HUD Publishes Proposed Rule on Reducing Barriers to Affordable Housing - Including New Criminal Screening Requirements

On April 10, 2024, HUD published a proposed rule titled "Reducing Barriers to HUD-Assisted Housing." Comments on the proposed rule are due no later than June 9, 2024.

In the proposed rule, HUD assumes that everyone deserves to be considered as the individual they are, and everyone needs a safe and affordable place to live. For people with criminal records, having a stable place to live is critical to rebuilding a productive life. Yet too many people who apply for housing opportunities are not given full consideration as individuals but instead are denied opportunities simply because they have a criminal record. Criminal records are often incomplete or inaccurate, and criminal conduct that occurred years ago may not indicate a person's current fitness as a tenant. Criminal screening policies disproportionately impact Black and Brown people, Native Americans, other people of color, people with disabilities, and other historically marginalized and underserved communities.

In April 2016, HUD issued guidance to all housing providers cautioning that unnecessary and unwarranted exclusions based on criminal records may create a risk of Fair Housing Act liability because they can have an unjustified disparate impact based on race. That guidance advised housing providers that individualized assessments considering relevant mitigating information are likely to have a less discriminatory effect than categorical exclusions based on criminal record.

HUD believes that people are still excluded from HUD-assisted housing for convictions that do not reflect current fitness for tenancy, such as stale convictions dating back more than a quarter century or those for low-level, nonviolent offenses, such as riding a subway without paying a fare. As mounting evidence shows, such exclusions do little to further legitimate interests such as safety, as an increasing number of housing providers and public housing agencies (PHAs) now recognize.

This proposed rule would help standardize practices within HUD programs concerning prospective tenants. The goal is to provide clearer rules and standards to help HUD-subsidized housing providers, and PHAs carry out the legitimate and important ends of maintaining the safety of their properties and the surrounding communities and following federal law (which requires exclusion from HUD-assisted housing of people who are engaged in certain conduct or have certain criminal history), but without engaging in overbroad or discriminatory denials of housing. This proposed rule would establish in HUD program regulations a set of practices that already are required of housing providers under state and local law in much of the country; that are consistent with guidance HUD has provided to all housing providers to comply with the Fair Housing Act and to HUD-subsidized providers and PHAs to comply with program rules; and that, as HUD has heard from its industry partners, are already being used and work in practice to effectively balance various equities. In doing so, the proposed rule would clarify a legal landscape many HUD-subsidized housing providers and PHAs find confusing, leading to divergent practices within HUD programs.

While existing HUD regulations generally permit a fact-specific, individualized assessment approach, they have not been updated to require it.

This proposed rule would cover various HUD programs, including public housing and Section 8 assisted housing programs, as well as the Section 221(d)(3) below-market interest rate (BMIR) program, the Section 202 program for the elderly, the Section 811 program for persons with disabilities, and the Section 236 interest reduction payment program, and in doing so would amend existing programmatic regulations. A summary of some of how these changes would impact different program rules is explained below:

Clarifying what counts as relevant criminal activity and how recently it must have occurred: Existing regulations permit an assisted owner or PHA (for voucher applicants) to prohibit admission when the household has engaged in "in a reasonable time prior to admission," (1) drug-related criminal activity; (2) violent criminal activity; (3) other criminal activity that would threaten the health, safety, or right to peaceful enjoyment of the premises of other residents; or (4) other criminal activity that would threaten the health or safety of the PHA or owner or any employee, contractor, subcontractor or agent of the PHA or owner. While public housing regulations do not have a similar "reasonable time prior to admission" qualifier, there is a "relevancy" qualifier preceding these same four substantive categories of criminal activity. Under the proposed rule, PHAs and assisted owners would still be able to deny admission for these four categories of criminal activity; however, the proposed rule would clarify that assisted owners and PHAs may not deny admission for categories of criminal activity beyond those specified in the regulations. The proposed rule would require establishing a "lookback period" limiting the reliance on old convictions. For all programs, it would provide that prohibiting admission for some time longer than three years following any particular criminal activity is "presumptively unreasonable." The general rule would be that PHAs and assisted owners cannot make decisions based on criminal history that research indicates is not predictive of future criminal activity; that is irrelevant to safety, health, or fitness for tenancy; or that is based on incomplete or unreliable evidence of criminal activity ( e.g., a record for an arrest that has not resulted in a conviction).

