May 8, 2024
District Judge Angel Kelly for Massachusetts recently approved a $2.275 million settlement. As of April 25, 2024, the Fair Housing Act (FHA) case against a major national consumer reporting agency has moved forward. This approval to move forward is on behalf of housing voucher recipients and will have class members directly notified about the suit. The court expects a final approval hearing to take place in November.
The Suit
According to the lawsuit, the reporting agency used racially biased algorithms in a tenant screening. As such, the plaintiffs claimed that the landlords’ algorithmic screening tool disproportionately affects black and Hispanic housing applicants. The case reminded involved parties that such discrimination went against Massachusetts’s Discrimination Law and violated the FHA. In 2023, the court denied the defendant’s requested motion to dismiss these claims.
This suit has earned considerable interest, especially from federal authorities. For example, the U.S. Department of Justice (DOJ) and the Department of Housing and Urban Development (HUD) revealed their interest. Because these Departments share enforcement authority under the FHA, they have filed a statement of interest in the case. In it, they stated, “The United States has a strong interest in ensuring the correct interpretation and application of the FHA’s pleading standard for disparate impact claims, including where the use of algorithms may perpetuate housing discrimination.”
The Issue
In this FHA case, the issue began when a landlord denied housing to two plaintiffs. Allegedly, the landlord based this decision on a “lease performance risk score” provided by the defendant. According to the plaintiffs, the CRA uses credit scores, eviction history, and other credit-related information to calculate these risk scores.
The plaintiffs argued that the use of non-tenancy-related debt and credit history have a disproportionate effect on non-white housing applicants. They also argued that the algorithm’s scoring system fails to consider the use of housing vouchers, which has a disproportionate impact on black and Hispanic individuals.
Under the settlement, the CRA must perform a more stringent evaluation of prospective tenants when considering their full qualifications instead of providing a score. Should the CRA provide a score using an algorithm in the future, a third party must validate the score; the tenants must also approve of the third party. Finally, the settlement’s $2.275 million fund will benefit the class members.
According to Christine Webber, co-chair of Cohen Milstein’s Civil Rights & Employment Practice, “This is a precedent-setting settlement, a case of first impression for the home rental and property management industries given the pervasive use of algorithms in assessing tenant worthiness.” Furthermore, Todd Kaplan, a Greater Boston Legal Services senior attorney, approved these efforts. Kaplan declared, “On behalf of housing voucher holders in Massachusetts, we are very pleased with this outcome… and it should protect voucher holders from any future discriminatory assessment.”