This article argues that a deceptively simple “exemption” to the 1988 Fair Housing Act Amendments (FHAA) for “reasonable” governmental occupancy standards has been misinterpreted by numerous courts, particularly by the Sixth Circuit in Affordable Housing Advocates v. City of Richmond Heights, 209 F.3d 626 (6th Cir. 2000). This misinterpretation undercuts the protection from housing discrimination that the FHAA provides for families, especially families of color. This article sorts through the confusion about the “exemption,” provides a step-by-step analysis for courts’ application of the exemption, and offers two plausible versions of a “reasonable” standard.