In the age of Black Lives Matter, backlash against “three strikes” laws and a movement to “ban the box” asking about criminal conviction history on job applications, there is change afoot in the interpretation of a law that most real estate agents and brokers are familiar with: the Fair Housing Act.

  • Because of widespread racial and ethnic disparities in the criminal justice system, denying people housing based on their criminal record is likely to have a disproportionate impact on minority home seekers, according to HUD.
  • Therefore, real estate professionals that deny housing to people with any kind of criminal record without considering the nature and severity of the offense or how much time has passed risk running afoul of the Fair Housing Act.
  • HUD's guidance indicates real estate pros should exclude people only based on criminal convictions that can be shown to be a risk to resident safety or to property.

In the age of Black Lives Matter, backlash against “three strikes” laws and a movement to “ban the box” asking about criminal conviction history on job applications, there is change afoot in the interpretation of a law that most real estate agents and brokers are familiar with: the Fair Housing Act.

The Fair Housing Act, part of the U.S. Civil Rights Act of 1968, prohibits housing providers such as landlords and real estate companies from discriminating against anyone on the basis of:

  • Race
  • Color
  • Religion
  • Sex
  • Disability
  • Familial status
  • National origin

Under the Act it is also unlawful to deny any person access to or membership or participation in any multiple listing service (MLS) or real estate brokers’ organization.

Not only that, but MLSs and brokers’ organizations can’t discriminate in terms or conditions of access, membership or participation against an applicant or member because he or she is in one or more of the above “protected classes.”

People with criminal records are not a protected class under the Act, but the law still comes into play when evaluating the criminal histories of those seeking housing, according to guidance issued by the U.S. Department of Housing and Urban Development (HUD) in April. How?

Nearly one-third of the population

As many as 100 million U.S. adults — or nearly one-third of the population — have a criminal record, according to HUD.

“Since 2004, an average of over 650,000 individuals have been released annually from federal and state prisons, and over 95 percent of current inmates will be released at some point,” HUD said.

“When individuals are released from prisons and jails, their ability to access safe, secure and affordable housing is critical to their successful reentry to society.”

Because African Americans and Hispanics are arrested, convicted and incarcerated at rates disproportionate to their share of the general population, “criminal records-based barriers to housing are likely to have a disproportionate impact on minority home seekers,” HUD added.

‘Disparate impact’

The government’s original interpretation of the Fair Housing Act required discrimination to be intentional for the law to apply, but after a U.S. Supreme Court decision last year that is no longer the case.

The court upheld the Obama administration’s “disparate impact” doctrine, which holds that even if you have no intent to discriminate against a protected class of persons under the Civil Rights Act, you may be in violation of the law nonetheless if your policy or action disproportionately harms that class.

Caroline Elmendorf at NARs 2016 midyear conference

Caroline Elmendorf at NARs 2016 midyear conference

Now, a policy that is “facially-neutral” (equally, consistently and fairly applied), but has a disproportionate effect on a protected class can violate the law, regardless of intent to discriminate, according to Caroline Elmendorf, compliance counsel for real estate development firm The Bozzuto Group. Elmendorf spoke at the National Association of Realtors’ midyear conference in May.

The Fair Housing Act does not prohibit housing providers from “appropriately” considering criminal history information when making housing decisions, but “arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification,” HUD said in its guidance.

“Thus, a discriminatory effect resulting from a policy or practice that denies housing to anyone with a prior arrest or any kind of criminal conviction cannot be justified, and therefore such a practice would violate the Fair Housing Act.”

In other words, you can’t generalize that “hey, if you’ve done one crime, you’re more likely to do another crime,” Elmendorf said.

Not a regulation

The “guidance” is not a statute or regulation, but a reflection of how HUD interprets existing laws and will enforce them, according to Elmendorf. HUD guidance is not supposed to set new standards or impose new requirements, though some would argue it does and perhaps it will be challenged in court for that reason, she said.

In the meantime, “I think we need to accept that it will be enforced and find a way to comply with it the best we can,” Elmendorf told conference attendees.

Some in the real estate industry have complained that they would like HUD to just tell them exactly what to do, she added.

