Steering in Real Estate: Definition & Fair Housing Examples

Steering is a form of discrimination in fair housing in which the real estate agent, landlord, or lender will either guide or direct prospective buyers or tenants towards or away from a neighborhood because of their race, ethnicity, religion, or any other characteristics. This is prohibited under the Fair Housing Act since it requires that equal housing opportunities be afforded to everyone.

What Is Steering in Real Estate?

In real estate, steering means guiding buyers or renters toward or away from certain neighborhoods, properties, or housing opportunities because of a protected characteristic. It can happen through direct comments, selective listings, coded language, or different treatment during the search process.

• Steering occurs when real estate professionals direct clients to specific areas based on their perceived demographic characteristics.
• It can happen subtly, such as through selective recommendations, or overtly, by outright refusal to show properties in certain areas.
• This practice contributes to housing segregation and limits opportunities for fair housing.

According to the Fair Housing Act, What Is Steering?

The Fair Housing Act (FHA) is a landmark civil rights law in the United States that prohibits discrimination in housing-related transactions. One of the discriminatory practices addressed by the FHA is steering, a form of housing discrimination that influences where individuals or families live based on protected characteristics such as race, color, national origin, religion, sex, disability, or familial status. Steering can occur in various ways, often subtly, and has long-term consequences for housing equity, segregation, and economic opportunities.

Forms of Steering and Their Impact

1. Encouraging or discouraging individuals based on protected characteristics
   • Real estate agents or landlords may guide prospective buyers or renters toward specific neighborhoods based on their race, ethnicity, or family status. For example, an agent might direct a Black family toward a predominantly Black neighborhood rather than showing them homes in diverse or predominantly white areas.
   • This practice reinforces racial and economic segregation, limiting housing choices and access to better schools, jobs, and public services.

Most agents involved in steering are special agents, hired for one specific transaction with a fiduciary duty to their client. But that fiduciary duty of obedience has a hard limit: an agent must never follow a client’s instruction to steer, even if the client explicitly asks to be shown only certain neighborhoods based on demographics. The exam tests this directly: “Your client asks you to show homes only in predominantly white neighborhoods. What should you do?” The answer: refuse and explain that complying would violate the Fair Housing Act.

2. Providing misleading or selective information about property availability

• Some housing providers or real estate agents may withhold listings in certain areas or falsely claim that a property is unavailable to discourage a buyer or renter from moving into a particular neighborhood.
• By doing this, they manipulate housing decisions and prevent individuals from freely choosing their desired location.

3. Using coded language or subtle suggestions

• Real estate professionals sometimes use neutral-sounding phrases that imply a preference for specific groups. For example:
  • “This neighborhood has a lot of great churches” (which may suggest a religious preference).
  • “This area is very family-friendly” (which may discourage single or elderly individuals).
  • “You might not feel comfortable here” (which subtly discourages someone based on race or background).
• While such language might seem innocent, it can significantly influence a person’s housing choices and contribute to systemic housing discrimination.

Steering through coded language often involves selectively describing deed restrictions or HOA rules. An agent who tells one buyer “this neighborhood has strict HOA rules about noise and gatherings” while describing the same community to another buyer as “quiet and well-maintained” may be steering, using the same deed restrictions differently depending on the buyer’s perceived characteristics. The facts about the CC&Rs are the same; the framing is what creates the violation.

What Is Steering in Fair Lending?

Steering in lending occurs when financial institutions influence borrowers’ decisions in a discriminatory manner, violating the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA).

Common examples:

1. Offering different loan terms based on race or neighborhood
   • Higher interest rates or stricter requirements for minorities, even if they have good credit.
   • Example: A Black borrower with a strong credit history receives a higher interest rate than a white borrower with the same profile.
2. Discouraging loan applications from certain ethnic groups with stricter requirements
   • Requiring higher credit scores or additional documentation only from certain applicants.
   • Example: A bank asks a Latino applicant for more proof of income than a white applicant with the same job and salary.
3. Lack of outreach to diverse communities
   • Promoting loans and financial resources only in predominantly white or high-income neighborhoods.
   • Example: A bank hosts home-buying workshops only in wealthy areas, excluding diverse communities.

Impact and consequences

• Increases economic inequality and limits social mobility.
• Reinforces segregation and a lack of housing access.
• Violates fair lending and housing laws.

Affected individuals can file complaints with the CFPB, HUD, or FTC to seek financial justice.

Steering vs Redlining vs Blockbusting

Steering, redlining, and blockbusting are related fair housing terms, but they describe different illegal practices. The easiest way to separate them is to look at who is being influenced and how.

Practice	What it means	Common exam clue
Steering	Guiding buyers or renters toward or away from neighborhoods because of protected characteristics.	An agent says a buyer would feel more comfortable in a certain neighborhood.
Redlining	Denying or limiting loans, insurance, or services in an area because of the neighborhood’s demographics.	A lender refuses to make loans in a particular zip code or neighborhood.
Blockbusting	Pressuring owners to sell by warning that members of a protected class are moving in and property values will fall.	An agent tells homeowners to sell quickly because a certain group is moving nearby.

State fair housing laws and their role

While the federal Fair Housing Act prohibits steering, individual states have their own fair housing laws that often expand protections. These laws:

• Provide additional penalties for violations.
• Extend protections to more groups beyond those covered by federal law.
• Offer state-level enforcement agencies to address complaints and ensure compliance. Illinois adds “source of income” as a protected class under the IL Human Rights Act (775 ILCS 5/), meaning steering a Section 8 voucher holder away from certain neighborhoods is a state-level violation even though it isn’t covered by the federal Fair Housing Act. Chicago’s history of residential segregation, including Martin Luther King Jr.’s 1966 fair housing campaign there, makes steering one of the most heavily tested topics on the free Illinois real estate practice exam. Georgia’s Fair Housing Act (O.C.G.A. § 8-3-200) mirrors federal protections, but Atlanta’s rapid gentrification in neighborhoods like West End and Old Fourth Ward has created modern steering scenarios that the free Georgia real estate practice exam uses in its fair housing questions.

