Occupancy Standards - Time to Review Your Policy
by Charles Brown

If you have not reviewed and modified your occupancy standards in the last year, you may be in violation of the fair housing laws.

What do occupancy standards have to do with fair housing laws? Occupancy standards may be a violation of the fair housing laws if they unfairly limit the housing options because of familial status . The fair housing laws make it unlawful to discriminate against persons based on race, color, religion, sex, familial status or national origin. Of these "protected classes," "familial status" is the class to be concerned with in establishing your occupancy standards. Any policy that directly or indirectly excludes families could be a violation of the fair housing laws. If your occupancy standards unreasonably limit the ability of families with children to obtain housing in your apartment community, you could have to defend yourself against a claim made under the fair housing laws.

The law in Texas regarding occupancy standards has changed recently. From May 1, 1995 until May 23, 2001, it was easy to know what your occupancy policy should be in Texas. On May 1, 1995 the Texas Commission on Human Rights (TCHR) put into effect a policy concerning occupancy standards. If an apartment owner followed the TCHR policy, they could rest assured that they would not be accused by TCHR of violating the fair housing laws.

This was the policy: TCHR Policy Before May 23, 2001:

TCHR "Maximum-Persons-Per-Bedroom" Occupancy Policy For Families

The following policy regarding maximum persons per bedroom for families was presumed reasonable by the TCHR:
A family may occupy an owner's dwelling if the family does not exceed two persons per bedroom plus a child who is less than 6 months old and who sleeps in the same bedroom with the child's parent, guardian, legal custodian, or person applying for that status. A more liberal occupancy policy may be adopted by a rental housing owner. A more restrictive occupancy policy will be presumed unreasonable and a violation of fair housing laws.
TCHR "Newborn Policy"

The following policy regarding newborns was presumed reasonable by TCHR:
If an owner makes timely written disclosures of the owner's newborn policy and maximum-persons-per-bedroom policy for families, the owner may adopt a newborn policy as follows: Residents who have a newborn less than 6 months old at the time of rental application or lease renewal and residents whose newborn has reached 6 months of age during the lease term may be required, at that time, to either (1) move into another available dwelling of the owner which has more bedrooms or (2) move out. Rent for the larger dwelling may be the rental rate at the time the lease or rental agreement is entered into for the larger dwelling.
TCHR Policy After May 23, 2001

On May 23, 2001, the TCHR abandoned the above policy and adopted the standards set out in the "Keating Memorandum." The Keating Memorandum was written by Frank Keating, the General Counsel of the Department of Housing and Urban Development ("HUD"). HUD has adopted the Keating Memorandum as its policy on occupancy standards. The Keating Memorandum sets out guidelines rental housing owners should use for establishing their occupancy policy. You may access the Keating Memorandum at the Texas Apartment Association website (www.taa.org).

Consider the Keating guidelines as the law now.

The problem is the Keating guidelines are just that - guidelines, not a definitive test. The Keating guidelines are not specific rules that are easy to apply in every case.

Keating says "an occupancy policy of two persons in a bedroom, as a general rule, is reasonable under the Fair Housing Act." However, the reasonableness of the two persons per bedroom policy may be disputed and you may not be in compliance based on this policy alone. Other factors must be considered in determining whether a policy of two persons per bedroom is reasonable. Factors such as the size of the bedrooms and unit, age of the children living in the apartment under some circumstances, configuration of the unit, physical limitations of the housing, state or local government occupancy standards and other relevant factors may be considered in determining what is a reasonable occupancy policy.

For example, if your two bedroom units have large bedrooms and a spacious living area or study, your policy of two people per bedroom may be unreasonably restrictive. In light of the size of the bedrooms and configuration of the unit, a more reasonable policy may be to allow five people to occupy this two bedroom unit.

Consider the following portion of the Keating Memorandum regarding the factor of the age of children:
"The following hypothetical involving two housing providers who refused to permit three people to share a bedroom illustrate this principal. In the first, the complainants are two adult parents who applied to rent a one-bedroom apartment with their infant child, and both the bedroom and the apartment were large. In the second, the complainants are a family of two adult parents and one teenager who applied to rent a one-bedroom apartment. Depending on the other facts, issuance of a charge might be warranted in the first hypothetical, but not in the second."
Your challenge is to read the Keating guidelines, examine the size and configuration of your apartment units and come up with a reasonable occupancy policy that does not unfairly discriminate against families with children. As a starting point, if your units are of an average size with an average configuration and not particularly spacious, two people per bedroom would be presumed reasonable per Keating. However, if the bedrooms of the units are unusually large or the configuration of the unit includes additional space, (ie a study and/or a living room), then a two people per bedroom limit may be unfairly restrictive and your policy should allow more than 2 people per bedroom.

