Citing a disproportionately high rate of arrest and incarceration among minorities, especially African Americans and Latinos, the United States Department of Housing and Urban Development (HUD) recently issued new guidance announcing that blanket policies that would deny housing to individuals with criminal backgrounds are likely to violate the Fair Housing Act (FHA). Specifically, HUD will carefully scrutinize any policy that appears neutral on its face to determine if there is a disparate impact against minorities in excluding them from housing. HUD’s new compliance with respect to the use of criminal backgrounds for tenants follows in the footsteps of similar guidance issued by the U.S. Equal Employment Opportunity Commission (EEOC) with respect to the use of criminal histories in employment decisions.

HUD’s new guidance will impact how property managers and management companies balance federal regulatory requirements while screening potential residents for tenancy. On one hand, the FHA does not protect individuals with criminal backgrounds. Thus, historically, HUD-assisted properties have been required to perform criminal background checks to determine eligibility for HUD-assisted housing. On the other hand, with this new guidance, landlords and property managers must now review their policies to fashion a narrowly tailored policy that provides for much more careful assessment of criminal histories during the application process. In addition, landlords cannot ban an individual from a property as a resident because of a criminal history in an attempt to mitigate potential liability from possible criminal conduct on the property. Therefore, it is imperative for housing providers to understand what they can and cannot do with regard to criminal backgrounds in light of this new guidance.

Compliance with HUD’s Guidance

Under HUD’s new guidance, a housing provider must now articulate “a substantial, legitimate, nondiscriminatory interest” in denying housing to a prospective resident with a criminal background and should evaluate whether that interest “could be served by another practice that has a less discriminatory effect.” To comply with this standard, HUD makes the following recommendations: (1) housing providers should only consider convictions rather than arrests in determining eligibility for housing and (2) when considering convictions, the housing provider should not implement a ban that is, or appears to be, arbitrary or overly broad. To that end, the housing provider will have to prove that its policy banning prospective residents based on conviction histories accurately distinguishes between criminal conduct that constitutes a demonstrable risk to resident safety and/or property and criminal conduct that does not.

In lieu of a blanket policy, HUD suggests that individual assessments may reduce the discriminatory disparate impact. These individual assessments would take into account the applicant’s age at the time of the crime, how long it has been since the crime was committed and whether or not there is evidence of rehabilitation efforts. Such guidance is arguably contradictory – on one hand, HUD is encouraging a narrowly tailored criminal conviction policy applicable to all applicants while, on the other hand, HUD condones individual assessments that are vulnerable to allegations of profiling and other subjective considerations.

We recommend reviewing your policies to determine if revisions are necessary. You should eliminate a complete ban on applicants with criminal histories; evaluate the actual, potential or demonstrable risks to resident safety and/or property; and fashion a new policy that would be narrowly tailored to these legitimate and substantial concerns. In the event that a prospective resident has a criminal history that involves a circumstance not considered by the policy, you should consult closely with counsel to determine whether to conduct an individualized assessment of the prospective resident before further processing his or her application.