Why Steering Is Harmful

Steering has long-lasting effects on buyers, renters, and communities because it limits housing choice before a person can make an informed decision. This practice contributes to:

1. Perpetuating residential segregation: Steering maintains racial and socioeconomic divides, making it harder for communities to integrate. Historically, steering has reinforced patterns of redlining, limiting minority communities’ access to wealth-building opportunities through homeownership.
2. Limiting economic and educational opportunities: Since housing location is closely tied to access to quality schools, healthcare, jobs, and public services, steering can significantly impact future economic mobility and life outcomes.
3. Reducing housing market fairness: Steering restricts fair competition in the housing market by denying potential buyers or renters the right to make their own informed choices.
4. Limiting housing options: People who are directed to specific neighborhoods can lose the chance to choose homes based on personal preferences, budget, commute, schools, or property needs.

Steering ultimately restricts the buyer’s bundle of rights before they even acquire the property. By limiting which neighborhoods a buyer sees, the agent effectively narrows the buyer’s right of disposition, the ability to choose where and what to purchase. The Fair Housing Act protects buyers’ right to make property decisions free from discrimination, which means the freedom to acquire property rights in any neighborhood regardless of protected characteristics.

Legal Consequences of Steering

The steering of clients is against the law and involves legal actions, fines, and other penalties against real estate professionals, landlords, or housing providers found guilty in court. Agencies like the U.S. Department of Housing and Urban Development investigate complaints, and people who feel they have been steered can file complaints to seek justice.

New Jersey’s Law Against Discrimination (1945) is one of the oldest anti-discrimination statutes in the country. It adds marital status, domestic partnership, sexual orientation, gender identity, and source of income as protected classes, none of which are covered by the federal Fair Housing Act. Steering someone based on any of these is a state violation in New Jersey. The New Jersey real estate salesperson exam tests these NJ-specific protected classes alongside federal ones.

New York’s Human Rights Law (Executive Law § 296) goes further by adding protections such as age, military status, lawful source of income, and citizenship or immigration status. NYC’s Human Rights Law also adds lawful occupation as a housing protected class, and NYC’s Commission on Human Rights is one of the most active enforcement agencies in the country. The New York real estate salesperson exam expects candidates to know both state and city-level protections.

The associate broker or managing broker at each firm is responsible for training agents on fair housing compliance and monitoring for steering behavior. If an agent engages in steering and the supervising broker knew, or should have known, both face penalties. Brokerages can be fined, lose their license, and face civil lawsuits from affected buyers. This is why fair housing training is mandatory at most firms and why the exam tests broker supervision of fair housing compliance.

How to recognize and prevent steering

Both consumers and real estate professionals can play a role in identifying and stopping steering practices.

For homebuyers and renters:

• Be aware of language that suggests specific neighborhoods are “better” or “safer” based on subjective opinions.
• Ask for a broad selection of listings instead of relying solely on recommendations.
• Report any instances where housing options are seemingly limited based on race or background.

For real estate professionals:

Agents must also be careful about what constitutes a material fact when describing a neighborhood. Demographic information about a neighborhood’s racial, ethnic, or religious composition is not a material fact, and volunteering it can constitute steering. Physical property defects, legal issues, and environmental hazards are material facts that must be disclosed. The line between required disclosure and prohibited steering is one of the most tested distinctions on the licensing exam: agents must disclose property conditions but must not volunteer neighborhood demographics.

• Provide all clients with impartial information about housing options.
• Avoid assuming particular preferences of any client based on race or any other attribute.
• Perform fair housing training and follow guidelines to ensure federal and state laws are followed.

Frequently Asked Questions

Your job is to follow your client’s preferences. Which client preference is illegal to follow?

An agent must not follow a client’s request to show homes only in neighborhoods with certain racial, ethnic, religious, or family characteristics. Following that preference would be steering, even if the client made the request first. The agent should refuse, explain that fair housing law does not allow that kind of limitation, and continue the search using lawful criteria such as price, location, property features, commute, and budget.

When you guide an individual based on race, color, religion, sex, disability, familial status, or national origin, what are you doing?

You are committing steering. Steering happens when a housing professional directs someone toward or away from a neighborhood, property, or housing opportunity because of a protected characteristic instead of objective housing needs.

Steering is defined as what in real estate?

Steering is guiding buyers or renters toward or away from neighborhoods, properties, or housing opportunities based on protected characteristics. On the exam, the key clue is that the recommendation is based on who the person is, not what the person asked for in the property search.

What is mortgage steering?

Mortgage steering happens when a lender or mortgage professional pushes a borrower toward a loan product or loan terms in a discriminatory way. For example, giving one borrower a worse loan option than another equally qualified borrower because of race, national origin, or neighborhood can be steering in fair lending.

Summary

Steering in fair housing is a serious issue that undermines equal access to housing. Buyers, renters, and real estate professionals have to be especially aware of how to recognize and avoid discriminatory practices that ensure fair housing for all.

Fair housing laws are a core part of ethical real estate practice and the licensing exam process. Start with our real estate exam prep and join Lexawise to become a knowledgeable and ethical real estate professional.