Criminal Background Checks and Fair Housing

person A.J. Johnson today 06/15/2019

     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.

Latest Articles

HUD Publishes 2025 Income Limits

On April 1, 2025, HUD published the 2025 income limits for HUD programs and the Low-Income Housing Tax Credit and Tax-Exempt Bond programs. The limits are effective on April 1, 2025. The limits for the LIHTC and Bond projects are published separately from those for HUD programs. For better understanding, LIHTC and Bond properties operate under the Multifamily Tax Subsidy Project (MTSP) limits. These properties are 'held harmless' from income limit (and therefore rent) reductions. This means that these properties may use the highest income limits for resident qualification and rent calculation since the project has been in service. However, it's important to note that HUD program income limits are not 'held harmless '. HUD publishes the 50% and 60% MTSP limits alongside the Average Income (AI) limits, which are set at 20%, 30%, 40%, 50%, 60%, 70%, and 80%. Projects that began service before 2009 may utilize the HERA Special Income Limits in areas where HUD has published such limits. Projects placed in service after 2008 cannot use the HERA Special Limits. Projects in rural areas not financed by tax-exempt bonds can use the higher MTSP limits or the National Non-Metropolitan Income Limits (NNMIL). It is important to note that for 2025, HUD has made changes to the definitions of geographic areas as determined by the Office of Management and Budget (OMB). The counties or towns within certain metropolitan areas may have changed. Owners and managers should consult the HUD Area Definition Report for a list of their areas and their components. The link to the Area Definition Report can be found on the website provided below. Owners of LIHTC projects may rely on the 2024 income limits for all purposes for 45 days after the effective date of the newly issued limits, which ends on May 16, 2025. The limits for HUD programs may be found at www.huduser.gov/portal/datasets/il.html. The limits for LIHTC and Bond programs may be found at www.huduser.gov/portal/datasets/mtsp.html.

Effects of Potential Staffing Cuts on HUD Programs

As the Trump administration moves forward with plans to reduce the federal workforce dramatically, the Department of Housing and Urban Development (HUD), according to recent reporting by the Associated Press, could face potential cuts that could eliminate half of its staff approximately 4,000 positions. Widespread Impact Across Essential Services The proposed reductions would affect numerous critical HUD programs, including disaster recovery efforts, rental assistance, housing discrimination investigations, and support for first-time homebuyers. Housing advocates and former HUD officials have raised substantial concerns that these extensive staffing cuts could greatly hinder or even stop the department s ability to carry out its mission. The official HUD position is that this information "should not be considered final. However, the potential extent of these reductions aligns with the administration s broader goal of reducing government spending. Recently appointed HUD Secretary Scott Turner announced the formation of a Department of Government Efficiency task force inspired by billionaire Elon Musk, while also underscoring the identification of "$1.9 billion in misplaced funds and "$260 million in wasteful contracts. Rental Assistance Programs at Risk The proposed cuts most concerning aspect is their potential impact on the Office of Public and Indian Housing, which could lose half its workforce from 1,529 employees to just 765. This office manages rental assistance subsidies for more than 3.5 million households and supports public housing for approximately 1 million people. Georgi Banna, general counsel for the National Association of Housing and Redevelopment Officials, warns that such reductions could delay payments for the Section 8 voucher program, which provides rental assistance to millions of low-income Americans. Although tenants have certain protections as long as they pay their share of the rent, they could ultimately face displacement if landlords withdraw from the voucher program due to payment issues. Budget Challenges Compound the Problem The potential staffing cuts come at a particularly challenging time as Congress continues to navigate a contentious appropriations process for HUD programs. The House version of the spending bill would boost funding for Housing Choice Vouchers by $115 million, which sounds promising but falls far short of the estimated $4.3 billion increase needed to simply maintain current service levels, according to the Center on Budget and Policy Priorities (CBPP). If the House budget is approved, it will only meet 90% of the need, potentially causing about 283,000 households to lose voucher access what the CBPP has described as the "most severe funding shortfall in the history of the voucher program. The situation has already caused damage, with some voucher-administering agencies halting the distribution of new vouchers. Local housing authorities have been operating on constrained budgets, and many lack robust reserves to weather a potential government shutdown or significant funding cuts. Fair Housing Enforcement Under Threat Perhaps the most alarming aspect is the proposed 77% reduction in the Office of Fair Housing and Equal Opportunity, which could shrink its staff from 572 employees to only 134. As HUD s main enforcer of national fair housing laws, this office investigates discrimination complaints and works to ensure equal access to housing. Although Secretary Turner has previously committed to upholding the Fair Housing Act, which includes a statutory mandate for HUD to combat discrimination, the administration s approach to implementing the law may undergo significant changes. Turner recently announced on social media that HUD had canceled $4 million in diversity, equity, and inclusion contracts. Uncertainty for Housing Authorities and Vulnerable Populations Potential staffing cuts and budget uncertainties have come together to create a tumultuous situation for local housing authorities. Housing authorities are finding it difficult to provide clear guidance to both families and landlords while anticipating potentially "draconian consequences if significant cuts or a government shutdown happen. The months ahead may pose unprecedented challenges and uncertainty for millions of Americans relying on HUD programs for stable housing, especially those using Section 8 vouchers. As Congress decides whether to pass a bill keeping the government open, the future of these critical housing programs and the millions of Americans who rely on them hangs in the balance. In conclusion, the proposed staffing cuts at HUD pose a significant threat to the stability and effectiveness of critical housing programs that serve millions of Americans. If carried out, these reductions could disrupt essential services like rental assistance, fair housing enforcement, and disaster recovery putting vulnerable populations at greater risk of housing instability and discrimination. The potential for delayed payments, reduced voucher access, and weakened fair housing protections highlights the profound human impact of these cuts. As Congress deliberates over HUD s budget, the stakes could not be higher for the families, landlords, and housing authorities that rely on these programs for their survival and stability. The coming months will challenge the resilience of HUD s mission and the nation s commitment to providing safe, fair, and affordable housing for all. All those in the affordable housing industry must reach out to their elected representatives to stress the importance of HUD and its programs to the housing needs of America s most vulnerable populations.

