Criminal Background Checks: HUD Issues Warning that Denying Housing Applications Based on Criminal Record May Be Discriminatory

With the largest prison population in the world (2.2 million adults), the United States has an incarceration problem. African Americans and Hispanics are arrested and incarcerated disproportionately to their respective share of the general population. As a result, barriers related to these criminal records have a disproportionate effect on the minority population. In response, the Department of Housing and Urban Development’s (“HUD”) Office of General Counsel issued a guidance memorandum warning landlords and housing providers that rejecting tenants or buyers based on their criminal records may violate the Fair Housing Act.

Having a criminal record is not a protected characteristic under the Act, but restrictions based on criminal history can violate the Act if the restrictions burden one race or national origin over others. Similarly, landlords and home sellers can be in trouble if they treat individuals with similar history differently due to race, origin, or another protected characteristic.

There are several factors that should be taken into consideration when it comes to a housing application. It is suggested that landlords look for the kinds of convictions that might indicate that the applicant would not be a very good tenant, such as drug-related crimes, violent crimes or prostitution convictions. In conjunction, the age of the conviction should be taken into consideration.

When evaluating whether a criminal history policy has a discriminatory effect, there are several factors to consider. First, a plaintiff must prove that the policy results in a disparate impact based on race or origin. There are national statistics that provide grounds for HUD to investigate complaints that challenge criminal history policies. Along with additional evidence like applicant data, tenant files, census demographic data, and localized criminal justice data, they can determine if local statistics are consistent with national data.

Second, the landlord or housing provider must prove that the policy being challenged is justified. However, a housing provider with a practice of excluding individuals because of one or more arrests without conviction may not satisfy its burden of showing that the practice is necessary. The Supreme Court has said that “[t]he mere fact that a man has been arrested has very little, if any, probative value in showing that he has engaged in any misconduct.”

The next factor is only necessary if a housing provider successfully indicates that their criminal history policy is necessary. The burden shifts back to the plaintiff or HUD to prove that their interest could be served by another practice yielding less discriminatory effects.

A criminal record can constitute a legitimate, nondiscriminatory reason for a refusal to rent, however, a plaintiff or HUD may still prevail by showing that the criminal record was not the true reason for the adverse housing decision, and was instead a mere pretext for unlawful discrimination. In addition, shifting or inconsistent explanations offered by a housing provider for the denial of an application may also provide evidence of pretext.

In practice, housing providers must individually review an applicant’s criminal history to determine whether rejection based on a criminal record is appropriate. The housing provider should follow these guidelines:

1. A tenant should not be rejected because of an arrest, for any crime, where the tenant was not ultimately convicted.

2. A rejection “must be necessary to achieve a substantial, legitimate, nondiscriminatory interest.” A housing provider must be able to show that the denial “accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.”  A review of the specific facts relating to the arrest, including but not limited to (1) length of time between the application and the conviction; (2) facts and circumstances of the crime itself; and (3) risk to other tenants, must be made.

3. Federal law allows rejection of applicants with drug distribution and drug manufacture convictions. Importantly, this exception does not include drug possession convictions.

4. Treatment of criminal issues on applications must be uniform.

5. Selective use of criminal history as a pretext for unequal treatment of individuals based on race, national origin, or other protected characteristics is discriminatory.

Generally, criminal background rejections should be limited to situations where the tenant has recent or multiple convictions involving theft, violence, or serious drug crimes.  There is admittedly a lot of gray area, but the ultimate question is whether the tenant’s conviction suggests a risk to our other tenants.

To emphasize the scope of the guidance memorandum, the Office of General Counsel’s conclusion is reprinted below in full:

The Fair Housing Act prohibits both intentional housing discrimination and housing practices that have an unjustified discriminatory effect because of race, national origin or other protected characteristics. Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African Americans and Hispanics. While the Act does not prohibit housing providers from appropriately considering criminal history information when making housing decisions, arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification. Thus, a discriminatory effect resulting from a policy or practice that denies housing to anyone with a prior arrest or any kind of criminal conviction cannot be justified, and therefore such a practice would violate the Fair Housing Act.

Policies that exclude persons based on criminal history must be tailored to serve the housing provider’s substantial, legitimate, nondiscriminatory interest and take into consideration such factors as the type of the crime and the length of the time since conviction. Where a policy or practice excludes individuals with only certain types of convictions, a housing provider will still bear the burden of proving that any discriminatory effect caused by such policy or practice is justified. Such a determination must be made on a case-by-case basis.

The above conclusion to the guidance memorandum is sweeping, broad, and should give all housing providers pause.  If your background check of a housing application uncovers a criminal record, you are strongly encouraged to seek legal counsel before rejecting the application.