Earlier this year, the Office of the General Counsel for the U.S. Department of Housing and Urban Development (HUD) released “Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions”; a memo to give property owners guidance on how the Fair Housing Act applies to the use of criminal background checks in making rental decisions. The issue, as HUD sees it, is that using criminal background checks in tenant screening will result in possible discrimination under fair housing laws. Therefore, HUD warns against blanket policies under which any prospective tenant with a criminal record is denied the opportunity to rent.

The Fair Housing Act and Disparate Impact

As a brief recap, the Fair Housing Act prohibits discrimination in real estate transactions based on race, color, religion, sex, disability, familial status or national origin. However, even if a landlord is careful in his practices, certain policies could lead to “disparate impact.” Disparate impact is defined by HUD as a violation of the Fair Housing Act when the landlord’s policy or practice looks neutral on face value, but has an unjustified discriminatory effect – even when the landlord has no intent to discriminate. So a landlord may treat all applicants exactly the same, but the application process results negatively against a protected class resulting in a disparate impact.

Criminal background checks come into play with disparate impact because, as HUD advises, if a landlord runs a background check evenly and against every prospective tenant, that landlord will actually end up discriminating against minorities because research and statistics show that a higher percentage of minorities have a criminal history compared to the white population. HUD provided a list of statistics demonstrating disproportionately high rates of arrest and incarceration based on race, noting that African-American males are imprisoned at a rate nearly six times that of white males, and Hispanic males at more than twice the rate of white males.

Therefore, when a landlord’s practice of denying applicants on the basis of criminal history impacts a particular protected class more than the general population, that practice is illegal under fair housing law unless (1) there is a “substantial, legitimate nondiscriminatory interest” and (2) there is no other way to get the same result without the discriminatory effect – standards that, under HUD’s requirements, may be impossible for a landlord to establish in defense.

What must every landlord know about these guidelines?

An applicant absolutely cannot be denied based upon arrests alone. HUD explicitly stated that a landlord who denies housing based on prior arrests without convictions can never justify the policy. It doesn’t matter if an applicant has 36 drug possession arrests – if there are no convictions, a landlord cannot deny the application on that basis alone.

A landlord cannot impose a blanket restriction against criminal convictions in the application process, but must consider each conviction on a case-by-case basis factoring in information outside of the criminal record, including:

  • the age of the individual at the time they committed the crime,
  • evidence of good behavior since that time,
  • evidence of being a good tenant before and after the crime,
  • evidence of rehabilitation efforts,
  • how long ago the conviction occurred,
  • and the nature of the criminal activity.

Interestingly, this practice is contrary to what all landlords have been trained to do: establish a bright-line policy that treats every applicant exactly the same. Now, landlords must treat applicants with a criminal conviction differently than an applicant without a criminal conviction, and in most cases, will treat applicants with the same criminal conviction differently based upon these surrounding circumstances that HUD now requires be analyzed.

An applicant can be denied for a drug manufacturing or distribution conviction. HUD says that a landlord will not be liable under the Fair Housing Act for excluding individuals because they have been convicted of drug manufacturing or distribution crimes, regardless of any resulting discriminatory effect. Just take note that drug possession is not one of these convictions – only manufacturing and distribution.

The Effect on Local Crime-Free Leasing Ordinances

The practical implications of these HUD guidelines in municipalities that have adopted crime-free housing programs are remarkable. Where a local municipality attempts to increase safety and protect its community by restricting rentals to convicted felons, the federal government steps in threatening liability against landlords who comply with the local ordinance by denying applicants with criminal convictions. So where does that leave landlords? Either violating a local ordinance or violating the Fair Housing Act, with very little leeway in between.

In sum, denying a prospective tenant’s rental application based on his or her criminal background may violate the Fair Housing Act. However, in some cases turning down an individual because of his or her record can be legally justified.

To determine whether your landlord practice is legal or if it may violate the Fair Housing Act, please do not hesitate to contact Kovitz Shifrin Nesbit at 855-537-0550 or visit our website at www.ksnlaw.com.

 

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