By Denny Dobbins, Attorney
CrimShield, Inc., AAA Landlord Services, Investigative Screening and Consulting

On April 4, 2016, the U.S. Department of Housing and Urban Development (HUD) issued new guidelines in the wake of the June 2015 U.S. Supreme Court decision which held disparate impact claims could be viable under the Fair Housing Act.  The guidelines address how the Fair Housing Act (FHA) applies when Landlords use criminal history to deny the lease of property to prospective tenants.  Following the guidelines will help to avoid disparate impact claims under the FHA when a Landlord refuses to rent or renew a lease based on a Tenant’s criminal history.

The Good News:  Landlords do not need to panic.  Criminals have not been specifically added as a “Protected Class”.  The question that many Landlords are asking is whether a housing provider may still use criminal history information in their analysis to determine if an applicant qualifies for residency, without committing a violation of the FHA?  The answer is a resounding YES, but additional considerations are necessary.

Good landlords have long been following the new HUD guidelines in their business practices.  The use of criminal history in the application process has been a logical and necessary practice for many reasons.  Some of the substantial and legitimate reasons include the facts that considering an applicant’s criminal history as part of the qualification process helps to avoid risk, to protect other residents, to protect owners’ investments, to avoid legal liability for failure to provide a reasonably safe premise as required by State Statute and Case Law, to avoid lawsuits from good residents or from neighbors for damages resulting from placing a tenant that poses risk of harm to others in a multifamily community or in single family home neighborhood and to protect the landlords’ employees, contractors and agents.

Bad News:  Landlords will just need to do a little better job documenting the reasons they denied an applicant and revisit their policies and practices (criteria) to make sure their approval criteria with respect to an applicant’s criminal history are supported by a “legally sufficient justification”.  The new guidelines include some steps that HUD suggests Landlords employ to avoid illegal discrimination and to treat Tenants fairly.  Employers have been taking most of these steps for years.  It will not be difficult for good Landlords to comply.  The steps will be discussed with more specificity below.
HUD RATIONAL FOR NEW GUIDELINES:  First, it is important to understand the background for HUD’s reasoning for implementing the new guidelines.  HUD cites statistics that African Americans comprise about 36% of the total U.S. prison population, but only 12% of the Country’s total population; Hispanic Americans account for 22% of the prison population, but only 17% of the total population; while White Americans comprise 34% of the prison population and 62% of the total population.  HUD therefore opines that consequently, criminal records-based barriers to housing (criminal history) is likely to have a disproportionate impact on minorities seeking housing.  Everyone realizes that past incarceration or having a criminal record poses barriers to finding a good job and good housing, regardless of one’s race or national origin.  While that is not the fault of Landlords, Landlords must be mindful not to discriminate against people with criminal history based on race or national origin. Therefore, while HUD recognizes that having a criminal record is NOT a protected characteristic under the Fair Housing Act, criminal history-based restrictions on housing opportunities violate the Act

IF:   “…without justification, their burden falls more often on renters or other housing market participants of one race or national origin over another (i.e., discriminatory effects liability).  Additionally, intentional discrimination in violation of the Act occurs if a housing provider treats individuals with capable criminal history differently because of their race, national origin or other protected characteristics (i.e. disparate treatment liability)….”

New HUD Guidelines – Three (3) Step Process:

HUD sets forth three (3) steps to analyze to determine whether a claim that a housing provider’s use of criminal history to deny housing results in a discriminatory effect in violation of the Act.

Step One:  Evaluate Whether the Criminal History Policy or Practice Has a Discriminatory Effect.
The complaining party, or HUD, must prove that the Landlord’s criminal history policy actually or predictably resulted in a discriminatory effect or resulted in disparate impact due to race or national origin.  This step will depend on the facts.  It is important to understand that the way the complaining party will seek to prove that the Landlord’s policy is discriminatory is to file a fair housing complaint with, most likely, their State Attorney General.  That office will then analyze the complaint based on the elements in Step Two (2) below.  Therefore, it is imperative to understand and implement the elements of Step Two (2) in a proactive and broad manner in an effort to avoid such a complaint.

Step Two:  Evaluating Whether the Challenged Policy or Practice is Necessary to Achieve a Substantial, Legitimate, Nondiscriminatory Interest.

