City of San Francisco v. Post (2018) – FEHA Does Not Preempt Local Anti-Discrimination Regulations Not “Encompassed by Its Provisions”

“[T]he purpose of FEHA is precisely as broad – and as narrow – as the field of exclusivity that FEHA’s preemption clause demarcates. The statute’s purpose is ‘to provide effective remedies” for the 14 categories of “discriminatory practice[]’ that FEHA itself addresses. All agree that FEHA does not reach the discriminatory practice of a landlord refusing to rent to a participant in the Section 8 program. This means that San Francisco’s ordinance prohibiting such conduct has, by definition, a different purpose from FEHA.”

In CCSF v. Post, the San Francisco City Attorney sued property owners for listing ads for rental units that included a statement that they would not accept Section 8 vouchers, in violation of Section 3304 of the San Francisco Police Code. The City sought (and received) a preliminary injunction against the alleged business practice. The property owners appealed, arguing that the California Fair Employment and Housing Act (FEHA) already occupied the field of discrimination in this area. FEHA already prevents “source of income” discrimination, but defines it more narrowly that Section 3304, therefore they are allowed to discriminate against Section 8 vouchers while still in full compliance with FEHA.

The Court of Appeal agreed with the trial court that Section 3304 is not preempted by FEHA. FEHA regulates housing discrimination under Section 12955(a) of the Government Code, which prohibits discrimination on the basis of:

  • race,
  • color,
  • religion,
  • sex,
  • gender,
  • gender identity,
  • gender expression,
  • sexual orientation,
  • marital status,
  • national origin,
  • ancestry,
  • familial status,
  • source of income,
  • disability, or
  • genetic information

However, under FEHA, “source of income means ‘lawful, verifiable income paid directly to a tenant or paid to a representative of a tenant’, where ‘a landlord is not considered a representative of a tenant. (Gov. Code, § 12955, subd. (p)(1)),” whereas, Section 3304 more broadly defines the term to mean “all lawful sources of income or rental assistance from any federal, State, local, or nonprofit-administered benefit or subsidy program”.

In Section 8 tenancies, the landlord is in contract with the tenant as well as the local public housing authority, which pays the difference between the tenants’ portion and the rental rate. In other words, under FEHA, the PHA portion is not considered income, whereas in San Francisco, it is.

The issue is that FEHA is clear in its legislative intent to occupy the field on discrimination: “it is the intention of the Legislature to occupy the field of regulation of discrimination in employment and housing encompassed by the provisions of this part”. The property owners argued that, as FEHA already regulates “source of income” discrimination, San Francisco cannot also regulate it in a manner that is different than FEHA.

The Court of Appeal looked to another decision, Rental Housing Ass’n of N. Alameda Cty. v. City of Oakland (2009) 171 Cal. App. 4th 741, which upheld against a preemption challenge an Oakland housing ordinance that provides: “It shall be unlawful for a landlord to refuse to rent or lease or otherwise deny to or withhold from any person any rental unit because the age of a prospective tenant would result in the tenant acquiring rights under this Ordinance.” FEHA does not regulate against age discrimination.

Oakland imposed such a requirement because tenants over a certain age are considered “protected” against certain non-fault evictions (such that a landlord may have an incentive not to rent to someone who is or who is about to become protected). Rental Housing, however, found that FEHA only preempts discrimination “encompassed by the provisions of” FEHA. FEHA does not regulate age discrimination, therefore Oakland may.

However, the court in Post extended this reasoning to conclude that “the purpose of FEHA is precisely as broad – and as narrow – as the field of exclusivity that FEHA’s preemption clause demarcates. The statute’s purpose is ‘to provide effective remedies’ for the 14 categories of ‘discriminatory practice[]’ that FEHA itself addresses. All agree that FEHA does not reach the discriminatory practice of a landlord refusing to rent to a participant in the Section 8 program. This means that San Francisco’s ordinance prohibiting such conduct has, by definition, a different purpose from FEHA.”

It is difficult to accept how a preemptive state law can regulate “source of income” discrimination, but a local ordinance may nonetheless evade that preemption by simply redefining the category. While California state law may invite regulation of other categories, this particular action enforced state unfair competition law for violations of home-grown regulations. California’s Unfair Competition Law tends to be murky, where each “violation” comes with a penalty of up to $2,500, but there is little guidance on what constitutes an insular “violation” or how much the penalty should be.

Some landlords prefer Section 8 tenancies. Particularly in rent controlled cities, the rental rates are set by HUD based on local standards, and are not constrained by the annual allowable increase of a rent ordinance. On the other hand, while the goal of housing Section 8 tenants is noble, a landlord may not want to have a third party government agency involved in their rental contract, creating additional hurdles to the enforcement of basic landlord-tenant law.

The effect of this decision may simply be that FEHA’s only enduring preemptive operation is on the remedies for prohibited conduct, rather than which conduct is itself prohibited.

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