HUD Issues Guidance on Use of Criminal Background Checks

By Janet  B. Thoren, Legal Counsel

Diligent property managers often run criminal background checks on prospective tenants before allowing them to lease a landlord’s property.   In April 2016, HUD issued guidance on how the Fair Housing Act (“the Act”) impacts the use of such a background check by all providers of housing, including property managers.  When designing a process for screening tenants, it is important for brokers to consider this guidance and how the use of such background checks might violate fair housing laws.

Before getting into the HUD guidelines, there are a few terms brokers should recognize and understand.  The Act includes the following seven protected classes:  race, color, religion, national origin, sex, disability, and familial status.  A landlord or property manager may not discriminate against anyone in one or more of the protected classes.   Another term, “disparate impact”, is often used in housing discrimination cases and refers to a policy or practice that is neutral on its face, but its application actually has a discriminatory impact on a protected class.

The use of a criminal background check as part of a tenant screening process seems to be a neutral process as long as it is required of all potential tenants, not just certain ones selected by the landlord or property manager.  However, HUD has determined that due to higher than average incarceration rates among certain races relative to their percentage of the total population, and when compared to incarceration rates of other races, the use of criminal background checks to deny housing may actually cause a disparate impact on certain races and therefore be discriminatory.

What does all of this mean for a landlord or property manager? First, criminal background checks should only be used for a non-discriminatory business objective, and there cannot be an alternative to the background check that is less discriminatory.  There should be some evidence that the background checks actually accomplish the goal.  Does a refusal to rent to individuals with criminal convictions actually mean fewer criminal acts or property destruction in the properties being managed?  A blanket prohibition against anyone with any type criminal record likely would not survive a charge of discrimination.  There are a couple of exceptions.   The Fair Housing Act specifically states that landlords do not have to make housing available to persons with convictions for the manufacture or distribution of controlled substances.  Just remember, though, other drug-related convictions are not specifically exempt from fair housing requirements.  In addition, project-based HUD subsidized properties must prohibit anyone subject to a lifetime registration requirement under a state government sex offender registration program.

For anything outside the exceptions, HUD suggests that landlords and property managers should consider the following factors when using criminal background checks for prospective tenants:

Do not consider charges or arrests that did not result in conviction.  Arrest records should not be used as a basis for denying an applicant for housing.  Such a record does not indicate that the applicant actually engaged in any criminal activity.  Remember – innocent until proven guilty.

Do not have a blanket policy against renting to anyone with any type of criminal conviction.  Explain to landlord-clients the dangers of such a policy and advise them to use a more tailored approach.

Consider the type of conviction.  Look at the nature and severity of each conviction.  A shoplifting conviction should not carry the same weight in a housing decision as a conviction for distributing cocaine.  While fishing without a license is not good, an applicant participating in that type of activity will likely be a lesser risk to residents and property than someone selling drugs, which often brings more dangerous people and illegal drugs into the neighborhood.

Consider the timing of the conviction. How long ago did the event happen and how long ago was the conviction?  Research tends to show that the likelihood that a person with a prior criminal conviction will commit another offense decreases over time.  HUD offers no insight into how long might be a reasonable period to consider, so consider a reasonable amount of time that you feel you can defend if challenged.

Consider each offense individually.  Create an assessment plan that is fair and takes into account mitigating factors such as the surrounding events, the age of the individual at the time, rehabilitation efforts, and the rental history of the individual.  In other words, each instance should be reviewed on a case-by-case basis and narrowly tailor any refusals.

As a property manager, you have a duty to discuss these issues with your landlord clients and create a program that will help keep you and your clients out of trouble and will allow all housing applicants fair access to available housing.  To see the HUD guidelines in full, use the link below.

This article came from the February 2017-Vol47-3 edition of the bulletin.