If a fair housing complaint is made against the Landlord, the Landlord must prove that the challenged policy or practice regarding its use of criminal history in its application process is justified or necessary to achieve a substantial, legitimate, nondiscriminatory interest.  This means there needs to be evidentiary proof supporting the challenged policy and that the challenged policy actually achieves that interest.  There can be no hypothetical or speculative interests – the interest(s) must be real and not a pretext.  So, what is a substantial, legitimate, nondiscriminatory interest?  HUD does not provide a litmus test or provide a list of what is acceptable and what is not acceptable.  Generally, such an interest, or policy for using criminal history for rental purposes is for the protection of property (the Landlord’s investment), protection of other residents, or protection from risk of liability of some sort (for example an owner’s/landlord’s duty not to put its others at risk of harm) or for other important business reason.  The Landlord must also produce reliable evidence that the policy or practice in the use of criminal history in the application process actually assists in protecting resident safety, the property or other important and legitimate reasons. Unfortunately, the new guidelines to not explain what is reliable or evidentiary proof.

Landlords need to determine, after careful consideration, that their criteria, with respect to criminal history, has a substantial and legitimate basis; a tailored approach where the Landlord makes a decision as to what crimes pose a risk and why, and then to determine what constitutes a reasonable time period where the applicant no longer poses an unacceptable risk.

When developing written criminal history policies a Landlord should individually assess the applicant’s criminal history, including giving special attention to the following elements:

Arrests.  Caution/Warning:  Do not exclude applicant because of an arrest record alone.  HUD contends that a previous arrest record proves nothing.    HUD’s new guidelines provide:

“…a housing provider who denies housing to persons on the basis of arrests not resulting in conviction cannot prove that the exclusion actually assists in protecting resident safety and/or property.”

However, an open or pending case is more than just an arrest.  If a case that poses a risk is being litigated, then such an issue or interest may be substantial, legitimate and nondiscriminatory.  It will always depend on the facts.  In those situations, consult with your attorney to determine the appropriate course of action.

Prior convictions. Caution/Warning. Do not have a blanket prohibition such as, “No Felonies Ever,” or “No Criminal Convictions”.  There is one exception that HUD has made.  A Landlord may discriminate for a conviction for illegal manufacture or distribution of a controlled substance as set forth in 21 U.S.C. 802.

Nature and gravity of the conviction.   What kind of crime was it and how serious was it?  Decide what is acceptable and what is not acceptable as a risk for the particular criminal activity.  What poses unacceptable risk and what does not?  Caution is advised when denying an applicant who has a criminal history, which from the record alone, appears to be a conviction for a very serious offense.  This is where an individual assessment becomes so important.  Consider this example.  An applicant has a conviction for sexual misconduct with a minor that occurred when the applicant was 19 and the victim was 16 years old.  Now the applicant is 31 however he married the victim when she turned 18 and they have three children together.  To ascertain the nature and gravity of the crime may take more than just reviewing the criminal history provided by your screening company.  You may deny an applicant when you see such a crime.  However, if that applicant indicates that there is more to the story, you must continue your individualized assessment.  A denial based on a criminal history report alone may not be appropriate if the applicant indicates that there are mitigating and unexplained circumstances that have a bearing on what risk may or may not exist.  It will depend on the facts of each case as they relate to reality.  Although you do not have to attempt to re-litigate the case, you may be required to evaluate the attendant circumstances that can also prove to be a significant challenge to apply equality and fairness to all applicants in the future.  HUD recognizes that a court conviction record can generally be relied upon for what is stated in the case disposition.

However, HUD makes the statement that, “Bald assertions based on generalizations or stereotypes that any individual with an arrest or conviction record poses a greater risk than any individual without such a record are not sufficient to satisfy this burden.”  Therefore, the criteria must be specific when looking at the nature and gravity, or the seriousness of the crime and the assessment of risk regarding that crime regarding whether or not to approve an applicant.  You must determine what crimes may pose a risk to your substantial and legitimate interests.

Unfortunately, the new HUD guidelines do not take into account that you are still legally responsible to adequately screen your applicants; that is to do what is commercially available to obtain criminal history records in an effort to avoid a claim of negligence or premises liability from a person who is damaged by an applicant you have approved.  The new HUD guidelines address properly using criminal history in your application analysis, not obtaining criminal history.   Therefore, if you do not use criminal histories in your application process, you may have a better chance of avoiding a discrimination claim, but you may create added exposure for a negligence claim if you fail to obtain available criminal background history and then rent to a person with a criminal history who poses a risk and that person later causes harm to another.   Landlords are in a catch 22 and must walk a fine line not to discriminate while still taking reasonable measures to avoid renting to those who will create an unacceptable level of risk.

