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HUD's Guidance On Screening Ex-Offenders: Now What?

May 2016

An Interview with NAA General Counsel John McDermott.

The U.S. Department of Housing and Urban Development (HUD) issued guidance1 on the application of fair housing standards to the use of criminal history in resident screening. This guidance, established on April 4, sets out the test that would be applied to a specific housing provider's screening policy to determine if that policy constitutes discrimination under the Fair Housing Act (FHA). 

This test is built upon the disparate impact standard upheld under the FHA last year by the U.S. Supreme Court in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

Nicole Upano, Manager of Government Affairs at NAA, sat down with the association's General Counsel, John McDermott, to discuss the newly released guidance. In this interview, McDermott breaks down the guidance for units Magazine readers, highlights the main points of the document and talks about some related developments to consider.

NU: As you know, HUD just released guidance that could have significant implications for how owners screen ex-offenders. NAA members are concerned about whether they will be able to continue to adequately protect their residents, employees and properties. They are also worried about increased litigation for alleged fair housing violations and potential liability exposure from crimes committed on community property by an ex-offender. In your opinion, what is the significance of the guidance HUD issued?

JM: Well, it certainly is generating a lot of commentary, some accurate and some not. I would say it is a predictable document consistent with HUD's historic position on disparate impact and screening for criminal history. That said, owners need to take it seriously.

NU: Can you elaborate?

JM: First of all, the term guidance is neither a law passed by Congress nor a regulation issued by an agency after public comment. It represents HUD's current thinking on specific topics-in this case, criminal background screening having a disproportionate impact on minority populations and potentially triggering fair housing violations. 

Second, this has been HUD's position for years. HUD issued a similar guidance memorandum2 in November 2015 that outlined the same concerns, specific to arrest records for public and assisted housing. In 2011, then-Secretary Shaun Donovan wrote to housing providers urging them to accept persons with criminal histories in their rental communities.3 

In short, this is the latest example of an existing HUD policy. This is HUD's attempt to clarify its policy in the wake of last summer's Supreme Court decision.

NU: Didn't we lose that case?

JM: Yes, the Court did confirm the applicability of disparate impact theory in fair housing cases. However, Justice Kennedy's majority opinion raised the bar and tightened the evidentiary standards that a plaintiff must prove. The burden of proof is now tougher than what had existed under previous HUD regulations. Justice Kennedy wrote: "The limitations on disparate-impact liability discussed here are... necessary to protect potential defendants against abusive disparate-impact claims. If the specter of disparate-impact litigation causes private developers to no longer construct or renovate housing units for low-income individuals, then the FHA would have undermined its own purpose as well as the free-market system.4"

The guidance and many of the commentators gloss over any analysis of whether screening serves a legitimate interest.5  Owners must show that their screening policies are in place to achieve a "substantial, legitimate and non-discriminatory interest." Here's the interest: Apartment owners want to protect their residents, their employees and their property. Moreover, they are often sued for criminal acts against residents. Screening is a reasonable response to a foreseeable risk. Many expert witnesses would testify that a failure to screen is negligence. HUD recognizes that "...resident safety and protecting property are often to be among the most fundamental responsibilities of a housing provider.."6 My assumption is that companies that screen prospective residents pay lower insurance premiums than those who do not.

NU: In the guidance, HUD goes on to say:"A housing provider must... be able to prove through reliable evidence that its policy or practice of making housing decisions based on criminal history actually assists in protecting resident safety and/or property. 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."7  What are your thoughts on that?

JM: The risk posed by safety concerns and premises liability lawsuits is a substantial, legitimate and non-discriminatory interest that justifies screening potential residents.

NU: Speaking of arrest records, how should owners handle arrest records in their screening policies?

JM: HUD says reliance on arrest records alone will not meet the standard under their guidance for a substantial, legitimate and non-discriminatory interest.

NU: What about drug convictions?

