The Department of Housing and Urban Development (HUD) issued new guidance on April 4th, 2016 that is going to require all single-family and multifamily rental professionals to revisit their policies.

In a decision that is aimed at protecting the rights of “returning citizens”, HUD is limiting the use of arrest records in tenant screening nationwide for both public and private housing. While they are not discouraging the use of criminal records in the background screening process, they are requiring a conviction be reported for the record to be considered in the decision. Using an arrest record without a conviction is being viewed as discriminating against a consumer who has not been found guilty of having done anything illegal.

Per the new guidance:

Exclusions Because of Prior Arrest
A housing provider with a policy or practice of excluding individuals because of one or more prior arrests (without any conviction) cannot satisfy its burden of showing that such policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. 25 As the Supreme Court has recognized, “[t]he mere fact that a man has been arrested has very little, if any, probative value in showing that he has engaged in any misconduct. An arrest shows nothing more than that someone probably suspected the person apprehended of an offense.”26 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), 27 the fact of an arrest is not a reliable basis upon which to assess the potential risk to resident safety or property posed by a particular individual. For that reason, 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.

What does this mean?

In your rental policy there should be clearly defined requirements for an applicant to be approved to live in your property. For example: income must be xx times the monthly rent. Likewise there should be criteria that will disqualify applicants despite them meeting other requirements. This is the section where your policy clarifies your stance on criminal records that appear during the applicant’s background check. Our recommendation is that you specify that the use of a criminal record must be the result of a conviction, and denial should be limited to specific crimes such as:

  • Violent crimes, which would include any convictions with the use of firearms,
  • Crimes of a sexual nature,
  • Crimes against property or persons (such as arson and theft), and,
  • Convictions of drug manufacturing or distribution.

When updating your written rental policy, you should review the content so it answers these 3 questions:

  1. What is the nature of the criminal conviction?
  2. How severe is crime that resulted in a conviction?
  3. What is the length of time since conviction occurred?

Along with each of these questions you should consider whether your requirement is appropriate for the type of housing you offer, and the community it is in (i.e. family community, senior community, individual home, etc…).

Julian Castro on HUD rulingThe new guidance does not go so far as to make criminals a protected class so you are still completely within your right to deny applicants that violate the criteria above.  However, more than ever before, you have a burden of proof requirement. In order to safely depend upon making a decision involving prior convictions, you as the housing provider, must be able to prove that your policy clearly excludes individuals with only certain types of convictions. This proof in your policy is necessary to achieve a substantial, legitimate, nondiscriminatory interest. The use of ambiguous language or blanket statements such as, “a felony is an automatic denial” will get you into trouble.

The new guidance clarifies this requirement as:

A housing provider with a more tailored policy or practice that excludes individuals with only certain types of convictions must still prove that its policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” To do this, a housing provider must show that its policy accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.

HUD’s new requirements may seem like a big change at first, but it can be followed very easily by following these steps:

  1. Review your policy to make sure the language is clear, and conforms to the HUD guidelines (and have your housing specialist attorney read it over).
  2. Educate your staff, or anyone involved in reviewing background checks, so they are aware of the new guidance.
  3. Consider contacting your tenant screening provider to ask about their ability to restrict records that cannot be used in the decision.

CIC™ has already taken the steps necessary to filter our criminal background checks to exclude arrest records in order to mitigate our clients from Fair Housing enforcements and civil litigation.

For more information about the ruling read the complete HUD document

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About the Author

Ryan Green headshotRyan Green has been working within the real estate and property management industries since 2005, and presently serves as the Marketing Manager for CIC. He holds a degree in Business Administration as well as FCRA and Experian certifications for the multifamily housing industry. Since 2012, Ryan has been a writer for ResidentScreeningBlog.com as well as a contributing author for industry publications, news outlets and multiple forums.

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