Specifying procedural requirements before denying admission: Program regulations require PHAs and assisted owners to follow various procedural steps before denying admission based on a criminal record but do not provide important specifics. For example, PHAs and assisted owners must notify the household of the proposed denial, supply a copy of a criminal record, and provide an opportunity to dispute the accuracy and relevancy of the record before the denial of admission. However, the current regulations do not specify how much notice a household must receive or the meaning of the opportunity to dispute the accuracy and relevancy of the record before a denial of admission. The proposed rule would clarify that tenants shall be given at least 15 days to challenge the information's accuracy and relevance and provide any relevant mitigating information before an admissions decision.

Requiring a fact-specific and individualized assessment before making a discretionary decision to deny tenancy or admission based on criminal history: Current program regulations note that PHAs and assisted owners "may consider" certain circumstances before making a discretionary denial of admission or termination decision, and the different program regulations provide incomplete and inconsistent lists of appropriate considerations. HUD is proposing amended language that would make clear that for all discretionary admission and termination determinations, PHAs, and assisted owners must consider relevant mitigating circumstances. For admissions decisions, the proposed rule would require a fact-specific and individualized assessment of the applicant, adopting a term and concept familiar in the industry but not previously required in HUD programs. The proposed rule would harmonize the non-exhaustive list of relevant considerations across programs, setting out some specific factors that will frequently be considered relevant, such as how long ago the offense or incident occurred, mitigating conduct that has taken place since ( e.g., evidence of rehabilitation and successful reentry, including employment and tenancy), and completion of drug or alcohol treatment programs. So long as housing providers consider the circumstances relevant to the decision, the ultimate decision to deny tenancy or admission would remain within their discretion.

Revising and making available tenant selection plans and PHA administrative plans: Under existing rules, owners participating in certain assisted housing programs must have a written tenant selection plan. The proposed rule would require these owners to update their tenant selection plans to reflect the relevant policies they employ within six months following this rule's effective date. The proposed rule would also require PHAs and owners to make PHA administrative plans and tenant selection policies more widely available.

Providing additional guidance for PHAs and owners conducting screenings: When PHAs access criminal records from law enforcement agencies, existing regulations require PHAs to obtain consent from families before accessing their criminal records, require them to be kept confidential, and permit disclosure under limited circumstances. The proposed rule would broaden these protections to apply to all criminal record searches conducted by PHAs and assisted owners where appropriate. The proposed rule also would specify that, except in circumstances where housing providers and PHAs rely exclusively on an applicant's self-disclosure of a criminal record, they may not bar admission for failure to disclose a criminal record unless that criminal record would have been material to the decision.

Clarifying mandatory admission denial standards: Language concerning mandatory admission denials based on criminal activity and alcohol abuse, which are required by federal statute, is largely left unchanged by the proposed rule. For example, the requirement that an assisted owner or PHA prohibit the admission of individuals "if any household member has been evicted from federally assisted housing for drug-related criminal activity" in the last three years unless the "the circumstances leading to the eviction no longer exist" has not been modified. Nor have any modifications been made to the prohibition on admission to HUD-assisted housing to those who are "subject to a lifetime registration requirement under a State sex offender registration program." The requirement that assisted owners or PHAs must establish standards to prohibit the admission of individuals "currently engaged in" illegal use of a drug and in situations where individuals' pattern of illegal drug use or alcohol abuse may interfere "with the health, safety, or right to peaceful enjoyment of the premises by other resident[s]" would remain substantively unchanged.

