Appeal from a judgment entered in the United States District Court for the Eastern District of New York after a non-jury trial before the Honorable Tom C. Clark, Associate Justice of the United States Supreme Court, Retired (sitting by designation). The judgment declared the financial criteria used by defendants in the rental of their apartments to be in violation of the Fair Housing Act, 42 U.S.C. § 3601 et seq. and the Civil Rights Act of 1866, 42 U.S.C. § 1982, and enjoined defendants from applying the criteria to plaintiffs and all others similarly situated. Reversed.
Hays, Anderson and Mansfield, Circuit Judges. Mansfield, Circuit Judge (Dissenting).
Plaintiffs commenced this action seeking injunctive and declaratory relief on the ground that the use by The Lefrak Organization ("Lefrak") and Life Realty, Inc. ("rental office") of certain financial criteria to determine eligibility for tenancy in their apartments violated the Civil Rights Act of 1968, 42 U.S.C. § 3601 et seq. (1970) ("Fair Housing Act") and the Civil Rights Act of 1866, 42 U.S.C. § 1982 (1970) ("Civil Rights Act"). The named plaintiffs, black recipients of public assistance in New York City, whose applications to rent apartments were rejected by defendants, sue on behalf of "all public assistance recipients within the New York Metropolitan Area who have sought or may seek to rent accommodations in the residential buildings owned or operated by the Lefrak interests." Defendants are operators of 119 buildings within the City of New York, containing 15,484 apartments, with rental ranges running from $140 to $400 per month. The financial standard challenged herein is the requirement, applied by defendants in the rental of all their apartments, that an applicant, or applicant and spouse, have a weekly net income*fn1 equal to at least 90% of the monthly rental of the apartment applied for ("the 90% rule") or, alternatively, obtain a co-signer of the lease whose weekly net income is equal to 110% of a month's rent ("co-signer requirement").*fn2 The rental office and Lefrak appeal from a judgment entered in the United States District Court for the Eastern District of New York, after a trial before the Honorable Tom C. Clark, Associate Justice of the United States Supreme Court, retired, (sitting by designation), without a jury. The court below declared the financial criteria used by the rental office and Lefrak to be in violation of the Fair Housing Act and the Civil Rights Act of 1866, and enjoined defendants from applying the 90% rule and co-signer requirement to plaintiffs and members of the class they represent. We reverse.
On August 6, 1970, the United States of America, by the Attorney General, commenced an action under the Fair Housing Act, 42 U.S.C. § 3601 et seq., to prevent defendants from continuing an alleged pattern and practice of resistance to that statute. United States of America v. Life Realty, Inc., Civ. No. 70-964, (E.D.N.Y.). Appellants denied the allegations of the complaint. The Government's suit was concluded on January 28, 1971, without an adjudication on the merits, by a consent decree under which the rental office and Lefrak agreed to comply with the Fair Housing Act, to accept applications for apartments regardless of the race of the applicant, to maintain records of applicants for apartments in Brooklyn by race, and to apply to all applicants an eligibility requirement that an applicant's net weekly income be equal to 90% of a month's rent (the 90% rule).*fn3 The consent decree remained in effect until March 2, 1973, at which time the court (Weinstein, J.) on motion of defendants, unopposed by the Government, dissolved the consent decree and dismissed the action with prejudice.
In July of 1971, appellee Dorothy Boyd attempted to rent one of appellants' apartments and was refused.*fn4 Mrs. Boyd thereupon moved to intervene in the original action commenced by the Department of Justice. That motion was denied by the court (Weinstein, J.) which directed that Mrs. Boyd's application for intervention be treated as commencing a separate action. With leave of court, Mrs. Boyd filed an amended complaint on January 3, 1972.*fn5
In March, 1972, Inez Stoney attempted to rent one of appellants' apartments and was denied an apartment because she did not meet the 90% rule and did not have an acceptable guarantor. On March 18, 1972, Mrs. Boyd moved to have this action declared a class action and Miss Stoney moved to intervene. Judge Weinstein granted both motions, and the case was subsequently heard by Mr. Justice Clark who found in favor of plaintiffs.
The Fair Housing Act prohibits discrimination in housing because of "race, color, religion, or national origin." 42 U.S.C. § 3604 (1970). Plaintiffs argue that defendants by utilizing the 90% rule have violated this prohibition. They reason that the 90% rule excludes all public assistance recipients except for the very small number who can obtain an acceptable co-signer, that a large majority of public assistance recipients in New York City are black or Puerto Rican, and that therefore the use of the 90% rule is racially discriminatory. The premise of plaintiffs' argument is that "welfare recipiency . . . must be seen as the 'functional equivalent' of race." Appellee's brief at 36. Such an equivalency between race and income has been rejected by the Supreme Court in James v. Valtierra, 402 U.S. 137, 28 L. Ed. 2d 678, 91 S. Ct. 1331 (1971). Plaintiffs in that case, relying on a line of reasoning similar to that advanced by plaintiffs here, challenged an article of the California state constitution which provided that no low-rent housing projects should be developed, constructed or acquired by a state public body until the project was approved by the majority of those voting at a community election. Despite implicit recognition of the correlation between racial minority and low income, the Court refused to equate the two factors. The Court, in upholding the validity of the provision, said: "The Article requires referendum approval for any low-rent public housing project, not only for projects which will be occupied by a racial minority." Id. at 141.
