HUD Issues New Guidelines On The Use of Criminal Records In The Rental Screening Process

On April 4, 2016 the U.S. Department of Housing and Urban Development (HUD) dropped a bombshell on owners and managers of residential rental properties in the U.S.

HUD's Office of General Counsel published a 10 page guide entitled "Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real-Estate Related Transactions."

This guide essentially changes the rules as we currently know them with regard to rejecting a rental applicant based on their prior criminal history. I highly recommend that all of you read the document itself -- many times in fact -- as this is a very important change and this issue is not going to go away.

This Policy Is Applicable To All Landlords

HUD's guide applies to ALL HOUSING PROVIDERS. I repeat, this new policy applies to all of you. Some landlords assume that when the see "HUD" that it only applies to federally subsidized housing and public housing. Sometimes that is true, but not in this case. HUD is the federal agency that investigates allegations of fair housing (discrimination) violations. HUD investigates discrimination allegations against all landlords not just landlords of section 8 properties. So this guide published by HUD applies to all of you market rate/conventional housing landlords as well.

Disparate Impact

In order to understand HUD's view on the use of a person's criminal history in the screening process you have to understand something referred to as "disparate impact". In essence, "disparate impact" means that a landlord can have a facially neutral screening policy that is applied equally to everyone but it can still be discriminatory if its use results in a disproportionate impact on a member of a protected class.

HUD's guide includes lots of statistics that show that across the U.S. African-Americans and Hispanics are arrested, convicted, and incarcerated at rates disproportionate to their share in the general population.

As a result of these statistics, if a landlord considers and applicant's criminal history (arrest and/or conviction) as part of the screening process, that landlord may be discriminating against African- Americans or Hispanics based on their race and/or national origin (both of which are protected classes under Fair Housing laws).

So even if your screening policy on its face is not discriminatory and even if you are applying it evenly you may still be discriminating based on race and/or national origin, because your policy affects African-Americans and Hispanics more than others.

Substantial, Legitimate, Nondiscriminatory Interest

So does this mean that a landlord cannot take into consideration a rental applicant's criminal background at all? The answer is both "yes" and "no." HUD states that a landlord may not be discriminating based on race or national origin if his/her screening criteria with regard to the criminal history of an applicant can be proven to be "necessary to achieve a substantial, legitimate, nondiscriminatory interest of the [housing] provider."

What the heck does that mean?

There is no easy definition or explanation of this phrase. Whether a landlord's screening policy with regard to an applicant's criminal history is "substantial, legitimate, and nondiscriminatory" will depend on many specifics. It could depend on the facts of the crime or how old the conviction is or the exact wording of the criteria or how the criteria is applied etc. etc. And it is helpful to keep in mind that one Fair Housing investigator's interpretation of the phrase may be different than another's. And one judge's view may be different than another's.

HUD has tried to further clarify this phrase by boiling it all down to the following statements:

• A landlord must be able to prove through reliable evidence that his/her policy or practice of screening based on criminal history actually assists in protecting resident safety and/or property.

• Merely relying on generalizations or stereotypes that anyone with a criminal history poses a greater risk than a person without such a background is not sufficient.

Prior Arrests

HUD states that if a landlord rejects a rental applicant because of one or more prior arrests -- that have not resulted in a conviction -- that the landlord's policy cannot meet the burden of having a "substantial, legitimate, nondiscriminatory interest." Translation: if you are doing this, you are discriminating.

HUD states that "the fact of an arrest is not a reliable basis upon which to assess the potential risk to resident safety or property posed by a particular individual. For that reason, a housing provider who denies housing to persons on the basis of arrests not resulting in convictions cannot prove that the exclusion actually assists in protecting resident safety and/or property."

So landlords may no longer consider whether a rental applicant has been arrested unless that arrest resulted in a conviction.

HUD does not come out and say this but it would seem to me that by logical extension a landlord also can not deny an applicant who has a criminal case that it still pending (since there has not yet been a conviction).

So the applicant that has a pending "first-degree homicide" charge or a "sexual assault of a child" case that is still winding its way through the criminal justice system or is on appeal - cannot be rejected based on that fact alone.

I understand the whole "innocent until proven guilty" viewpoint, but do you think this will comfort your longstanding tenant that has minor children living with her when a middle-aged white guy charged with "sexual assault of a child" is allowed to move in next door to her because his case has not yet gone to trial and therefore he has not yet been convicted?

Oh just wait, it gets even better.

Criminal Convictions

HUD also states that a landlord that imposes a "blanket prohibition" on any rental applicant with a "conviction record -- no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then -- will be unable to meet this burden."

Translation: If you deny any and all applicants because they have a criminal conviction you are violating Fair Housing laws and therefore discriminating based on race and national origin, even if you apply that criteria evenly against everyone.

HUD goes on to say that even if you have a more tailored policy or practice that excludes individuals with only certain types of conviction you still must prove that your screening policy is necessary to serve a "substantial, legitimate, nondiscriminatory interest." There that pesky phrase again.

HUD recommends that any landlord that wants to consider an applicant's past criminal convictions as part of the screening process must at a minimum consider the following:

• The nature and severity of the crime, and
• The amount of time that has passed since the criminal conduct occurred.

That is the only guidance that HUD has given us. The rest is for you to figure out. And if you don't handle things properly you may get investigated or sued for discrimination.

Exception: Illegal Manufacture or Distribution of a Controlled Substance

There is one point of clarity. The federal Fair Housing Act does contain a section that states that the taking of an adverse action against a person who has been convicted for illegally manufacturing or distributing a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802) will not be discriminatory. So a landlord is still free to deny a rental applicant if they have ever been convicted of manufacturing or distributing a controlled substance.

Conclusion

What really frustrates me about this whole thing is that landlords are now being told that they must consider a applicant's criminal convictions on a case by case basis. For years we have been told by HUD that the best way to avoid discriminating against someone is to treat everyone the same; your screening criteria must be "objective" and not "subjective. But now HUD seems to be saying that is no longer appropriate.

Now HUD is telling landlords that they will need to become social workers and therapists and try to determine if an applicant who was convicted of a crime in the past has been rehabilitated or not.

Think of the time and effort that will be required for a landlord to travel to the courthouse to review the criminal case file to determine all of the facts surrounding the crime, all of the events that led up to the person engaging in the criminal conduct, the individual's past, to review any pre-sentencing report to see what the evaluator thinks about the defendant etc. None of this information is available on CCAP. You will only get this information from the actual file. Or are you just supposed to listen to the applicant's version of the facts of the conviction and believe them?

It appears to me that HUD might actually be hoping that landlords decide their is too much risk involved in denying any applicant based on their past criminal convictions (except for the conviction for manufacturing or distributing controlled substances - see above) and therefore they should all be accepted.

Landlords will now need to try and determine what convictions might be considered "directly related to the safety of your residents and your property" and hope their interpretation is correct or else risk being investigated and/or sued.