The Authority to Impose Occupancy Restrictions Is Clear; How HUD Will View them Isn’t Clear at All

Published on: April 30, 2014

Can condominium associations limit the number of people occupying a residence in the community? The short answer is, if the governing documents impose occupancy restrictions, association boards have the authority to enforce them. But can they do so without violating Fair Housing laws forbidding discrimination against families with children, ethnic minorities, and other protected classes? That’s a different question, and a far more complicated one.

Many associations impose occupancy limits (no more than two occupants per bedroom is common) for perfectly legitimate reasons, the physical limitations of the property primary among them. Consider a 20-unit development consisting of 10 one-bedroom and 10 two-bedroom units. The developers would have estimated maximum occupancy at around 60 —2 occupants in each one-bedroom and a 4 in each 2-bedroom ― and would have constructed the facilities accordingly. If there are 80 or more occupants flushing toilets, taking showers, using the modest swimming pool and trying to park 60 cars in a lot that has only 40 spaces, the resulting problems are not hard to imagine. Restricting occupancy levels seems a sensible and necessary response.

But some communities use occupancy limits to achieve less straightforward goals – as a backdoor way to prohibit rentals where the condominium documents don’t impose rental restrictions, or a way to limit the number of children living in a community, without actually saying ‘no children allowed,’ which is a violation of the Fair Housing Law.

If you’re wondering how to tell the difference between legitimate occupancy limits, designed to avoid overburdening facilities, and potentially discriminatory ones, designed to bar children, you’re asking precisely the right question. Good luck finding an answer to it.

The Department of Housing and Urban Development (HUD), which enforces the Fair Housing laws, has tried periodically to prune this legal thicket ─ most recently in a 1998 memorandum promising to explain the factors that HUD will consider to determine whether occupancy restrictions “may constitute discriminatory conduct under the Fair Housing Act.”

 

OK but Rebuttable

hud_logoThe memo notes that HUD has said in the past that “an occupancy policy of two persons in a bedroom, as a general rule, is reasonable under the Fair Housing Act.” That certainly seems straightforward enough, until HUD adds, “The reasonableness of any occupancy policy is rebuttable.” Translation: Occupancy restrictions are okay, except when they’re not. That’s a little like putting comfortable cushions on a stool , inviting you to sit on it, then sawing off one of the legs.

The memo makes it clear that you are free to sit in that chair, precarious though it may seem. In fact, HUD wants you to know that owners and managers are free to develop “reasonable’ occupancy requirements “based on factors such as the number and size of sleeping areas.” But if someone complains that the restrictions are discriminatory, the agency will “carefully examine” those restrictions to determine if they “operate unreasonably to limit or exclude families with children.” To recap: Some occupancy limits are reasonable and some aren’t. And some otherwise reasonable limits may operate “unreasonably” in some circumstances. Feeling better now?

Anticipating that housing providers might need a tad more clarity, the memo provides several hypothetical examples to explain how HUD will evaluate restrictions if they are challenged. The key point: It’s not just the number of rooms, but their size and configuration and the configuration of the families occupying them that will be considered. All the examples are based on a two-person-per bedroom limit:

 

The Key Variables

Example 1: If the two bedrooms are in a small mobile home, rejecting a family of five would likely be deemed reasonable; not so in a larger dwelling with “two large bedrooms and spacious living areas.”

Example 2: Two adult parents and an infant are seeking to rent a one bedroom apartment in which “both the bedroom and the apartment are large, and two adult parents with a teen-aged child are seeking to rent the same apartment. The occupancy limit would be reasonable for the family with the older child, but not reasonable for the family with an infant.

Example 3: Two community associations move to enforce their two-per-bedroom occupancy restrictions against a family consisting of two adults and three children. The unit in Community A has two bedrooms plus a den; the unit in Community B lacks that additional room. Community B would probably be on solid ground in rejecting the family, while Community A would likely find itself on the receiving end of a Fair Housing complaint.

What about the size of the occupants? It would seem that two 6-8” football players occupying a large bedroom might be deemed less reasonable than two 5’4”, 115-pound teen-aged girls occupying a smaller one. The HUD memo doesn’t use this example and understandably so — but it does illustrate the slippery-slope nature of the distinctions HUD is using.

 

From the Courts

The courts in many jurisdictions have also addressed the validity of occupancy restrictions, yielding varied opinions but without producing much in the way of helpful guidance. One case ─ Edmonds vs. Oxford House ─ actually made it to the U.S. Supreme Court. In this case, a housing advocacy group in Edmonds, WA tried to open a group home housing 10-12 unrelated individuals in a neighborhood zoned for single-family homes. Local officials blocked the move, citing an ordinance defining a family to include no more than five unrelated people.

Oxford (the advocacy group) said the town was required under the Fair Housing Act to waive its five-person maximum as an accommodation for the disabled residents who would be occupying the home. Edmonds countered that the Fair Housing Act exempts “any reasonable local, state or federal restrictions, regarding the number of occupants permitted to occupy a dwelling.”

