HUD ISSUES GUIDANCE ON USE OF CRIMINAL HISTORY TO SCREEN APPLICANTS

Bolstered by the recent decision in Texas Department of Housing and Community Affairs v. Open Communities in which the Supreme Court recognized disparate impact claims under the Fair Housing Act, HUD has issued new guidance warning housing providers that criminal background screening policies that are overly broad may result in disparate impact claims. The guidance issued by HUD’s Office of General Counsel provides some examples of policies that may run afoul with the Fair Housing Act but it lacks specific recommendations on how to craft a policy that is lawful.

Disparate impact claims filed under the Fair Housing Act are nothing new. Long before the Open Communities decision, virtually every federal circuit court of appeal had held that disparate impact claims could be brought against housing providers. These types of claims are brought when a facially neutral policy or practice has a discriminatory effect on the basis of race, color, national origin, sex, religion, familial status, or disability unless policy or practice is supported by a legally sufficient justification. National statistics suggest that any type of criminal background screening implemented by housing owners and managers will have a disparate impact on the basis of race and national origin. African Americans and Hispanics are arrested, convicted, and incarcerated at a rate disproportionate to their share of the general population. However, simply having a disparate impact is not enough to violate the Fair Housing Act. If the policy or practice in question is necessary to achieve “a substantial, legitimate, nondiscriminatory interest” and that interest cannot be served by a policy or practice that has a less discriminatory effect, it is lawful under the Fair Housing Act even if it has a discriminatory impact. So the key is to determine whether the criminal background screening policy is narrowly tailored to serve a legitimate interest.

Protecting resident safety and protecting the property are fundamental responsibilities of a housing owner and manager. Courts have universally recognized that a housing provider may consider these interests in determining whether to provide housing to an applicant. Criminal background screenings generally are supported by this interest. The question is whether the actual criteria used in the criminal background screening serves that interest or is so broad that in practice it does not serve that interest and results in unjustifiably excluding African American and Hispanic applicants.

The HUD guidance does provide some definition positions on some types of policies. HUD states that policies that exclude applicants if they have merely been arrested or any applicant with any prior conviction regardless of the severity of the crime or when the crime occurred likely violate the Fair Housing Act. HUD also emphasizes that housing providers may exclude any person who has been convicted of the illegal manufacture or distribution of a federally defined controlled substance regardless of its impact. However, HUD fails to offer any more specificity as to what criminal background Criteria indicates “a demonstrable risk to resident safety and/or property” and would be acceptable under the Fair Housing Act.

HUD’s guidance suggests that housing owners and managers conduct an individualized inquiry to determine whether each applicant with a criminal history should be excluded from housing. While an individualized inquiry may be appropriate in some circumstances, moving away from a uniform criminal background screening criteria puts housing providers at great risk of intentional discrimination claims. This is especially true for owners and managers with many tenants for whom multiple regional or district managers would be performing this “individualized inquiry.” The more prudent course may be to continue to rely on equally-applicable criminal background criteria that only excludes applicants convicted of crimes that demonstrate a demonstrable risk to resident safety and/or property.

The unmistakable message HUD is sending in issuing this new guidance is that housing owners and managers must evaluate their current criminal background screening criteria to ensure that applicants are only excluded if they have been convicted of a crime that demonstrates a risk to resident safety and/or property. Housing providers must also consider the length of time that has passed since the criminal conduct occurred. Studies suggest that the recidivism rate for crimes vary so that variation should be reflected in your screening policy or practice. HUD’s guidance cites a study that suggests that after six or seven years without reoffending, the risk of the person committing a crime is on par with someone who has no criminal record. This six or seven year standard may be a general standard on which a housing owner or manger can rely in adopting screening criteria.

Housing providers should not panic. There is no question applicants with criminal records that show they are a risk to resident safety and/or property can still be excluded from housing. HUD’s guidance simply reminds housing providers that the criteria used to screen individuals with criminal backgrounds must be narrowly tailored to ensure housing providers are actually protecting resident safety and/or property.

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Scott P. Moore is an attorney with Baird Holm, LLP, and represents developers, property management companies, nonprofit associations, real estate agents, architects, and engineers. His focus is on fair housing laws and HUD/RD compliance and he serves as the legal specialist for HUD's Fair Housing First Program. He may be reached at (402) 636-8268 or spmoore@bairdholm.com.

Reprinted with permission: CARH News March/April 2016.

Posted in: Fair Housing, HUD, LIHTC, USDA