Time that has elapsed since the conviction.  How long has it been since the conviction occurred.  The question is; how much time should pass before the conviction should not be a factor?  Obviously, it is appropriate to require a longer period for felonies than for misdemeanors since a felony is typically of a more serious nature and gravity.  Even in court, felonies can be used against a witness to impeach their propensity for truth and honestly.  Most jurisdictions allow a witness to be impeached for ten (10) years after conviction of a felony.  HUD has not provided what time lines are reasonable for using felonies or misdemeanors in the application process.  Although they provided nothing concrete, HUD has relied on a recidivism study that supports the premise that after six or seven years without reoffending, the risk of new offenses by a person with a prior criminal history begins to approximate the risk of new offenses among persons with no criminal record.  However the study makes it clear that persons with a prior police contact do not, at any time, become completely indistinguishable from those without a prior police contact in regard to risk of offending.

As part of the policy development, after you have performed your analysis of the applicant’s other factors, such as employment, past rental history and credit, then review the applicant’s criminal history.

So how does a Landlord operate safely regarding these new guidelines to avoid discrimination?

SAFE HARBOR MEASURES:

A possible SAFE HARBOR for developing and implementing a Landlord’s policy for analysis of criminal history in the application process relating to the Landlord’s substantial, legitimate and nondiscriminatory interest(s), including, but not limited to: protecting the residential unit from harm, protecting the unknowing neighbors from potential risk of harm and (in multi-housing) to protect other tenants from potential risk of harm and to protect management and owners from liability from civil liability for potential risk of harm to those management and owners are responsible to for reasonable safety, should include the following:

1. Felonies:

Nature and Gravity (Seriousness):  Murder, Manslaughter, Robbery, Burglary, Theft, Violence of all types, Crimes against persons of all types, Crimes against property of all types, Drug Offenses – (list all that pose a risk to persons and/or property or as stated by HUD on its website: HUD also includes crimes that may threaten the health, safety, or right to peaceful quite enjoyment of the premises by other residents, or other criminal activity that would threaten the health or safety of the owner, property management staff, or persons performing a contract administration function or responsibility on behalf of the owner, including the owner’s employees, contractors, sub-contractors or agents.

Time Elapsed:  Seven (7) years from the date of conviction or release from custody, whichever occurred last.  (Understand, that time does not start counting for recidivism purposes until a person has been released from custody and allowed back into society.)

One useful way to show evidentiary proof to support a Landlord’s policy for how long a crime should be used in the analysis for residency regarding risk to the Landlord’s substantial and legitimate interest(s) is to follow what HUD sets forward in its new guidelines regarding recidivism.  HUD suggests that seven (7) years is the outside time range to continue to analyze an applicant’s criminal history for residency purposes as set forth in the study on recidivism by Megan C. Kurlychek (and others) entitled: Scarlet Letters and Recidivism: Does an Old Criminal Record Predict Future Offending? 5 Criminology and Pub. Pol’y 483 (2006). HUD seems to rely upon this study to make its point that the risk of recidivism for a person with a prior criminal history starts to approximate the risk for someone committing a crime that has no prior criminal history.

2. Misdemeanors:

Nature and Gravity (Seriousness):  Assault, Disorderly Conduct, Theft, Violence of all types, Crimes against persons of all types, Crimes against property of all types, Drug Offenses – (list all that pose a risk to persons and/or property or as stated by HUD on its website: HUD also includes crimes that may threaten the health, safety, or right to peaceful quite enjoyment of the premises by other residents, or other criminal activity that would threaten the health or safety of the owner, property management staff, or persons performing a contract administration function or responsibility on behalf of the owner, including the owner’s employees, contractors, sub-contractors or agents.

Time Elapsed:  Five years from the date of Conviction or release from custody, whichever occurred last. Typically, jail time for misdemeanor crimes will be less than one (1) year.  Since misdemeanor crimes are less serious than felony crimes, then the time for rental prohibition can be less time, as there is less risk to a Landlord’s substantial and legitimate interests.

Even with a very tailored approach, a Landlord must still be able to prove that their policies are necessary to serve a substantial, legitimate, nondiscriminatory interest.  Policies must accurately distinguish between criminal conduct that indicates a demonstrative risk to resident safety and/property and criminal conduct that does not.  Of course, such a determination must be made on a case-by-case basis.