A. J. Johnson Partners with Mid-Atlantic AHMA for December Training on Affordable Housing—April 2025

In April 2025, A. J. Johnson will partner with the MidAtlantic Affordable Housing Management Association for four live webinar training sessions for real estate professionals, particularly those in the affordable multifamily housing field. The following sessions will be presented: April 15: Pets/Pot/Service Animals: Navigating Fair Housing A Comprehensive 90-Minute Webinar for Housing Professionals Join us for an essential training session that tackles three of the most challenging areas in fair housing compliance today. This practical webinar will equip affordable housing providers with clear guidance on: Service and Emotional Support Animals: Learn the crucial legal distinctions between pets and assistance animals, proper verification procedures, and how to handle accommodation requests while complying with FHA regulations. Pet Policy Development: Explore effective strategies for creating and enforcing fair pet policies that address resident needs while considering property management concerns. Medical Marijuana Considerations: Explore the intricate relationship between federal and state laws concerning medical marijuana use in housing, including the requirements for reasonable accommodation. Through case studies, interactive discussions, and expert analysis of recent court decisions, you will gain actionable strategies for confidently addressing these challenging issues. This tool is perfect for property managers, leasing agents, compliance officers, and housing administrators who want to minimize legal risk while creating inclusive communities. April 16: VAWA with Tips on Communicating with Victims - The Violence Against Women (VAWA) Reauthorization Act of 2013 expanded VAWA protections to many different affordable housing programs, including the Low-Income Housing Tax Credit (LIHTC) Program. While HUD has provided detailed requirements on VAWA implementation at HUD properties, there has been no uniform guidance for LIHTC owners and managers. A proposal before Congress would legislate that LIHTC Extended Use Agreements contain VAWA requirements. The IRS has not provided guidance, and while many state agencies are requiring VAWA plans, they are not providing information on what the plans should look like. This two-hour training, when combined with the course materials, will review VAWA requirements and recommend best practices for developing VAWA plans at LIHTC and other non-HUD properties. The session will be presented by A. J. Johnson, a recognized expert in the affordable housing field and the author of "A Property Manager s Guide to the Violence Against Women Act. April 24: Preparation for Physical Inspections - Agency inspections of affordable housing properties are required for all affordable housing programs, and failure to meet the required inspection standards can result in significant financial and administrative penalties for property owners. This four-hour training focuses on how owners and managers may prepare for such inspections, with a concentration on HUD NSPIRE inspections and State Housing Finance Agency inspections for the LIHTC program. Specific training areas include (1) a complete discussion of the most serious violations, including health & safety; (2) how vacant units are addressed during inspections; (3) when violations will be reported to the IRS; (4) the 20 most common deficiencies; (5) how to prepare a property for an inspection; (6) strategies for successful inspections; and (7) a review of the most important NSPIRE Standards as they relate to the three inspectable areas [Units/Interior/Exterior]. The training will summarize the HUD Final Rule on NSPIRE with a discussion of (1) the new Self-Inspection Requirement and Reports; (2) Timeline for Deficiency Correction; (3) New Affirmative Requirements; and (4) Tenant Involvement. At the end of the training, attendees will have a blueprint they can use to prepare their properties for agency-required physical inspections, regardless of the program under which they operate. April 29: Understanding and Managing Hoarding in Residential Properties: A Fair Housing Compliance Workshop - In May 2013, the American Psychiatric Association (APA) confirmed that Compulsive Hoarding is a mental disability and a protected class. More than 15 million Americans suffer from the mental health problem of hoarding and potential problems from hoarding include noxious odors, pest infestation, mold growth, increased risk of injury or disease, fire hazards and even structural damage. Hoarding is the one class of disability that requires landlords to offer an accommodation even if an accommodation is not requested! This 1.5-hour live webinar is designed to assist multifamily managers in understanding how to deal with hoarding problems in a way that will prevent liability under fair housing law. The session will define hoarding and provide detailed recommendations on how to deal with a hoarding problem. It will outline examples of accommodations for hoarding, how to engage in the "interactive process with residents who hoard, and the steps necessary to remove uncooperative residents. Finally, a recent court case regarding hoarding will be reviewed as an illustration of the potential difficulties managers face in hoarding situations. This is an evolving area of fair housing law, and this webinar will provide the guidance necessary to approach the problem in a systematic way that will give multifamily operators the best chance at avoiding the legal traps that exist when dealing with this unique disability. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA and are designed to provide affordable housing professionals with the knowledge to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

