling them. In another class analyzed by fair housing experts, an instructor informed the class that the purpose of the instruction was to inform them how “not to get caught” violating fair housing laws, rather than to inform the class of the purpose of fair housing laws (p. 70-1)

Consequently, the Committee instructed the State to impose effective standards for instructor licensing, the content of instruction, and to require instructors to sign a document under oath attesting to compliance with state fair housing laws. It also recommended barring instructors who have had their licenses revoked from reapplying for a period of five years.

Recommendation 4: Rescind Rule Requiring Classes to Be Recorded

After an outcry from fair housing groups, the Committee recommends rescinding Regulation 19 NYCRR 177.9 – Video Recording and Record Preservation, adopted last year:

Requires each entity, approved to provide instruction pertaining to fair housing and/or discrimination in the sale or rental of real property or an interest in real property, to record each “Fair Housing” course in its entirety, and maintain this recording for a period of one year.

The fair housing groups contended that the trainings are an opportunity for participants to have valuable, candid discussions on the regulations and the challenges they face in attempting to comply. Instead, the groups (and now the Committee) recommend auditing the courses the way that Newsday had done.

4. Increased Penalties and Broader Accountability

Recommendation 1: Increase Penalties for Violating Fair Housing Laws

Fair housing expert testimony persuaded the Committee that the $1,000 maximum penalty is insufficient to deter violations and higher punitive damages are necessary to deter fair housing violations. A new Senate bill proposes to increase the fine to $2,000, designating 25% of the revenue to county level Human Rights Commission offices and 25% towards a new special fair housing fund.

Recommendation 2: Improve Broker Supervision of Agents

The Committee found that broker to agent ratios are far too high in Long Island for a broker to ensure fair housing standards are being satisfied by his or her agents. The hearings revealed that some of the “bad actor” brokers were supervising 400, 800, even 1,700 agents (via middle management, of course). The Committee is recommending that the Department of State reevaluate supervision regulations, determine metrics that will provide more robust support and accountability for agents, and is backing a bill that would increase the years of experience required (by 2) to appoint an office manager.

Recommendation 3: Require Brokers to Standardize Their Policies for All Home Seekers

In order to “stamp out” unequal treatment, the Committee recommends standard operating procedures for providing services to prospective customers, to avoid the sometimes random requirements that bad actors in the Newsday report imposed on some customers and not others. One of the new bills mentioned above includes this proposal.

5. Ensure That Government at All Levels Is Part of the Solution

Recommendation: Require State and Local Governments to Affirmatively Further Fair Housing

Following a position that California took in 2018, the Committee recommends that NYS take upon itself an obligation that all state agencies and localities administering housing-related programs and laws actively pursue fair housing, rather than just avoid discriminatory practices. Some would call this semantics, but the intent is to raise the bar on what the State expects of its own agencies.

6. Brokerage Industry Reforms

Recommendation 1: Open Offices in Communities of Color

Because none of the 12 companies tested in the Newsday report had none had an office located in the eight predominantly minority communities on Long Island, the Committee perceived that many agents are making efforts to avoid selling homes in those communities. “One measure that the industry can undertake immediately is to open offices in underserved or underrepresented communities,” it wrote. “Opening offices and maintaining a presence in a neighborhood will help to ensure equal and fair access to housing is being provided to all, regardless of their race or ethnicity” (p. 90-91). We’re curious whether this is true, but we’ll leave that for Part 2. It’s said that fashion trends start in NYC and then spread from there to the rest of the country. That phenomenon is probably not limited to fashion.

Recommendation 2: Disseminate a Model Fair Housing Policy

In this section the Committee called on NAR to provide a model fair housing policy to all members, including how to avoid discriminatory practices in real estate transactions and marketing. To achieve uniform practice, it called on real estate firms to adopt and share such policy statements with all of their brokers and agents, as well as a clearly defined list of consequences for noncompliance with fair housing laws.

Recommendation 3: Foster a More Diverse Real Estate Sales Force

The Committee referenced a 2017 study by NAR reporting that “80% of its members were white, while only nine percent were Hispanic or Latino, five percent were Black, five percent were Asian or Pacific Islander and just one percent were American Indian, Eskimo, or Aleut” (p. 92). Like the statements under Category 5 above, the Committee recommends that the industry be proactive in recruiting members of racial and ethnic minority groups.

What’s all this mean for you and the industry?

We’ve got some color commentary simmering on the stove. Stay tuned for Part 2.

-gwm

Pink Floyd – High Hopes

Beyond the horizon of the place we lived when we were young…
The ringing of the division bell had begun