In light of the explosive “Newsday” article, here is a look at what steering is, why it’s critical to fully understand it and how to avoid it both personally and for your brokerage.
Troy Palmquist is an indie broker in California with more than a decade of experience. His regular column, which covers a range of helpful tips for agents and op-eds on industry happenings, publishes Thursdays on Inman.
In light of the explosive Newsday article regarding steering in Long Island, I want to take a moment to point out what steering is and why it’s something to avoid.
What is steering?
Steering or trying to influence a person toward or away from a particular property or neighborhood based on one of the protected characteristics — such as race, color, national origin, religion, sex, family makeup and disability — is illegal under the Fair Housing Act.
What you need to know about the Newsday investigation
The three-year Newsday investigation indicates widespread housing discrimination against blacks and other minorities in New York’s suburbs. Even worse, it is still taking place nearly 50 years after the Fair Housing Act.
Perhaps this recent New York Times article sums it up best saying:
“More than half a century after the great civil rights battles to end discrimination, the newspaper found that black home buyers are being steered to black neighborhoods and more closely scrutinized by brokers. Newsday sent white investigators posing as buyers to meet with 93 real estate agents about 5,763 listings across Long Island.
“Then, they sent a second buyer — either black, Hispanic or Asian — to meet with the same agents. The practice is a gold-standard methodology known as ‘paired testing,’ in which real estate agents are contacted by pairs of prospective clients with similar financial profiles.”
The bombshell revelation adds that:
“Black testers were treated differently than white ones 49 percent of the time. Hispanic buyers encountered unequal treatment 39 percent of the time and Asian buyers 19 percent of the time. Along with steering minority testers to majority-minority areas, and white testers to mostly white areas, some agents required black buyers to meet additional financial conditions that they didn’t demand of white buyers with the same profile.”
As a broker-owner, my main concern is for my agents and our clientele.
Although we as broker-owners consistently provide education and training on the matter, the Newsday investigation is an important reminder to make sure that we are all up to speed on the issue and that our practices are up to par.
So I reached out to real estate compliance consultant, Summer Goralik, right away for her insights on the matter. And what she revealed might surprise you.
“In the California Department of Real Estate (DRE) world, there are two regulations that the DRE specifically enforces which govern prohibitions against steering, panic selling, and other discriminatory conduct (i.e., Commissioner’s Regulation 2780 and 2781). I quickly searched those regulations on the DRE’s website in order to see if any enforcement actions involving these regulations came up and didn’t find any related discipline in this area,” she said.
“So, in other words, these types of violations in California, implicating real estate licensees, do not appear to be that common. It’s also possible that if violations are taking place, then perhaps the victims of this conduct have not reported these actions to the DRE.”
She went on to say that when she worked at DRE, she investigated only one case that alleged discriminatory conduct against a real estate licensee, and the case was closed for lack of clear and convincing evidence.
The truth is that allegations of discriminatory conduct can be difficult to prove without witnesses, written evidence or a pattern of misconduct by the licensee, she added.
The other thing that’s part of your supervision duties as a responsible California broker is establishing policies and procedures that familiarize your sales agents with the requirements of federal and state laws regarding discrimination, she said.
“However, in my opinion, this often gets forgotten and some supervising brokers just assume their agents know these laws. When I interview brokers about these laws (as a compliance consultant, and formerly when I was a DRE Investigator), they typically say that ‘you can’t discriminate against anyone,’ but they rarely know the specific laws, differences between federal and state statutes, protected classes that they respectively cover, nor have any real training or educational program in place to ensure agents actually know what types of behaviors and practices they must avoid.”
How do you avoid a steering violation?
As a licensed real estate agent, you should be aware of several key areas that could present an actionable steering violation. Among the most obvious is the language you use — both in person and in marketing collateral. But also in the data you pull and present.
According to CRES Insurance Services, an insurance firm for agents and brokers rooted in risk management, “Two areas where your risk increases is in marketing materials and how you respond to client questions or requests.”
CRES suggests staying away from using discriminatory language in marketing, such as “singles only” or “no children.” And you’ll definitely want to eliminate any references to the ethnic or racial makeup of a neighborhood.
Even mentioning the proximity to a particular church, temple or mosque can be problematic and lead to an actionable offense.
CRES brings up another good point: “So how do you respond to these kinds of requests from clients, to allow you to meet their needs and meet the requirements of the law? Ask them to define the parameters of the search. So if they want to be in a neighborhood with a specific religious, racial, age or ethnic mix, ask them to tell you where they’d like to look — within certain streets or ZIP codes for example.”
And it’s also important to be careful with questions regarding the safety of a neighborhood, the quality of the schools and the diversity of an area.
When faced with such discussions, it’s important to encourage your clients to do the research themselves. Of course you can provide resources and tools, but you want to avoid making assumptions or imparting your own opinion, which can lean into steering territory.
A simple example
The Department of Housing and Urban Development (HUD) website is a great resource with several examples of housing discrimination.
Among these are steering. Their example, under the heading “Steering Is A Form Of Discrimination” states:
“John, who is an Asian man, meets with a real estate broker to discuss purchasing a house for his family. When John names the neighborhood that he is interested in, the broker asks John if he is sure that his family will feel comfortable there.
“The broker tells John that she has a wonderful listing in another neighborhood where there are more ‘people like them.’ When the broker takes John to see the house, John notices that the residents of the neighborhood appear to be mostly Asian. John files a complaint with HUD because steering someone to a certain neighborhood because of his race is a form of race discrimination.”
Overall, the lines of steering are often blurry. Do a self-check every quarter, and have set of responses and a plan of action in place to cover your bases.
Eventually it will become second nature, you can avoid the confusion of steering altogether, and get back to what you do best — serving your client.
For more specific examples on housing discrimination, check out regular contributor Bernice Ross’s “Fair housing mistakes are rampant — are you getting it right?“