NY Source of Income Antidiscrimination Law Ruled to be Unconstitutional

In People vs. Commons West, LLC, the Cortland County New York Supreme Court ruled the New York Source of Income Antidiscrimination statute (“SOIA”) to be unconstitutional. The New York Human Rights Law (Executive Law article 15) was amended in April 2019 to make it an unlawful discriminatory practice to refuse to rent or lease housing accommodations to any person, or group of persons, based on their “lawful source of income “

As defined in the Human Rights Law, “lawful source of income” specifically includes “any form of federal, state, or local public assistance or housing assistance including … section 8 vouchers … whether or not such income or credit is paid or attributed directly to a landlord” Pursuant to section 8 of the United States Housing Act of 1937, the federal government operates the Housing Choice Voucher Program that provides housing assistance to eligible low-income families by giving subsidies to landlords who rent apartments to them

Respondents own and operate numerous residential rental properties in the City of Ithaca. The New York State Attorney General (“NYSAG”) commenced a proceeding alleging that respondents’ refusal to participate in Section 8 constitutes impermissible source of income discrimination in violation of the Human Rights Law, and seeking (1) a permanent injunction enjoining respondents from refusing to rent or lease apartments to recipients of Section 8 housing assistance; (2) restitution for consumers injured by respondents’ conduct; and (3) the imposition of penalties and costs. Respondents moved to dismiss the petition or alternatively, for an order granting discovery.

Respondents first contend that SOIA is unconstitutional because it compels landlords to participate in Section 8 — which is a voluntary program under federal law — thereby impermissibly requiring landlords to waive their rights under the Fourth Amendment of the US Constitution. A landlord cannot accept a Section 8 housing voucher as payment for rent without agreeing to participate in Section 8 by entering into a Housing Assistance Payment (“HAP”) contract with a Public Housing Agency (“PHA”) .The HAP contract must be in the form required by the Department of Housing and Urban Development.

The HAP contract requires a participating landlord to consent to inspection of “the contract unit and premises at such times as the PHA determines necessary,” and to provide the PHA, the Department of Housing and Urban Development, and the Comptroller General of the United States “full and free access to the contract unit and the premises, and to all accounts and other records of the owner that are relevant to the HAP contract,” which includes access to “any computers, equipment or facilities containing such records”.

The “premises” are “[t]he building or complex in which the contract unit is located, including common areas and grounds”. Respondents contend, therefore, that SOIA violates a property owner’s Fourth Amendment rights by giving the owner no choice but to consent to these inspections by entering into a HAP contract.

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NYSAG agrees that Section 8 is a voluntary program, but contends that the Human Rights Law does not mandate participation in Section 8 because the law “merely prohibits [respondents] from denying an applicant for an apartment based on their source of income, which includes Section 8 vouchers”

In 1967, the United States Supreme Court established the principle that administrative searches of buildings to ensure compliance with a municipal housing code are significant intrusions upon the interests protected by the Fourth Amendment The New York Court of Appeals specifically held that laws which authorize inspections of residential rental properties without either the consent of the owner or a valid search warrant violate the Fourth Amendment, and specifically noted that a property owner cannot be indirectly compelled to consent to a search.

The court ruled that the NYAG’s argument is fundamentally flawed for the simple reason that, a landlord cannot accept a Section 8 housing voucher as payment for rent without agreeing to participate in Section 8, which, in turn, requires that the landlord authorize warrantless searches of the rental property and the landlord’s records. The NY Appellate Division  has expressly held that similar SOIA statutes adopted by municipalities prior to the April 2019 amendment of the Human Rights Law required a landlord to accept Section 8 vouchers, effectively compelling the landlord’s participation in the otherwise voluntary program Thus, although Section 8 is a voluntary program at the federal level, the source of income protections provided by the Human Rights Law would necessarily compel a landlord to participate in Section 8 to obtain reasonable rent for an apartment rented or leased to a person who is eligible to receive Section 8 assistance.

A law may not coerce property owners into consenting to warrantless inspections in derogation of their constitutional rights by conditioning their ability to rent real property on providing such consent, which is precisely the effect of the source of income antidiscrimination statute. Thus, by requiring landlords to accept Section 8 vouchers, SOIA necessarily compels landlords to consent to warrantless searches of their properties, in violation of the Fourth Amendment.

Similarly, SOIA further violates the Fourth Amendment by compelling landlords to consent to warrantless searches of their records. The NYSAG has not identified any law or regulation requiring respondents to maintain specific business records, and renting residential, Accordingly, SOIA is unconstitutional to the extent that it makes it an unlawful discriminatory practice to refuse to rent or lease housing accommodations to any person, or group of persons, because their source of income includes Section 8 vouchers.

Based on the foregoing, respondents’ motion to dismiss was granted, and the NYSAG’s petition was dismissed, with prejudice.

Source: Friedman & Ranzenhofer

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