One of the most important screening weapons a landlord has in his arsenal is the criminal records search.  Why is that so important?  It is because felons tend to re-offend.  The Bureau of Justice Statistics reported in April 2014 that more than three-quarters, 76.1 percent, of prisoners were rearrested and 55.1 percent of felons were back in prison within five years.  They were living somewhere.  A crook landing back in prison means no rent next month for the landlord who rented to him.  That’s one reason we generally avoid renting to people with criminal records.

Another reason is that they are likely to commit another crime after they are released.   The worst re-offenders are those who committed property crimes such as burglary and theft.  Over 60 percent of them landed back in prison within five years.  Those criminals are the ones who will rob other tenants and the neighbors of the property.  And one of the most important duties of a landlord is to provide a safe home for tenants and to protect his or her property.

Now an edict has come down from the Department of Housing and Urban Development (HUD) saying that refusing to rent to people simply because they have a criminal record may violate the Fair Housing Act.  In order to justify that ruling, they hauled out the “disparate impact” principle.  Their reasoning is that because a disproportionate number of ex-convicts are black or Hispanic, that refusing to rent on the basis of a criminal record has a disparate impact on a minority and thus violates the Fair Housing Act.

The April 4, 2016 “General Counsel Guidance” states,

Where a policy or practice that restricts access to housing on the basis of criminal history has a disparate impact on individuals of a particular race, national origin, or other protected class, such policy is unlawful under the Fair Housing Act if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the housing provider, or if such interest could be served by another practice that has a less discriminatory effect.

Disparate impact is a legal doctrine that states that even if a policy, such as a rental policy, is neutral on its face and lacks any legitimate, non-discriminatory business need, it may be considered discriminatory if it has a disproportionate “adverse impact: on a protected class, in this case primarily blacks and Hispanics.

The decision as to whether a policy is necessary to “serve a . . . legitimate interest of the housing provider” is left up to HUD.   The only thing HUD has to prove, reports the document, is that a “less discriminatory alternative” is possible.  And that comes only after a judge has thrashed HUD because  the landlord proved the policy was necessary to “achieve its . . .  legitimate interest.”  You can download and read the entire document at http://portal.hud.gov/hudportal/documents/huddoc?id=HUD_OGCGuidAppFHAStandCR.pdf

The only exception mentioned in the HUD edict was for a conviction for illegal manufacture or distribution of a controlled substance” (drug manufacturing or dealing), but not for drug possession. So we can legally refuse to rent to a meth cook or dope dealer but not to a heroin addict who is “trying to turn his life around.”  The Fair Housing Act specifically says that addicts in “recovery” are a protected class.

But wait, we may not be off the hook, yet.  If a felon’s rental application is denied because he was convicted of dealing dope, HUD will look for a pattern of discrimination in other instances from that landlord and rule that the dope dealer was illegally discriminated against because he was, say, Hispanic.  And HUD has an entrenched belief that all landlords are bigots and will look for any excuse to illegally discriminate.

Unmentioned in the edict are sex offenders.  All states and the federal government have a sex-offender database and convicted sex offenders are forbidden, for example, to live within 1,000 feet of a school.  If the convicted sex offender has his rental application denied because the property he applied to rent is 450 feet from a school, but he is black, can the landlord expect a visit from a HUD investigator?  After all, the landlord obeyed state law, but is that considered a “substantial, legitimate, nondiscriminatory interest” of the landlord?

An important consideration is that the older someone is and the longer he or she has remained out of jail, the less likely it is that he or she will re-offend.  So someone convicted of burglary 10 years ago and has remained out of prison and been a good citizen otherwise will likely continue to be a good citizen and maybe a good tenant.  The only way to discover that is with careful screening.

What’s a landlord to do?  The bottom line is to be consistent. You know the rental policies and standards we set up and hand to all applicants?  Those must be applied consistently to all applicants regardless of whether they are member of a protected class.  Even more so, they must not have a “disparate impact” on a member of a protected class.   One vital thing to be aware of is using arrest records.  If your rental policies state that you will reject an applicant if he or she has been arrested in the past five years, count on HUD coming down hard, assuming that the applicant you rejected was a member of a protected class.  As HUD accurately points out in its edict, “Because arrest records do not constitute proof of past unlawful conduct and are often incomplete(e.g. by failing to indicate whether the individual was prosecuted, convicted, or acquitted)” an arrest is no reliable indicator of a potential risk to resident and/or property safety.

HUD’s edict concludes

policies that exclude persons based on criminal history must be tailored to serve the housing provider’s substantial, legitimate, nondiscriminatory interest and take into consideration the type of crime and the length of time since conviction.

A rental policy that states that any criminal conviction will disqualify an applicant is considered illegal because it has a disparate impact on minorities.  However, a rental policy that says a conviction of burglary, drug dealing or manufacture, felonious assault where the applicant was released from prison within the last five years might be legitimate.  Do not take my word for it, though.  Run your rental policies and standards by your real estate attorney and suggest he or she read the HUD edict if he or she has not already and write a legal policy for you.  Having an attorney write the policy will cost far less than defending yourself against a HUD prosecution.

Careful screening is always the most reliable method of tenant selection.  Bad credit, no job, poor references, insufficient or unverifiable income, too short a rental history, missing rental history, and lying on the application are all legitimate and businesslike reasons to reject an applicant regardless of the applicant’s status as a protected class.

The key word and the thing that HUD will look for is “selective.”  Rental policies must be applied consistently without regard to race, religion, creed, national origin, and so on. Using anything, but especially a criminal conviction, as a “pretext for unequal treatment” violates the Fair Housing Act, according to HUD.

By Robert L. Cain