3. Crimes Against Children and Sex Crimes:   HUD indicates on its website that a criminal background investigation MUST be performed (at least for public housing authorities) to determine lifetime registered sex offenders that then may be precluded. The nature and gravity of a sex crime may be so serious that even the slightest amount of risk may be too much when contemplating the protection of your substantial and legitimate interest(s).  A case-by-case evaluation based on the facts is necessary for how long to prohibit residency for those with a sex crime who do not have a lifetime sex offender registration status.

4. Methamphetamine Production and other Similar Convictions: A Landlord can prohibit residency for a conviction for methamphetamine production.  If HUD accepts residency prohibition for methamphetamine production, then logically and arguably a Landlord my prohibit residency for protecting the Landlord’s substantial and legitimate non-discriminatory for policies and procedures that include similar types of drug related criminal convictions.

5. Drug Related Criminal Activity, Violent Criminal Activity and other Criminal Activity: A Landlord may also prohibit residency to protect the Landlord’s substantial and legitimate non-discriminatory interest(s) based on drug related criminal activity, violent criminal activity against person or property and other criminal activity that may threaten the health, safety, or right to peaceful enjoyment of the premises by other residents; or other criminal activity that would threaten the health or safety of the owner of any employee, contractor, subcontractor or gent of the owner how is involved in the housing operations.

The Rental Application and the Criminal History Inquiry:

A question arises regarding what to ask on the rental application about an applicant’s criminal history.  For years a typical question on an application was, “Have you ever been convicted of a crime?”   That may be a dangerous question under the new guidelines.  To avoid a claim that very question is discriminatory, a Landlord should be more specific and ask a more relevant question such as, “Have you been convicted of a crime in the last seven years, or have you been released from custody (prison) in the last seven years?”  This question covers crimes in the past seven years and covers the seven years after the person has been released from prison where the person could recidivate.  This way the inquiry goes directly the discussion regarding the elapsed time and recidivism in relationship to protecting a Landlord’s substantial, legitimate and nondiscriminatory interest(s) and it is has its basis in the study HUD cited in its new guidelines.
Individualized Assessment.   If an applicant believes that his/her application should not have been denied based on their criminal history the Landlord should provide an ongoing individualized assessment.  This means that the Landlord should look at other factors that the applicant can provide the Landlord for review, such as:

• Mitigating information beyond that contained in the applicant’s criminal record such as inaccuracies, incompleteness and/or circumstances surrounding the conviction should be considered.  That does not mean that the Landlord has to re-try the case.
• Age of the applicant at the time of the criminal conduct;
• Evidence that the applicant has maintained a good tenant history before and/or after the conviction or conduct;
• Evidence of rehabilitation efforts, and;
• Basically, entertain and review anything that the applicant wants to provide for mitigation purposes.

Provide a copy of the Landlord’s criteria to the Tenant early in the application process so that the Tenant will know what to expect in a criminal history evaluation.

Step Three:  Evaluating Whether There is a Less Discriminatory Alterative.

If the Landlord proves that its criminal history policy is necessary to achieve its substantial, legitimate, nondiscriminatory interest, then the burden of proof shifts back to the plaintiff, or HUD, to prove that such interest could be served by another practice that has a less discriminatory effect.  What does that mean?  HUD would be evaluating Step Two, subsection 6 elements, to determine if the applicant received a complete and fair evaluation of all mitigating factors.  By including these elements in its initial evaluation, the Landlord has already complied with this issue in a proactive approach before the complainant or HUD begins to investigate a claim of a FHA violation based on additional mitigating information.  The key here is to allow the applicant every opportunity to show mitigation and that the applicant is no longer a risk based on the mitigation factors presented to the Landlord.

The foregoing is simply an example of a safe haven to avoid discrimination when using criminal history in the application process.  This analysis does not purport to be THE answer to all the questions posed by the new guidelines for any particular set of facts.  Your criteria must be developed after careful consideration with your attorney regarding all of the factors and information available to formulate exactly what criteria is appropriate to implement in order to minimize the risk of disparate impact claims based on use of criminal history in your application process.

As with all discrimination issues, the purpose for the HUD guidelines are intended to further ensure that Landlords treat everyone equally regardless of any protected characteristics and that decisions concerning an applicant’s approval for residency regarding those applicants with criminal history are not made pursuant to arbitrary or overly broad criminal history-related standards.  Although these guidelines may be used to file frivolous claims and be a source of new and unnecessary litigation, time will tell to what degree.  One thing we can predict is that the new guidelines will be a source of more government involvement into the private sector over the next few years, especially for bad Landlords.

Denny Dobbins, Attorney at Law

CrimShield, Inc., AAA Landlord Services, Investigative Screening and Consulting.