As in Valtierra, supra, the rule under consideration here cannot be said to rest on distinctions based on race. See 402 U.S. at 141. While blacks and Puerto Ricans do not have the same access to Lefrak apartments as do whites, the reason for this inequality is not racial discrimination but rather the disparity in economic level among these groups. While a showing of a disproportionate effect on non-whites is sufficient to require application of the compelling state interest standard in the context of an equal protection challenge to government action, see, e.g., Hunter v. Erickson, 393 U.S. 385, 391-92, 21 L. Ed. 2d 616, 89 S. Ct. 557 (1969), such an analysis is inappropriate in the context of a purely private action asserting a claim of racial discrimination. A businessman's differential treatment of different economic groups is not necessarily racial discrimination and is not made so because minorities are statistically overrepresented in the poorer economic groups. The fact that differentiation in eligibility rates for defendants' apartments is correlated with race proves merely that minorities tend to be poorer than is the general population. In order to utilize this correlation to establish a violation of the Fair Housing Act on the part of a private landlord, plaintiffs would have to show that there existed some demonstrable prejudicial treatment of minorities over and above that which is the inevitable result of disparity in income. Cf. James v. Valtierra, supra. Just as this court will not impose even on the government an affirmative duty to construct low-income housing when the decision not to build is not racially motivated, Citizens Committee for Faraday Wood v. Lindsay, 507 F.2d 1065 slip op. at 596, (2d Cir. 1974); Acevedo v. Nassau County, 500 F.2d 1078, slip op. at 4618-19 (2d Cir. 1974), so we will not impose an affirmative duty on the private landlord to accept low income tenants absent evidence that his motivation is racial rather than economic in origin.
The conclusion that defendants' seemingly neutral rule is in fact aimed at excluding a racial minority finds no support in the record. The percentage of blacks in appellants' apartments (about 19.8%) closely approximates the percentage of blacks in the population of New York City (21%). There is no claim that black public assistance recipients are treated differently from white public assistance recipients. Nor is there any evidence that public assistance recipients have been excluded from Lefrak apartments for any reason other than inability to meet the financial standard. On the other hand, the evidence indicates that when the financial standard could be met as, for example, by obtaining an acceptable co-signer, public assistance recipients, including those belonging to minority ethnic groups, were rented apartments on the same terms as were any other qualifying applicants. To use ethnic distribution of tenants excluded from appellants' apartments as a basis for inferring discriminatory practices in this situation is like imputing discriminatory motives to producers of high priced goods because such goods more often find their way into the hands of wealthier white consumers than into the hands of the poor. As this court has said in the context of the equal protection clause, "the mere fact that a requirement, otherwise proper, may have a greater impact on the poor, does not render it invalid. . . ." English v. Town of Huntington, 448 F.2d 319, 324 (2d Cir. 1971).
A landlord in the private sector*fn6 is entitled to choose whom he will accept as tenants as long as he does not discriminate on one of the statutorily condemned bases. Certainly he may seek assurance that prospective tenants will be able to meet their rental responsibilities. "There is no requirement that welfare recipients, or any other individuals, may secure apartments . . . without regard to their ability to pay." Male v. Crossroads Associates, 469 F.2d 616, 622 (2d Cir. 1972).
Plaintiffs claim that the 90% rule, and indeed any economic standard computed on a percentage-of-income basis, is an inappropriate measure of a public assistance recipient's rent-paying ability because, unlike the working person, the amount which a recipient receives for his non-shelter needs remains the same regardless of the amount of his shelter allowance*fn7 and because increased shelter allowances can be obtained by recipients if approved by the New York City Department of Social Services. While it may be true that a public assistance recipient's ability to pay rent is related to the Department of Social Services' willingness to approve shelter allowances, the private landlord in choosing his tenants is free to use any grounds he likes so long as no discriminatory purpose is shown. See Madison v. Jeffers, 494 F.2d 114, 116-17 (4th Cir. 1974); Pughsley v. 3750 Lake Shore Drive Cooperative Building, 463 F.2d 1055, 1056 (7th Cir. 1972). His choice is not limited by any obligation to accommodate a special class of low income applicants.
Plaintiffs' reliance on Griggs v. Duke Power Co., 401 U.S. 424, 28 L. Ed. 2d 158, 91 S. Ct. 849 (1971) and other cases interpreting the Fair Employment Act, 42 U.S.C. § 2000e et seq. (1970) is misplaced. The "business necessity" test developed in that context, whereby employers must demonstrate the business necessity of employment tests which have an unequal impact on minority job applicants, has never been applied in any Fair Housing Act case, either public or private, and we find it to be inapposite here. Cf. Jefferson v. Hackney, 406 U.S. 535, 549 n. 19, 32 L. Ed. 2d 285, 92 S. Ct. 1724 (1972).
Plaintiffs have contended that the 90% rule is unevenly applied in that the income of welfare recipients was, in effect, dismissed out of hand as insufficient while the income of the working family was carefully explored and all non-cash bonuses included in order to enhance the possibility of acceptance. Not only is this contention irrelevant to the issue of racial discrimination but defendants have denied that their rule is thus applied. In any event, plaintiffs' contention ignores the fact that even if liberal allowance is made for non-cash benefits and increased shelter allowances, welfare recipients would still have to pay a disproportionate amount (from 47.8% to 64.8%) of their income for rent in order to live in appellants' apartments. Conversely, if an individual could meet the minimum income level necessary to comply with the 90% rule, calculated at trial to be $10,500 per annum, he would be precluded from remaining a ...