Do you use arrest and conviction records to assess potential tenants before allowing them to rent your property? You might want to read this as a misstep can destroy your business and your life.
The use of criminal history to assess existing and prospective tenants was delved into by a guidance memo published on April 3, 2016 by the Department of Housing and Urban Development (HUD). While such a memo doesn’t have any legal bearing in a court of law, it does hold sway with judges. The contents of the memo mirror those of the Enforcement Guidance memo published by the Equal Employment and Opportunity Commission so it didn’t catch those in the legal fraternity by surprise.
Here’s what you need to know regarding your dealings with your tenants on this issue.
Tenants and rental applicants who have a criminal record have not hitherto received protection from housing discrimination. The HUD memo highlighted the fact that federal fair housing laws only protect individuals from discrimination based on color, race, familial status, religion, national origin, disability, and sex. Those with criminal records are exempted from this privilege.
The implication of this under federal law is that landlords had the freedom to adopt policies targeting those with a criminal history. For example, a rental applicant who had been convicted or arrested would be given no chance. Noteworthy is that some local laws such as those of San Francisco (the 2014 “Ban the Box” ordinance) prohibits questions about arrests on housing applications for homes that are subsidized by the city.
Only people with a drug use conviction are exempted from this practice. The overriding theory for this is that drug users are actually dealing with a disability. This is a protected class as previously indicated. Drug dealers, on the other hand, do not enjoy this privilege. Fair housing lawyers have been trying to nullify landlord policies that reject tenant applicants with an arrest or conviction record for a while now. The inherent challenge has been how to do it given that these people don’t have the “protected class” status.
In 2015 a U.S. supreme Court case held that housing discrimination was demonstrable where the landlord had clear bias against one group and where the landlord had a policy that seemed neutral at face value but had the effect of discriminating against a protected class.
A good example of real-world intentional discrimination is where a landlord’s policy states that
“I don’t rent to Blacks/Asians/women/gays, etc.”
Indirect discrimination or disparate impact is where the policy states
“I don’t rent to groups of people living in [an area where the majority of the population are a racial minority].”
It’s easy for the rejected applicant to prove discrimination in the first example by using the landlord’s stated policy as evidence. For the second example, the rejected applicant would be required to prove that the policy was discriminatory due to the large number of people belonging to a racial minority living in that area.
The memo captured this new way of proving discrimination. It is hinged on pointing out statistics that show that exceedingly more Hispanics and Blacks are arrested and/or convicted than their White counterparts. As a result, when a landlord includes the no arrest or conviction rule in their policy, these class of people are harmed disproportionately compared to Whites. While such a policy may seem neutral, it is actually a discriminatory policy against protected individuals.
The memo did not touch on the issue of turning away rental applicants and tenants who have relevant convictions. However, it did disagree with the rejection of applicants based on arrests without convictions. According to the memo this is inappropriate because an arrest simply shows that someone was suspected of an offense. While it’s required of the landlord to keep guests, residents, employees, and repair persons safe from would-be troublemakers, it would be a disservice to reject an applicant based on an arrest. An arrest is not a justifiable reason for rejection and is therefore not relevant during the screening process.
With convictions, landlords are allowed more leeway. Some convictions are indeed relevant to the landlord’s obligation to protect residents and other people in his property. For example, if the applicant has been recently convicted of assaulting a neighbor, the landlord has a justifiable cause to deny them tenancy. The same goes for a person who has a domestic violence conviction.
However, if the conviction is a few decades old then there is no valid reason to deny the applicant tenancy as chances are very slim that they will cause problems in future. The HUD memo goes further to suggest that landlords consider factors such as the age and nature of conviction before denying housing to an applicant. What was the applicant convicted for? How long ago was it? What circumstances surrounded the conviction? Have they been reformed and crime-free since the conviction? These are some of the questions landlords should ask before making a decision.
This would require a case-by-case evaluation of applicants. This is a job many landlords would loathe to do since they don’t have clear guidelines on how to go about it. On the other hand, landlords would have to make some judgment calls during the evaluation. For example, they would have to decide how old is old enough with regard to a conviction and hope that their decision stands in court if it is challenged.
So, what is the effect of the HUD guidance on Whites with a criminal record? The memo seems to suggest that only Hispanics and Blacks can raise a discrimination claim as they are unduly disadvantaged by policies denying tenancy to those with criminal records. The implication of this is that a White applicant cannot argue that their race has been targeted disproportionately if they are denied tenancy as a result of an arrest record.
Does this mean that a landlord should only apply the no-arrest policy to applicants that are White? The memo does not delve into this issue, but we can always come up with a common-sense answer. For one, it is a recipe for trouble and confusion since you can’t tell landlords to discriminate applicants based on their race where different rules apply to different groups of people. As a rule, if a practice (rejection of arrest-only applicants) is unfair and consequently illegal for one group of people, it should be illegal to everyone.
Secondly, the United States Supreme Court has always been willing to extend the benefits of a rule that in a way affected one group of tenants to another group of tenants. For example, White tenant applicant challenged a prospective landlord’s practice of denying blacks tenancy. The grounds for the challenge were that the policy denied the White applicant the benefit of living in a racially-integrated community. They went further to note that the person blacklisted was not the only victim of the discriminatory housing practice. The high court agreed with the White plaintiff’s argument and the case was given the green light to proceed to trial.
Given the expansive provisions on who can challenge discriminatory practices by a landlord, it is clear as day and very likely that White applicants will find a way to benefit from the HUD memo.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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