Real estate industry faces new rules targeting discrimination

New state laws targeting discrimination in the real estate industry have given more responsibility to brokers for supervision of agents and the creation of standardized procedures for dealing with clients, a top official at the Long Island Board of Realtors said..  

One of the new laws, signed by Gov. Kathy Hochul in December, places obligations on associate real estate brokers that serve as office managers. They are now required to supervise real estate agents. The Department of State, which regulates real estate licenses, could file a complaint against an office manager for “failure to supervise” if an agent at the brokerage engages in discrimination.

“It created a new duty for office managers that previously didn’t exist,” Patrick Fife, associate general counsel of the real estate board, said last week at a forum on fair housing hosted by the Nassau County Bar Association. About 100 people, including attorneys and real estate agents, attended the event in Mineola. “The state wants to see active supervision by office managers and brokers," he said.

The forum began with a discussion of Newsday’s Long Island Divided series, a three-year investigation published in November 2019, which found evidence of widespread separate and unequal treatment of minority potential homebuyers and minority communities on Long Island. The investigation used undercover fair housing testers to determine whether white and minority prospective homebuyers were treated differently by real estate agents while presenting the same financial profile and search criteria. The investigation showed Black testers received disparate treatment 49% of the time. Hispanic testers were treated differently in 39% of cases, and Asian testers in 19%, according to fair housing experts who reviewed Newsday’s video recordings of the encounters.

The new real estate laws  were developed after a series of state Senate hearings on housing discrimination that were held in response to the Newsday investigation.  The nine laws include stiffer penalties for housing discrimination, increased training requirements for real estate agents, and rules requiring standardization in how agents treat prospective clients.

Standardized procedures are designed to prevent real estate agents from setting different standards for prospective homebuyers seeking their services. The law requires brokers to set policies around whether they require prospective clients to show identification, sign an exclusive broker agreement and receive pre-approval for a mortgage before working with a client. Brokers can choose to require none, some or all of these documents, but they must be consistent, Fife said.

In one case described in Newsday’s Long Island Divided series, Anne Marie Queally Bechand, a real estate agent formerly with Signature Premier Properties, required a Black fair housing tester to be prequalified for a mortgage before she would show her homes but did not require the same of a white tester, who she took on two home tours. Queally Bechand's license was revoked in January 2020.  

“The state wants to see consistent and clear standard operating procedures and communication, not only within the office, but [with] the public,” Fife said.

If a broker decides they do not require mortgage preapprovals before working with a homebuyer, an agent working under the supervision of that broker can’t impose that requirement on one prospective client, he said.

“There’s no exceptions,” Fife said.

Brokers are required to publish information on their policies conspicuously on public websites, mobile apps, in office locations and provide them to homebuyers upon request. Those policies can help homebuyers understand what the brokerage requires and ensure they are not being treated differently than others, Fife said.

Martine Hackett, an associate professor of population health at Hofstra University who served as one of Newsday’s undercover testers in Long Island Divided, said at the forum Thursday that the way agents treated testers differently was subtle and only became evident after watching the video recordings.  

“You would never know that you were being treated differently until you had something to compare it to,” she said.

Ian Wilder, executive director of Long Island Housing Services, said real estate agents can use standardized practices to promote themselves to communities who have been affected by real estate discrimination and predatory lending in the past. In that way fair housing isn’t just about equal treatment, it’s smart business, he said.

“You want to use it as your selling point, ‘This is how we treat everybody the same,’” Wilder said. 

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.