NAR – Fair Housing Act: Criminal History-Based Practices and Policies

Landlords are warned not to use criminal records as a blanket prohibition for rentals

By: Anthony Gatto, Esq., General Counsel

On April 4, 2016, the Department of Housing and Urban Development (HUD) issued a document titled “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” (Document). The Document sets forth guidance for landlords (and agents representing landlords) prohibiting policies or practices that restrict access to housing on the basis of a tenant’s criminal history. It should be noted that this does not make individuals with criminal records a protected class, rather it prohibits the policy of refusing housing to anyone with a criminal record.

Furthermore, it requires landlords to look at criminal convictions on a case-by-case basis taking a number of factors under consideration. Landlords are not required to accept every individual that has a criminal record. The guidance is based upon the Disparate Impact Theory (DIT). In 2015, the Supreme Court issued a decision in the case of the Texas Department of Housing & Community Affairs v. Inclusive Communities Project (135 S.Ct. 2507). In the decision, the court applied the DIT to a fair housing claim. Under the DIT, an individual may claim to have been subject to discriminatory conduct without proof of any intentional discrimination. Such discrimination may be found if a business practice has a disproportionate effect on certain protected groups of individuals and if the practice is not grounded in sound business considerations. There are also some on the application of DIT “to protect potential defendants against abusive disparate-impact claims limitations.” For instance, the showing of a racial imbalance, without more, cannot be found to show a discriminatory act sufficient to sustain a DIT claim. Those individuals claiming discrimination under DIT would need to show a “robust” causal connection between the challenged business practice and the alleged disparities. Those accused of discriminatory conduct under DIT may justify their positions so long as they are “not contrary to the disparate-impact requirement, unless…artificial, arbitrary, and unnecessary.”

In providing guidance, HUD relies entirely on the DIT set forth in the Supreme Court decision. According to HUD, “A housing provider violates the Fair Housing Act when the provider’s policy or practice has an unjustified discriminatory effect, even when the provider had no intent to discriminate. Under this standard, a facially neutral policy or practice that has a discriminatory effect violates the Act if it is not supported by a legally sufficient justification. Thus, where a policy or practice that restricts access to housing on the basis of criminal history has a disparate impact on individuals of a particular race, national origin, or other protected class, such policy or practice is unlawful under the Fair Housing Act if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the housing provider, or if such interest could be served by another practice that has a less discriminatory effect.”

HUD outlined a three-step process to analyze claims that a housing provider’s use of criminal history to deny housing opportunities results in a discriminatory effect in violation of the Act. The steps include: 1) Evaluating Whether the Criminal History Policy or Practice Has a Discriminatory Effect; 2) Evaluating Whether the Challenged Policy or Practice is Necessary to Achieve a Substantial, Legitimate, Nondiscriminatory Interest; and 3) Evaluating Whether There Is a Less Discriminatory Alternative. There is substantially more information available on these steps in the Document. The only exception provided by HUD can be found in Section 807(b)(4) of the Fair Housing Act. Section 807(b)(4) provides that the Act does not prohibit “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).” As such, a housing provider will not be liable under the Act for excluding individuals because they have been convicted of one or more of the specified drug crimes, regardless of any discriminatory effect that may result from such a policy. Section 807(b)(4) only applies to disparate impact claims based on the denial of housing due to the person’s conviction for drug manufacturing or distribution; it does not provide a defense to disparate impact claims alleging that a policy or practice denies housing because of the person’s arrest for such offenses or for other drug-related convictions such as drug possession. While this exception is under the section titled “Religious organization or private club exemption”, HUD is indicating it is applicable to landlords as well.

According to the document, “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.”

Furthermore, “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.”

In conclusion, HUD claims that “selective use of criminal history as a pretext for unequal treatment of individuals based on race, national origin, or other protected characteristics violates the Act.” Landlords seeking the information as to how to act in compliance should seek the opinion of their own competent legal counsel.