As most of you are aware, in 2016, HUD released guidance for all housing providers regarding how the use of criminal background checks could potentially violate fair housing laws. The guidance outlines how using criminal background screening to deny housing can create a disparate impact (discriminatory effect) based on race due to the higher incarceration rates among Hispanics and African Americans relative to their percentage of the total population and when compared against the incarceration rates of non-Hispanic Caucasians. 

The guidance also outlines HUD’s position regarding what is necessary for a housing provider to successfully defend such a complaint. In September 2019, the Fair Employment and Housing Commission approved new implementing regulations for the Fair Employment and Housing Act (the “Regs”) which went into effect January 1, 2020. Unfortunately, the HUD Guidance and the Regs raise more questions than answers on how to comply. There are also conflicts between the HUD Guidance and the Regs. 

For example, the HUD Guidance states that denial for convictions for the manufacture or distribution of controlled substances is a “safe harbor” because the Fair Housing Act specifically states that landlords do not have to make housing available to persons with such a conviction. However, the Regs do not mention this exclusion. Since the Regs are stricter than the HUD Guidance, it is our opinion that in California, denial for this type of conviction is no longer a “safe harbor” and that if an owner or management company will consider denial on that basis, that consideration should be subject to the below recommendations. This article will attempt to provide some practical suggestions for eliminating or reducing potential fair housing liability. Narrowly Tailor Criminal Background Policies: If you want to deny housing based on past convictions, the HUD Guidance states that policies must be narrowly tailored and that a landlord must be able to show that its “tailored” use of criminal background checks “accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.  The Regs state that any criminal background policy must be necessary to achieve one or more substantial, legitimate, nondiscriminatory business interests, such as the safety of residents, employees or the property. These are going to continue to be difficult burdens to meet. Below are some practical tips for consideration:

  1. Only Consider Actual Convictions: The HUD Guidance and the Regs both state that landlords should not use arrest records as a basis for excluding applicants. The reasoning is that an arrest which does not lead to a subsequent conviction does not prove that an individual engaged in illegal activity. Therefore, the use of arrest records would not provide information regarding whether the applicant who was arrested would be a threat to the safety of other residents or the property. Note that project-based HUD subsidized properties must also prohibit admission to sex offenders subject to a lifetime registration requirement under a state government’s sex offender registration program or to individuals found to have manufactured or produced methamphetamine on the premises of federally assisted housing. 

The Regs further prohibit the use of information about any diversion or deferred entry of judgment, or any conviction that has been sealed, dismissed, vacated, expunged, voided, invalidated, pardoned, or otherwise rendered inoperative by judicial action or by statute or for which a certificate of rehabilitation has been granted.

  1. Avoid Blanket Prohibitions: The HUD Guidance and the Regs indicate that blanket prohibitions, such as denial of housing to persons with any conviction (or any felony) will not stand up to fair housing scrutiny. 
  1. Consider Credit and Other Qualifying Criteria Before Criminal History: The HUD Guidance and the Regs state that housing providers should establish a policy under which other qualifying criteria are considered first. For example, you should check the applicant’s credit, income, rental history and ability to meet any other qualifying criteria and if the applicant does not qualify, deny the application on that basis. By doing this, you would be able to prove that criminal history did not influence the decision to deny the application and thus no disparate impact discrimination occurred. Criminal history would only be considered if the applicant met all of the other qualifying criteria. While this would not completely eliminate potential liability, it could have the effect of reducing the pool of potential complainants.
  1. Tailor Screening Policies to Focus on Protecting Resident Safety and/or Property: Neither the HUD Guidance nor the Regs provide specifics on how a housing provider might tailor its policies in this manner. The HUD Guidance does provide some general guidelines. It states that criminal screening standards must take into account the “nature and severity” of an individual’s conviction, how long ago the criminal activity occurred, and conduct an “individualized assessment” of each applicant, considering “relevant mitigating information” such as: (1) the facts or circumstances surrounding the criminal conduct; (2) the age of the individual at the time the conduct occurred; (3) evidence that the individual has maintained a good tenant history before and after the conviction or conduct; (4) and evidence of rehabilitation efforts. The Regs also add the following factors: (5)Whether the conduct arose from the individual’s status as a survivor of domestic violence, sexual assault, dating violence, stalking, or comparable offenses against the individual; and (6) whether the conduct arose from the individual’s disability, or any risks related to such conduct, which could be sufficiently mitigated or eliminated by a reasonable accommodation; or (7) Other relevant facts or circumstances surrounding the criminal conduct and/or conduct after the conviction. It is recommended that you consider eliminating policies that deny for less serious convictions such as infractions and misdemeanors and focus only on felonies that you reasonably believe could make someone a risk to resident safety and/or property. You would then need to decide the length of time since conviction that could be defensible as posing a current threat to resident safety and/or property. Lastly, you would need to conduct the aforementioned individualized assessment for each applicant.

5. Compile Evidence that the Criminal Screening Policies Actually Achieve the Purpose of Protecting Resident Safety and/or Property: Both the HUD Guidance and the Regs state that in order to mount a successful defense to a disparate impact case, the housing provider would need to prove that the criminal screening policies actually accomplish their stated purpose. However, neither document gives any insight or examples of how you might prove that your policies actually have the desired effect. Presumably, if you could provide evidence that a property was experiencing high incidents of, and/or police calls to service for, certain prior crimes to implementing the criminal screening standards and that those incidences dropped significantly after the criminal screening was implemented, the burden could be met. This would likely require an individualized assessment on each property. 

Finally, some cities have passed local ordinances banning or restricting the use of criminal background checks in rental housing. In January 2020, Oakland was the first city to pass an ordinance banning the use of criminal background checks in most rental housing. San Francisco and Richmond have similar, but more narrowly focused laws that restrict the use of criminal background checks in certain types of rental housing. As of the date this article was updated, Berkeley was considering a measure similar to the Oakland ordinance. This may signal a growing trend throughout California. It is important for landlords to be aware of and comply with any local ordinances that ban or limit the use of criminal background checks. It is strongly recommended that decisions regarding the policies be made by owners or upper management rather than by on-site employees and that the policies be reviewed by an attorney with expertise in fair housing before implementation. 

It is also strongly recommended that the individualized assessments mentioned in this article be conducted by owners or upper management, rather than by on-site employees. 

This article is for general information purposes only. While KTS provides clients with information on legislative changes, our courtesy notifications are not meant to be exhaustive and do not take the place of legislative services or membership in trade associations. Our legal alerts are provided on selected topics and should not be relied upon as a complete report of all new changes of local, state, and federal laws affecting property owners and managers. Laws may have changed since this article was published. Before acting, be sure to receive legal advice.

 

Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. While KTS provides clients with information on legislative changes, our courtesy notifications are not meant to be exhaustive and do not take the place of legislative services or membership in trade associations. Our legal alerts are provided on selected topics and should not be relied upon as a complete report of all new changes of local, state, and federal laws affecting property owners and managers. Laws may have changed since this article was published.   Before acting, be sure to receive legal advice from our office. For contact information, please visit our website: www.kts-law.com.  For past Legal Alerts, Questions & Answers, and Legal Articles, please consult the resource section of our website.