A District Court agreed that the exemption applied but the Ninth Circuit Court overturned that decision, concluding that the Edmonds ordinance was a definition of family, related to zoning requirements, not an occupancy restriction, related to health and safety concerns, as contemplated by the FHA. Faced with nearly identical facts in a Georgia case, the Eleventh Circuit reached the opposite conclusion.

Stepping in to resolve the contradictory interpretations, the Supreme Court agreed with the Ninth Circuit that a definition based on the relationships of occupants rather than their number was not an occupancy restriction and so did not qualify for the FHA exemption. The High Court stated that it was not deciding whether Edmonds’s definition of family (no more than five unrelated individuals but any number of related individuals), itself violated the Fair Housing Act “and if so, under what circumstances,” adding another unanswered question to a long list of questions about occupancy limits and how they should be applied.

These restrictions are common in condominium associations and many communities have stumbled over them. In one recent case, a Florida association (Town Homes of Kings Lake) and its management company paid $150,000 to resolve a suit filed by HUD, alleging that the community’s occupancy limits discriminated against families with children. Those limits, specified in the governing documents, were: A maximum of 6 occupants for a 4-bedroom residence; 4 occupants for a 5-bedrom unit; and 3 occupants for a 2-bedroom unit. The suit arose when the board sought to evict a family with 6 children who had rented a 4-befroom townhome. In announcing the settlement, Bryan Greene, HUD’s assistant secretary for Fair Housing and Equal Opportunity, said: “Twenty plus years of HUD guidance have put providers on notice that occupancy standards which unfairly limit or exclude families with children violate the Fair Housing Act.”

It would be nice if those “20-plus years” of guidance had produced more clarity for condominium boards and others trying to determine whether and how to enforce occupancy restrictions in their communities. If you’re looking for certainty, you won’t find it in HUD’s memos or its enforcement decisions, but you can find some hints that can help you craft restrictions that stand a good chance of passing muster with HUD and the courts.

 

Advice for Associations

  1. Tie your restrictions to objective standards, such as the minimum space requirements specified in a local or state sanitary code. (In Massachusetts, those limits are: 150 sq. ft. of living space for the first occupant and at least 100 s. ft. for additional occupant; and in bedrooms occupied by more than one individual at least 50 sq. ft. per occupant.) The Fair Housing Act’s exemption for “any reasonable local, state or federal” occupancy restrictions would not apply to a condominium law, even if it mirrors the Sanitary Code. But the connection would underscore the health-and safety purpose of the restriction and enhance its credibility.
  2. Base the restrictions on the association’s obligation to preserve property and protect the health and safety of residents. Concerns about overburdening the septic system will give you a strong defense against allegations that your restrictions are discriminatory.
  3. Talk about number of people, not about “family members” or “unrelated individuals.” That was the key problem with Edmonds’ occupancy limits. Also “family” and “unrelated” are linguistic trip wires that risk igniting complaints about discrimination based on marital status or sexual orientation.
  4. Define the community’s goals clearly and consider carefully whether occupancy limits are the best means of achieving them. If you want to limit rentals in the community, you might be better off having owners approve a by-law amendment, which is much less vulnerable to a discrimination claim and more likely to withstand a legal challenge.
  5. Consider the effect of your restrictions as well as their intent. You might limit the number of unrelated occupants in order to prevent rentals to large groups of students and avoid the noise and other disturbances they might create. But this restriction might also bar occupancy by a divorced father or mother who ends up with custody of two children they never adopted. Restrictive occupancy limits aimed ostensibly at students might also prohibit rentals to large extended families that are common for Hispanic, Asian and other ethnic minorities. Your rules may not be intended to discriminate against these or other protected classes, but they could have a discriminatory effect on them. This is known as “disparate impact,” and it is a significant fair housing enforcement tool.
    1. To illustrate how broadly the disparate impact scythe can swing, a community association in Providence, Rhode Island, located near Brown University, barred rentals to undergraduate students. Although students are not a protected class under the Fair Housing Act, a group of Asian students successfully challenged the restriction, arguing that because of the concentration of Asian students in the area and dearth of available housing, the restriction had a discriminatory impact on them.
  6. Consider the association’s history. If the board has been sued for discrimination in the past; if board members are on record asking discriminatory comments or comments that might be interpreted as discriminatory, an occupancy restrictions you enforce will be scrutinized closely and critically. There may be a presumption the restrictions are discriminatory, even if they are not.
  7. Enforce your restrictions consistently and evenhandedly. Enforcing an occupancy restriction against a Hispanic family but not against a White family with the same number of occupants in an identical unit would almost certainly trigger a discrimination claim.
  8. You don’t have to enforce a restriction, even if it’s in the documents, and you may be well-advised not to, especially if, for example, the board’s past history makes it vulnerable to a discrimination claim. Even if you don’t enforce an occupancy restriction, its existence could be problematic – for example, if knowledge of the restriction discourages a family with “too many” children from buying or renting a unit in your community. Although the risk of a discrimination claim seems small, it is a risk, nonetheless. To protect itself, the board might consider asking owners to approve a by-law change eliminating the occupancy restriction. Even if the vote falls short, the board could argue legitimately that it has taken no steps to enforce the potentially discriminatory provision and has done everything within its power to eliminate it.

 

By Patrick Brady and Mark Einhorn