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Criminal records and fair housing

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It is common practice for landlords to screen prospective tenants, and many associations require owners to conduct background checks before leasing units in common interest communities. Credit reporting agencies offer inexpensive tenant screening services that compile credit information, residential history, employment history, and public information regarding judgments, bankruptcies, evictions and criminal convictions. In the interest of safety and security, some associations and landlords have adopted policies and practices against leasing to individuals with criminal records; however, based on recent guidance from the U.S. Department of Housing and Urban Development, doing so may create liability under the Fair Housing Act.

The Fair Housing Act prohibits discrimination in residential leasing based on race, color, national origin, religion, sex, familial status (the presence of children in the household) or handicap. There are two types of Fair Housing Act violations: intentional discrimination, and policies or practices that have an unjustified discriminatory effect.

On April 4, 2016, HUD’s Office of General Counsel issued guidance regarding how the Fair Housing Act applies to the use of criminal history in housing decisions, such as refusal to rent based on an individual’s record of arrests or felony convictions. HUD’s guidance notes that treating individuals with similar criminal histories differently because of their race, national origin or other protected characteristic constitutes intentional discrimination in violation of the Fair Housing Act.  In addition, a housing provider violates the Fair Housing Act if the provider’s policy or practice regarding criminal history of occupants has an unjustified discriminatory effect on individuals of a particular race, national origin, or other protected class, even if they had no intent to discriminate.  This is commonly known as discriminatory effects liability.

HUD’s guidance describes the three-step analysis of claims that criminal history screening results in a discriminatory effect in violation of the Fair Housing Act:

First, the plaintiff (or HUD) must prove that the screening criteria results in a disparate impact on a group of persons because of their race or national origin. HUD’s guidance includes national statistics indicating that racial and ethnic minorities have disproportionately high rates of arrest and incarceration.  Based on those statistics, it appears that the plaintiff (or HUD) is likely to meet its burden of proof.

Second, the burden shifts to the housing provider to prove that the particular criminal history screening criteria is necessary to achieve a substantial, legitimate, nondiscriminatory interest, such as ensuring safety and protecting property. HUD’s guidance states that screening based on prior arrests (not resulting in conviction) cannot satisfy this requirement, because arrest does not prove guilt. Further, a blanket prohibition on leasing to any individual with a felony conviction does not satisfy this requirement, because it does not take into account the nature, severity and recency of the criminal conduct on a case-by-case basis.

Third, the burden shifts back to the plaintiff or HUD to prove that there is an alternative that has a less discriminatory effect. For example, HUD’s guidance states that individualized assessment of relevant mitigating information beyond the criminal record (such as age, circumstances, rental history, and rehabilitation efforts) is likely to have a less discriminatory effect than categorical exclusions.

HUD’s guidance notes that the Fair Housing Act does not apply to “conduct against a person because such person has been convicted . . . of the illegal manufacture or distribution of a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802).” Based on this statutory exemption, there is no discriminatory effect liability under the Fair Housing Act for refusing to lease to a person because he or she has been convicted of manufacturing or distributing illegal drugs in violation of the federal Controlled Substances Act.

Criminal background checks are an important part of tenant screening, but policies and practices must be carefully tailored to comply with the Fair Housing Act in light of HUD’s guidance. Associations and landlords should consult with their attorneys for advice and assistance in this matter.

Originally published in Minnesota Community Living (a publication by CAI-MN)