But what if these two people have a child living with them? Should you allow these three people (two adults and child) to occupy a one bedroom that is average size? It may depend on the age of the child. But, the Keating guidelines do not expressly state that a child's age is a factor. But, Keating implies that infancy may be a factor by indicating in the above-quoted portion of the memorandum that an infant child be allowed to stay in a large bedroom in a large apartment.

The old TCHR policy did not include the characteristics of the unit as a factor but it did include the age of the children as a factor. Keating does not define what bedroom size would be considered unusually large or what would be a "spacious" living area. Some experts say that a bedroom in a unit above 350 square feet in size would be unusually large. I think you would have to consider the unit sizes in your city or even your neighborhood. What is unusually large in New York City is probably not considered unusually large in Austin, Texas.

Can two reasonable people look at the same apartment and have a different opinion on how many people should be allowed to live there? Absolutely.

One Tenant Attorney's View of "Reasonableness"

I asked an attorney who has been an advocate for tenant's rights for many years for his view on how Keating guidelines should be applied when counting children in the number or persons per bedroom calculation. This experienced attorney believes that the age of the child should be at least 5 or 6 years old before you count them in making your persons per bedroom calculation. His reasoning is that prior to reaching the age of 5, a child does not have a significant impact on the amount of wear and tear on the unit. Therefore, a landlord does not have a legitimate business reason to include a child under 5 years old in calculating the number of persons per bedroom. He concludes that a policy that precludes families with children under 5 is unreasonable because children that young do not make a difference to the landlord's bottom line.

In other words, he contends that a landlord does not have a legitimate business reason for having a policy that discriminates against families with children under 5 years old. A "legitimate business reason" has been used as a defense to fair housing claims in some cases. A "legitimate business reason" may excuse a policy that is otherwise discriminatory and a violation of the fair housing law. Don't count on it. The Keating guidelines do not specify at what age to count children in your persons-per-bedroom calculation nor does Keating cite that business reasons are a factor in judging the fairness of an occupancy policy.

One Landlord Attorney's View of "Reasonableness"

Another experienced fair housing attorney I consulted believes that the old TCHR guidelines were and still are "reasonable" and that a family occupancy policy following the old guidelines is not discriminatory under federal law, subject to one clarification: He advises that a more liberal occupancy policy should be expressly stated whenever a particular dwelling or floor plan type contains: (1) an above-average-size bedroom that is large enough to accommodate three children or one adult and two children, or (2) a den, family room, or loft that could be used as an extra bedroom. In other words, you can have more than one occupancy policy in an apartment complex if differing sizes and configurations of the units and/or children's ages justify it.

For example: In a two-bedroom unit, you could have a limit of two adults and three children; or in a one-bedroom unit with a very small loft, you could limit occupancy to a three-person family when the child or children are over 6 months old. In same one-bedroom-loft unit, you should allow an extra child if the child is an infant less than 6 months old.

In the opinion of that expert, you can still lawfully adopt a policy of not renting an average or larger-than-average one-bedroom dwelling to a couple with a child older than 6 months-for two reasons: (1) the typical child begins to crawl at six months and a crawling child causes more wear and tear on a dwelling than an infant (because the child is more mobile and is more likely to urinate on or soil carpets, mar walls, etc.), and (2) a child more than 6 months old sleeping in the same bedroom as the parents is more likely to hear and observe what should be private parental conversations and sexual activities in the parent's bedroom.

For practical considerations, that expert believes that you should go ahead and allow residents whose infant child is born or reaches 6 months of age during the lease term to stay in the dwelling until the end of their current lease term-even though the parents would not qualify under your policy to initially move into the one bedroom unit with a child older than 6 months. It is significant that Keating does not state that it would be unreasonable for a landlord to refuse to rent an average-size one-bedroom unit to a couple with an infant. Similarly, Keating does not state that it would be unreasonable to refuse to rent a larger-than-average-size one bedroom unit to a couple with a non-infant child. The emphasis of the hypothetical exception in the Keating guideline is on infancy.

Are landlords limited to purely "landlord business reasons" in setting a family occupancy policy? Are landlords excluded from taking into consideration factors that can adversely affect the physical safety or health of the child? The answer is "no" to both, according to that fair housing attorney. For example, if a landlord allows an infant to stay in the same bedroom as the parent, the landlord can lawfully insist that the child be in a crib to lessen the chance of an adult in the same bed rolling on top of the infant and hurting or smothering the infant accidentally. It is quite "reasonable" for a landlord's occupancy policy to reflect what is commonly considered by the general populace as being in the best interest of the child.

