Criminal Background Checks as Violation of Fair Housing Laws

Reliance on criminal conviction, without more, to deny housing is a Fair Housing disparate impact violation

HUD says that most landlords’ criminal background checks violate the Fair Housing laws. The Supreme Court probably agrees. You must take this seriously. Read on for details, and guidance on how to tailor your criminal background policies in the future. You can have them, they just have to be carefully designed and administered.

On June 25, 2015, the United States Supreme Court held that a plaintiff can maintain a Fair Housing complaint based on disparate impact.  This means that if a neutral policy has an unintentional and disproportionate effect on a protected class, that might be enough to violate the Fair Housing laws.

It is a similar concept to the issue about test bias. My father was in the Army. I grew up in Army base apartments for the first 10 years of my life. The “lawns” were dirt and gravel. I remember an IQ test question that involved an analogy. In order to answer the question correctly, you had to know that freshly mown grass had a smell. I did not know that. I missed the question. Nobody intended for Army kids to miss such a question. They just never thought about it.

The Supreme Court’s disparate impact decision was something HUD had been waiting for, and eagerly wanted. On April 16, 2016, HUD released its “Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions.”  It is the next step in disparate impact law.

First, HUD said that a history of prior arrests, without conviction, has no value in housing decisions. Anybody can be arrested for anything.  Rental decisions based on arrest records, without convictions, is not allowed. We are all presumed innocent until proven guilty.  You cannot assume that “where there’s smoke, there’s fire.”

Second, HUD said that automatic denial of housing, based on the mere existence of a prior criminal conviction, has a disparate impact on several protected classes. In particular, African Americans and Hispanics have much higher conviction rates than the general population. As a result, it is a violation of the Fair Housing laws to use convictions, without more, as a basis to deny housing.

BUT, HUD said it does not give rise to a disparate impact claim if you deny housing due simply to the person’s conviction for drug manufacturing or distribution. If they are arrested but not convicted, you cannot consider it at all. If they are convicted of possession, but not manufacturing or distribution, then it must be treated liked any other conviction, below.

Don’t freak out on me. You can have “no convictions” policies, but they have to be more refined than a simple “Conviction of a crime in past ten years, for anything, and you can’t rent here” type of thing.  Continue reading.

HUD said you must show that your policy actually achieves legitimate goals. You can’t say, “Everybody knows there is a high likelihood that convicted felons won’t pay their bills on time and often threaten or injure other tenants.” That is pure speculation, with nothing to back it up.  You might be successful with, “We turn down everyone with an assault conviction, or prison release from such a conviction, within the past 18 months. That is because in this part of the state 87% of such offenders will repeat within the next year after a conviction or prison release. We have a duty to protect our other tenants from violence, so we cannot afford to rent to someone who meets that description.”  (Note: I made up the statistic. It is just an example.)

Let’s assume a judge says, “Congratulations, Landlord, I agree with your policy and I think the reason for it is legitimate and actually works.” You have not won, yet. The plaintiff gets another shot at you.

The plaintiff can then say, “Well, that might be true, but the landlord could have designed a different policy that would meet the same objectives, but without any disparate impact.”

HUD says an example is a policy that goes beyond the mere fact of a conviction, to consider other factors. How old was the defendant at the time of the incident that gave rise to the conviction? Is there a good tenant history after the conviction? What evidence is there that the tenant prospect has been generally rehabilitated?  In other words, what evidence is there that this particular tenant applicant falls into the 13% that do not re-offend?

To me, this is crazy. We’ve spent years telling landlords to make bright-line rules and stick to them in order to avoid Fair Housing complaints.  “Don’t make any exceptions for any sad stories,” we’ve told landlords. “Otherwise, someone will sue you for a Fair Housing violation because you didn’t consider the unmarried mother’s sad story to be good enough, but the childless man’s sad story earned him a rental unit.”

Finally, HUD suggests evaluating a tenant prospect on things such as income and credit score BEFORE even looking at criminal history.  If a tenant prospect is disqualified on those grounds, then criminal history is irrelevant.

(I don’t trust HUD on this one, though. We all know that criminal history often results in no access to credit or meaningful employment, resulting in no credit score and poor income history.  I bet we’ll hear more from HUD on this subject, too!)

The bottom line is, we are going to have to monitor what HUD says about these things, and tailor rental policies to HUD’s pronouncements.  Insurance companies who write Fair Housing riders to E&O policies might provide some help. In addition, how judges rule in particular Fair Housing lawsuits will also be helpful. I’ll continue to monitor this very important issue, and keep you posted on developments.