JM: There's a terrible irony at work there. The FHA allows discrimination against persons who were convicted of the manufacture or sale of illegal substances, no matter how small the amount. This means that neither HUD nor anyone else can allege fair housing violations under disparate impact, or any other theory for denying housing to a person with criminal convictions for manufacture or sale of drugs. Of the entire prison population in the U.S., that represents 30 percent of the prisoners, according to the FBI.

NU: But there is no such "bright-line" exceptions for other offenses?

JM: That's right. A drug dealer can be excluded from housing but the HUD guidance does not allow similar exceptions for, say, persons with convictions for violent offenses. Every situation is different, but I would suspect that owners are as concerned about individuals with violent criminal histories as they are for those with a history of drug manufacturing or distribution.

NU: How would you advise NAA's members moving forward?

JM: Engage your legal counsel and screening company partners to review and, if necessary, revise your resident screening policies. NAA and NMHC issued a white paper last month to help in this process, including some recommendations for how to set policies. It's never a bad idea to check your work and see if there are any problem areas. 

Provide updated fair housing training for onsite staff and refresh them on how to manage resident screening. Remind them, for example, not to speculate on what the results of a resident screening could be. Treat everyone in the same manner without any editorial commentary.

NU: According to the guidance, owners must perform an individualized assessment of an applicant regardless of the offense in question or they risk facing a fair housing violation.

JM: This is a complicated question. On the one hand, in order to follow the guidance, your policy should reflect a willingness to consider relevant factors beyond what is contained in the person's criminal record. HUD urges housing providers to consider a broad-based set of information in their policies.

However, owners should be careful because individualized assessments are inherently subjective and could open you up to a fair housing claim. In using the individual's criminal history information, you intentionally discriminated against an applicant or renter on the basis of race, national origin or another protected characteristic. One way to mitigate this, even in an individualized assessment, is to maintain set guidelines and apply them evenly.

For example, consider the following when you evaluate your screening policies. Convictions are more predictive of criminal behavior than arrests. Felonies are more serious than misdemeanors. Your screening policies should reflect these weighted values. A vagrancy or public intoxication charge would not necessarily mean that someone might pose a threat in an apartment community. However, any conviction associated with violent behavior should be given the highest scrutiny.

Again, the NAA/NMHC white paper goes into more detail on these questions.

NU: Some housing providers are receiving inquiries from non-governmental entities about their screening policies. What do you know about that?

JM: A number of companies have been contacted recently by an organization called the Lawyers' Committee for Civil Rights Under Law, and asked about their tenant screening practices for persons with criminal backgrounds. They are asking those firms to produce their screening policies and resident data.8

This group has been around for about 40 years. Their board and contributors represent some of the largest law firms in the country. They bring lawsuits to address what they perceive to be civil rights injuries. I met with them recently to discuss their work in this area. 

They have a group within the organization called the Fair Housing and Community Development Project. Those are the folks writing the letters you described. Initially, the Lawyers' Committee will be focusing on companies advertising that they will not accept persons with arrest records or deny anyone with a criminal history.

NU: What if a client of yours received such a letter from the Lawyers' Committee?

JM: Well, consider this: A total stranger is accusing you of breaking the law and asking you to produce the corporate documents to help them try to prove the violations, as well as all of the criminal history data on residents and rejected applicants. It's a fair assumption that no client of mine would be sending any documents whatsoever to the Lawyers' Committee or any similar organization.

NU: Are they out to get our members?

JM: Not necessarily. I think they are well meaning people who are legitimately concerned about the difficulties faced by persons with criminal history in finding housing. That said, they have identified a business practice that is not the cause of the problem. I think their lack of familiarity with apartment industry operations allows them to believe that focusing on screening is the cure for making more housing available. That simply is not the case.

Do you remember that article you wrote for units Magazine a few years ago that described Lori Trainer's work with the New Moves Partnership?

NU: Sure.

JM: Lori was concerned with providing housing for homeless families who were in that state through no fault of their own. What struck me was her statement that to be successful, there must be a coordinated effort of a variety of organizations providing assistance. One group cannot be successful on its own. 