My View

I believe that you can look at the prior TCHR policies as a guide for what was previously considered reasonable by TCHR (i.e. do not count infants under 6 months in the persons-per-bedroom calculation). However, do not rely on the old TCHR policy alone. You should now add to that TCHR policy a consideration of factors such as the age of children, bedroom size, configuration of the unit and any physical limitations of the housing (e.g. capacity for septic, sewer, or other building systems). Follow the old TCHR rules set out above but make adjustments to your calculation if the bedroom size or configuration of the unit would support a greater occupancy.

Let's say a couple with a three-year-old child seeks to rent a one-bedroom apartment in your community. Assume that the one-bedroom apartment had larger than average size bedroom and had an unusually large dining/living area. Under old TCHR guidelines, you could require them to rent a two-bedroom apartment because their child was over 6 months of age regardless of the characteristics of the unit. Because Keating guidelines require that you take into account the bedroom size and configuration of the unit, these people would be entitled to rent a one-bedroom unit under the Keating guidelines.

If you want to be conservative, use an older age for your definition of an "infant" than the six months of age used under the old TCHR policy. Other sources that I have consulted recommend that you treat all children up to one year as "infants" and do not count infants in calculating the number of people per bedroom. The older the age of the child that you use before you count them in your occupancy calculation, the less likely you will have a claim that you violated the fair housing laws. It is less likely that you will be accused of discriminating against families if you do not count children under three years old as opposed to not counting children under six months old in calculating occupancy limits.

Texas Property Code section 92.010 also governs occupancy limits. Generally, the maximum number of adults (18 years or older) that a landlord may allow to occupy a dwelling is three times the number of bedrooms in the dwelling. The statute does not limit the number of children. Keep in mind that the occupancy standards may be more restrictive if a family is not involved. The concern is that occupancy standards may unfairly discriminate against families and violate the fair housing act. If the prospective tenants do not involve a family, a more restrictive occupancy policy may be adopted such as one person per bedroom. Also, just because the prospective tenant is a family, you do not have to consent to lease to them due to their familial status. The applicants, even if a family, must meet your other criteria such as financial ability or acceptable rental history.

Here are some tips to avoid a discrimination claim based on familial status:

1. Read the Keating Memorandum and the TCHR policy set out above and develop a family occupancy policy based on the Keating guidelines and the TCHR policy with consideration of the size of the bedrooms and configuration of the units. If your bedrooms are unusually large or spacious, allow more than two people per bedroom. If you want to be more conservative, set an age older than six months for which you will count a child as a person. The older the age, the less likely you will be accused of discriminating against families.

2. Tell prospective tenants what your occupancy policy is as soon as possible in the leasing process. Do not wait for them to ask about your policy. If you tell them up front, you will be less likely to mislead someone into thinking they are eligible to rent only to find out that the occupancy policy precludes them from leasing. Tell all prospects about your policy, not just people who ask or people who have children.

3. Do not have anything in your policy that would prevent children of different sexes from sharing a bedroom or would restrict a child from sharing a bedroom with a parent, legal custodian, or person who has written permission of the child's parent or legal custodian to live with the child. You would not have any legal basis for such restrictions and it would have a disparate impact on families.

4. Do not ask a prospect how many children they have or how many children will be living in the unit. Do not comment on a person's pregnancy. First, imagine how embarrassed would you be if you asked "When is the baby due?" and her response was "I'm not pregnant." Secondly, you do not count a pregnant woman as two people in deciding what size apartment she will need. You may ask how many people will be living in the unit. Do not say things like "we only allow two children per bedroom because a remark like that may look like you are discriminating. Use neutral language that would apply to any prospective tenant such as "we allow two people per bedroom." Keating says that "An occupancy policy which limits the number of children per unit is less likely to be reasonable than one which limits the number of people per unit.

5. Be consistent in applying your family occupancy policy. Do not make exceptions.

In summary, the law says you may not discriminate against families with children. You can enforce a limit on the number of people who live in a dwelling. Two people per bedroom is presumed reasonable. The exception to this presumption is units that have extra-large bedrooms or the overall size and configuration of the unit would warrant more than two persons per bedroom. The age of any children should also be considered. Put your occupancy standards in writing and be consistent in enforcing them.

Charles Brown
Charles Brown is an attorney who invests in real estate in the Austin, Texas area. He is Board Certified in Residential and Commercial Real Estate Law by the Texas Board of Legal Specialization. He can be reached at 512-476-8942.

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