People get around this by never putting themselves in the position of having to refuse. If, as a landlord, you only ever buy single bedroom apartments and studios, you aren’t going to run into families that need 4 bedrooms. It’s not illegal for the landlord to discriminate as to what sort of properties they buy.

I mean, gp recounted a story about someone who has a policy against renting to families, so so it sounds like they do refuse sometimes. Also, where I live, lots of families live in one or two bedroom apartments.