The federal Department of Housing & Urban Development (HUD) and the Department of Justice (DOJ) are making investigations of fair housing violations in three specific areas a priority for 2019. These areas are sexual harassment, tenant-on-tenant harassment, and policies regarding criminal record checks. In the past two weeks I posted articles on the first two issues and I am completing this series with a discussion of criminal screening policies.
If you have not done so in the past couple of years, a review of your companies criminal screening policies should be a priority. It is important to ensure that your company policies relative to screening for criminal activity do not run afoul of 2016 HUD guidance in this area. It should be noted that the HUD guidance applies to all housing that is subject to the Fair Housing Act - not just HUD-assisted housing.
While communities are not prohibited from using criminal history as a factor in tenant selection, liability is possible under fair housing law if a criminal history policy, without justification, has a disparate impact on minority applicants. If your criminal screening policy considers arrest records as a reason for rejection, you should make some immediate changes. There is virtually no circumstance where an arrest record is considered by HUD to be a legitimate factor in criminal screening. The one exception to this may be a situation in which an arrest has occurred for a crime that could indicate a danger to the community and there has not yet been an adjudication. Other than this exception, HUD has stated clearly that screening based on arrest records is likely to have a discriminatory impact based on race and national origin.
Does your policy list "any felony" or felonies that occurred long ago as reasons not to rent to someone? HUD guidelines call into question the lawfulness of excluding people based on criminal convictions - without consideration of what the conviction was for or how long ago it occurred.
Case Example: Jackson v. Tryon Park Apartments, Inc. January 2019
In this case, a court refused to dismiss a lawsuit filed by an applicant who claimed that a community discriminated against him on the basis of race when it denied his rental application based on a policy of automatically rejecting anyone with a felony conviction.
The applicant is African-American with a felony conviction. He met the income eligibility requirement for the apartment he applied for, had no prior evictions, and had an acceptable credit history. The community notified him that his application had been denied due to a felony on his criminal record. The applicant called twice to request an appeal, but his calls were not returned.
The applicant sued, claiming the company policy had a disparate impact based on race. The suit claims that statistics show that blanket bans based on criminal history result in the denial of housing opportunities at a disproportionate rate for African-Americans and minorities.
The community asked the court to dismiss the case and the court refused. The court stated that the statistical racial disparity the plaintiff cited was directly related to the property’s alleged policy of excluding persons with a felony conviction. This case is now moving forward.
As noted, the applicant requested a hearing, and was effectively denied such a hearing by the fact that his calls were not returned. HUD guidance states that communities should offer applicants with criminal records an opportunity to explain the circumstances and what has happened in their lives since the conviction. This is similar to the "interactive process" housing providers are required to enter into before rejected a reasonable accommodation request from a disabled applicant or resident.
In another example (Hall v. Philadelphia Housing Authority, April 2019), a court dismissed claims by an applicant who accused the housing authority of race discrimination by denying him housing due to his criminal record. In this case, the person applied for housing in 2016, and the PHA required a credit check and criminal background check for all applicants. The PHA policy stated that certain factors could lead to a mandatory denial, including a homicide-related offense. Critical to this policy is that applicants were provided with the opportunity to dispute the accuracy and relevancy of the information through an informal hearing. After an interview, the PHA denied his application for two reasons: (1) a police record of a felony guilty plea to involuntary manslaughter in 1997; and (2) a landlord/tenant judgment against him for $871.
At his hearing, that applicant clarified that his conviction was for a misdemeanor, not a felony, and provided an explanation for the landlord/tenant dispute. The PHA reversed its decision on the criminal conviction and gave the applicant 30 days to provide proof that he had entered into a repayment plan with the landlord. The applicant did not meet the 30-day deadline, so the PHA upheld the denial of his application. A week later, he sent in the repayment agreement and the PHA granted his application. Eventually, he signed a lease for a unit at the PHA property.
The man then sued, accusing the PHA of race discrimination in violation of fair housing law.
Siding with the PHA, the court dismissed the case. Although the PHA initially found him ineligible for housing due to his criminal record, the PHA reversed its decision after a hearing revealed that the offense was only a misdemeanor. The PHA followed the guidance outlined by HUD and the applicant eventually was housed. This case illustrates the importance of having a policy allowing for appeals and individual assessments of specific circumstances relating to a person’s criminal record.
It is also crucial that any policy relating to criminal background checks be implemented consistently, without regard to any protected characteristic. Applying it only to applicants who are members of racial or ethnic minorities, but not to white applicants, is sure to result in a fair housing violation. This point is well made in U.S. v. Dyersburg Apartments, Ltd., October 2018. In this case, the DOJ sued a Tennessee community and its property management company (MACO Management Company) for denial of an application from an African-American applicant because of his criminal record, despite approving the rental applications of two white applicants with disqualifying felony convictions.
This case began in 2012 when a man living with his ex-wife at the community disclosed a felony conviction for writing a bad check. The property’s resident selection guidelines provided for rejection of applicants who had a felony conviction within the last ten years as well as any conviction for the sale, distribution, or manufacture of controlled substances or certain sexual offenses.
The manager of the community denied the application because of the policy not to rent to felons. At or about the same time, according to the DOJ complaint, at least two other applicants who were not African-American and who had criminal records in violation of the resident selection guidelines were approved for apartments at the community. Both had disclosed their felony convictions on their rental applications. The first had a conviction for felony sexual battery and was on the national sex offender database; the second pleaded guilty to felony drug charges and was on probation.
Again - consistency is critical!
Finally, as I noted in a post on May 19 of this year, a court has ruled that consumer reporting agencies must comply with the Fair Housing Act when conducting tenant screening services for landlords. In this case (Fair Housing Center, et. Al. v. CoreLogic Rental Property Solutions, LLC, March 2019), the court rejected the CoreLogic claim that the case should be dismissed because fair housing laws do not apply to its services. The court stated that the company "held itself out as a company with the knowledge and ingenuity to screen housing applicants by interpreting criminal records and specifically advertised its ability to improve ‘Fair Housing compliance.’" Basically, if a consumer reporting agency is going to make housing decisions for landlords, it must do so in accordance with fair housing requirements. The bottom line here - it is not a good idea to accept the decisions of on-line screening companies as a final decision! Final leasing decisions should be made by landlords.
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