Impact of Trump Administration's Regulatory Restructuring on HUD and IRS

The Trump administration's recent executive order on federal regulations, "Ensuring Lawful Governance and Implementing the President's 'Department of Government Efficiency' Deregulatory Initiative," signals significant changes for federal agencies. The order has particularly notable implications for the Department of Housing and Urban Development (HUD) and the Internal Revenue Service (IRS). The New Regulatory Framework On February 19, 2025, President Trump signed this executive order as part of a broader deregulatory agenda aimed at reducing what the administration views as bureaucratic overreach. The directive mandates that federal agencies conduct a comprehensive 60-day review of their regulatory frameworks to ensure alignment with both legal requirements and administration policies. The order targets explicitly regulations considered: Unconstitutional Based on improper delegations of legislative power Imposing excessive costs without clear public benefits Harmful to national interests Hindering development across various sectors This order is part of a series of regulatory rollbacks, including directives like "Ensuring Accountability for All Agencies" and "Unleashing Prosperity Through Deregulation," which expand upon the administration's previous deregulatory efforts. Specific Impacts on the IRS The IRS faces several significant challenges under this new directive: Continued Hiring Freeze: The executive order maintains an existing hiring freeze at the IRS, which will remain in effect until the Treasury Secretary, in consultation with the Office of Management and Budget (OMB) Director, determines that lifting it serves the national interest. Increased White House Oversight: IRS regulations will once again be subject to White House review through the Office of Information and Regulatory Affairs (OIRA), reinstating a policy from Trump's first term that adds another layer of scrutiny to IRS rulemaking. "10-for-1" Deregulation Mandate: The IRS must eliminate ten existing guidance documents for every new rule or guidance it issues, significantly constraining its ability to update tax regulations and provide new guidance. These measures could substantially impact the IRS's capacity to uphold compliance and maintain operational efficiency, potentially affecting tax administration and enforcement nationwide. Implications for HUD For the Department of Housing and Urban Development, the executive order brings equally significant changes: Comprehensive Program Review: The order requires a review of hundreds of HUD programs, potentially leading to significant restructuring or budget cuts. Grant Funding Uncertainty: Although a federal court temporarily blocked a separate memo seeking to freeze federal grants, the administration's intent to reassess HUD funding remains evident. "10-for-1" Rule Application: Like the IRS, HUD must adhere to the requirement of eliminating ten existing regulations for every new one proposed, which could significantly impact housing policy implementation and program management. These changes may affect HUD's ability to administer housing assistance programs, enforce fair housing regulations, and support community development initiatives. Legal and Procedural Challenges The administration's deregulatory push faces potential legal obstacles: Agencies seeking to rescind or modify rules must generally follow a new rulemaking process, including issuing a Notice of Proposed Rulemaking, collecting public comments, and finalizing the new rule. Failure to adhere to these procedural requirements could expose regulatory rollbacks to legal challenges under the Administrative Procedure Act (APA). The APA requires agencies to engage in reasoned decision-making when modifying or rescinding regulations, and courts may overturn agency decisions if this standard is not met. Outlook As the 60-day review period progresses, the IRS and HUD must navigate competing demands: implementing the administration's deregulatory agenda while maintaining their core functions and avoiding legal challenges. The outcome will likely reshape how these agencies operate and could have lasting implications for the United States s tax administration and housing policy. The full impact of these changes will become more evident as agencies determine which regulations to target and how to implement the administration's directives while fulfilling their statutory obligations.

Want news delivered to your inbox?

Subscribe to our news articles to stay up to date.

We care about the protection of your data. Read our Privacy Policy.