New HUD Guidance Puts Damper on Background Checks

background checkHUD’s Office of General Counsel issued guidance this week that says using a prospective tenant or buyer’s criminal record to make a decision about whether to rent or sell them a home may be a violation of the Fair Housing Act (FHA).

The reasoning: Because minorities are arrested and convicted in disproportionate numbers compared to the general population, the use of criminal records to screen renters and buyers has a harsher impact on minorities and may violate disparate impact regulations.

FHA prohibits discrimination in the sale, rental, or financing of dwellings for reasons of race, color, religion, sex, disability, familial status or national origin. And under disparate impact, it is not necessary to prove intentional discrimination, only that a policy or practice has the effect of discriminating against members of a protected class.

Fair housing rules apply to all homes, not just HUD-subsidized units: Complaints may be filed against providers and operators of market-rate properties that receive no federal grants, subsidies or mortgage insurance.

What the Guidance Says

A plaintiff who has been denied housing based on criminal activity can use local or national statistics to show that certain minorities are arrested at rates above their proportion to the general population. This sets the stage to force the housing provider to defend its criminal activity policy, which must have a legitimate, nondiscriminatory purpose.

In its guidance, HUD concludes that arrest records are not an appropriate screening device, because arrests alone do not prove unlawful conduct. Similarly, HUD explains that even a policy that restricts housing based on convictions may not be based on a legitimate interest. Instead, HUD suggests that housing providers review “the nature, severity and recency of criminal conduct” before making an adverse housing decision.

Finally, if a housing provider’s criminal history policy is legitimate and necessary, the provider would still be in violation of the FHA if the plaintiff can prove that a less discriminatory policy would also succeed.

However, the HUD guidance fails to address its own regulations that provide when a housing provider must deny housing to sex offenders and those evicted from certain housing based on drug-related criminal activities. Furthermore, HUD’s regulations allow housing providers to restrict other persons who have been involved with certain types of criminal activities.

NAHB staff is reviewing the guidance to assess the impact on NAHB members. Please send comments to Devala Janardan.

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