However, HUD proposes adding greater clarification to the definition of "currently engaging in," which, as described above, triggers a mandatory exclusion concerning illegal drug use and discretionary exclusion authority concerning certain criminal activity. The existing regulations provide only that currently engaging in "means that the individual has engaged in the behavior recently enough to justify a reasonable belief that the individual's behavior is current." The proposed rule would provide that a PHA or assisted owner may not rely solely on criminal activity that occurred 12 months ago or longer to establish that behavior is "current." The proposed rule would also require that any such determination be based on a preponderance of the evidence standard and that such a determination consider mitigating evidence, for example, that the individual has completed substance use treatment services.

Specifying standards of proof in admissions and terminations decisions based on criminal activity: Existing regulations are largely silent on the standards of proof that must be met for admissions and terminations decisions based on criminal activity. Where they speak to the subject at all, they state broadly that an assisted owner or PHA may terminate a tenancy when a household member engages in certain criminal activity, regardless of whether they have been arrested or convicted for such activity, and without satisfying the heightened standard of proof necessary to support a criminal conviction. There is no similar provision in existing regulations regarding admission decisions, nor do existing rules specifically discuss how PHAs and assisted owners may or may not consider arrest records in making either admissions or termination determinations. The proposed rule would (1) prohibit the consideration of arrest records standing alone (in the absence of other reliable evidence of criminal conduct) for any exclusion from the housing and (2) provide that criminal conduct or any other finding on which such an exclusionary decision is made must be based on a preponderance of the evidence. This would establish and clarify certain evidentiary standards and requirements for making key determinations in a manner that is largely consistent with what HUD already recommends in guidance for its housing providers and PHAs.

Implementing limited changes affecting owners accepting Housing Choice Vouchers (HCVs) and Project Based Vouchers (PBVs): Most of the changes in the proposed rule would not apply to owners who participate in the HCV or PBV programs. The proposed rule would not apply most changes to owners participating in the HCV or PBV programs to avoid discouraging owner participation. Those owners who participate in the HCV or PBV programs would still be able to screen for drug-related criminal activity and other criminal activity that is a threat to the health, safety, or property of others. The proposed rule would add language to clarify that this includes "violent" criminal activity and that owners in the HCV and PBV program must also conduct any screening consistent with the Fair Housing Act, which was not previously spelled out in program regulations. Additionally, for tenancy terminations, HUD proposes the same standards regarding the preponderance of evidence and arrest records as would apply for PHAs and assisted owners. Finally, existing regulations note that owners "may consider" certain mitigating circumstances when terminating a tenancy. HUD proposes that where termination is based on criminal activity, illegal drug use, or alcohol abuse, an owner may consider an updated set of circumstances—the same circumstances, including mitigating and contextualizing evidence, that PHAs and assisted owners would be required to consider in the context of admissions and termination decisions.

Collectively, the principles embodied by this proposed rule are meant to ensure that people are considered individuals in HUD-assisted housing. Requiring housing providers and PHAs to make fact-specific determinations based on the totality of the circumstances, rather than denying opportunities based solely on criminal history, would help ensure that stale, inaccurate, and/or incomplete evidence and stigma surrounding people with criminal justice system involvement do not create unnecessary and counterproductive barriers to safe and affordable housing. Research shows that expanding access to such housing reduces the risk of future criminal justice system involvement and, in doing so, strengthens public safety. That does not mean everyone with a criminal history will satisfy legitimate tenant screening criteria that apply to all applicants equally. Housing providers would retain the authority to screen out individuals who they determine, based on consideration of relevant information, pose a threat to the health and safety of other tenants. The proposed rule would bar the categorical, blanket exclusion of people with criminal records without regard to all relevant and contextualizing evidence and consideration of the full life someone has lived.

Bottom Line

Owners and operators of HUD programs affected by the Proposed Rule are encouraged to review the rule and provide comments to HUD no later than June 9, 2024.