NU: Right. I remember Lori saying, "It's a hand up, not a hand out for families experiencing homelessness." Lori's team at Southern Affordable Services (SAS) works with local partners, including a coalition of like-minded businesses and social service agencies. They trade referrals to match homeless moms and dads with job training and housing to help them get back on their feet. SAS provides housing for folks and their rent is on a graduated scale, starting low and then increasing to near market rate as their ability to pay improves.

JM: The same principles applied to homelessness assistance should apply here. The answer to the problem with ex-offenders should not lie solely on the backs of apartment owners. It should be a coordinated effort among all the stakeholders.

NU: Thanks, John. I'm sure your comments will help ease some member concerns.

JM: Thanks. Yes, they may, but for more detailed information on how to comply with the new guidance, members should refer to the NAA/NMHC white paper, available on the NAA website

Resident Screening Policies: FYI 

In light of HUD's Guidance, consider the following. If you have any specific questions, consult a local attorney.

  • Remember, you may still deny an applicant based on other factors in your company's screening criteria, i.e., if they do not qualify financially or have unfavorable rental history. 
  • Eliminate any policies that require the denial of all ex-offenders regardless of their criminal history or exclude applicants based solely upon arrest records. Remember to remove any references to these policies in any advertising or on the company's website. 
  • Remember, HUD?guidance says you must perform an individualized assessment on the applicant or renter. But you should remember to maintain certain guidelines and apply them evenly.
  • Your screening criteria should reflect a willingness to examine relevant individual circumstances, such as:
    • The facts or circumstances surrounding the criminal conduct;
    • The age of the individual at the time of the conduct;
    • Evidence that the individual has maintained a good tenant history before and/or after the conviction or conduct; and
    • Evidence of rehabilitation efforts
  • Review your screening policies for the following:
    • Give greater weight to convictions for violent offenses than non-violent offenses;
    • Give greater weight to convictions than arrests; and
    • Give less weight to criminal activity that occurred years ago.
  • You may exclude an applicant or resident who was convicted of the distribution or manufacture of drugs without further inquiry because the FHA allows you to do so. 
  • Provide updated fair housing training for on-site staff and refresh them on how to manage resident screening. Remind them, for example, not to speculate on what the results of a resident screening could be. Treat everyone in the same manner without any editorial commentary.  —NAA

FOOTNOTES

1 U.S. Department of Housing and Urban Development, Office of General Counsel Guidance, (Apr. 4, 2016), available at http://portal.hud.gov/hudportal/documents/huddoc?id=HUD_OGCGuidAppFHAStandCR.pdf

2 U.S. Department of Housing and Urban Development, Guidance for Public Housing Agencies and Owners of Federally-Assisted Housing, Notice PIH 2015-19 (Apr. 4, 2016), available at http://portal.hud.gov/hudportal/documents/huddoc?id=PIH2015-19.pdf

3 U.S. Department of Housing and Urban Development, Secretary Letter to PHA Executive Directors, (June 17, 2011), available at https://www.usich.gov/resources/uploads/asset_library/Rentry_letter_from_Donovan_to_PHAs_6-17-11.pdf

4 Texas Department of Housing and Community Affairs, et al. v. Inclusive Communities Project, Inc., et al., 576 U.S. ___ (2015) at 21.

5 24 C.F.R. § 100.500(c)(2)

6 HUD, Office of General Counsel Guidance, (Apr. 4, 2016) at 5.

7 HUD, Office of General Counsel Guidance, (Apr. 4, 2016) at 5.

8 Lawyers' Committee for Civil Rights Under Law, Lawyers' Committee Opens Nationwide Inquiry Into Housing Providers That Impose "Blanket Bans" Upon Applicants Who Have Had Contact With the Criminal Justice System, Press Release (Apr. 4, 2016), available at http://bit.ly/BlanketBans.