“I suspect the reason HUD didn’t do that is because it would look more like a regulation and therefore would be subject to legal challenge,” she said.

The industry has two options, she said:

  1. Terminate criminal background screening for now and wait for follow-up guidance from other sources, such as courts, states, associations or advocacy groups. Or,
  2. Develop a written program that responds to HUD’s guidance, perhaps based on your human resources department’s process for job applicants.

Don’t consider arrests alone

Elmendorf — who said she was not providing conference attendees with legal advice — noted that HUD’s guidance was specific in some instances. For example, HUD said a housing provider that excludes 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.”

An arrest does not prove that someone committed a crime and, in 2013, African Americans were arrested at a rate more than double their proportion of the general population, HUD said.

“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), 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,” HUD said.

“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.”

At Bozzuto, just excluding arrests from consideration greatly reduced denials to only 1-2 percent of applicants, Elmendorf said.

No blanket bans

In most instances, a conviction will serve as proof of criminal behavior, but that doesn’t mean that a housing provider can impose a blanket ban on anyone that has ever been convicted, according to HUD. Housing providers must prove that their policy on criminal records is “necessary to achieve a substantial, legitimate, nondiscriminatory interest,” the federal agency said.

“A housing provider that imposes a blanket prohibition on any person with any conviction record — no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then — will be unable to meet this burden,” HUD said.

More tailored policies that exclude individuals with only certain types of convictions have the same burden.

“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 said.

Exclusions for some misdemeanors, some nonviolent crimes such as bigamy, or “victimless” crimes such as gambling probably wouldn’t pass muster, according to Elmendorf.

A policy or practice that fails to take into account the nature and severity of an individual’s conviction or the amount of time that has passed since the criminal conduct occurred is also unlikely to satisfy the “substantial, legitimate, nondiscriminatory interest” standard, according to HUD.

The federal agency pointed to research finding that the likelihood that someone with a criminal record will commit another crime decreases over time, and that, six or seven years out, the risk of a new offense is about the same as for someone with no criminal record.

Some violent felonies that housing providers could designate as exclusionary — within a specific “look-back” period — include: murder, kidnapping, assault and battery, false imprisonment, arson, robbery, domestic violence, destruction of property, weapons charges and stalking, according to Elmendorf.

Drug manufacture vs possession

The Fair Housing Act specifically allows housing providers to permanently exclude people that have been convicted of illegally manufacturing or distributing drugs. But the Act does not provide a defense to disparate impact claims for excluding those that have been convicted of drug possession, HUD said.

Lifetime sex offender registrants are already prohibited in federally assisted housing, so permanent exclusions can also apply to them, Elmendorf said.

Unresolved grey areas

Questions remain about what should be included in exclusion policies, Elmendorf said, including:

Should financial crimes such as embezzlement and fraud exclude someone from housing? “That alone has a disparate impact” because Caucasian people are more likely to commit those types of crimes and less likely to be sent to prison than people of color, Elmendorf said.

How should a person with one offense vs. multiple offenses be judged? “Does a person with five convictions or three convictions have a different look-back period than someone who made one mistake?” Elmendorf said. “The look-back period should probably have a sliding scale depending on the severity of the crime.”

HUD wants more individualized assessments, but does that open you up to more legal liability? Either way adds risk, Elmendorf said. “You can have them come in and give you extenuating and mitigating information, same as with employment,” Elmendorf said.

“Talk to your HR department — how do you make that decision? Who does it — internally or an outside person like a lawyer or outside group? Don’t have the same people doing the hiring doing the mitigating circumstances analysis because it could come back on them [and] could cause tension in the office.”

Allowing people to present mitigating factors “shows good faith and best efforts” and “if you give someone a fair shot, even though they get denied, they’re less likely to want to sue you,” she said.

On the other hand, “some attorneys say not to do it because it’s impossible to be consistent. Everybody’s different. It can expose you to more liability if you don’t get it right.”

Do’s and dont’s

To help Realtors review their existing criminal history-based policies or create new ones, NAR produced a “Do’s and Dont’s” guide summarizing HUD’s guidance:

Source: National Association of Realtors

Source: National Association of Realtors

Property rights and civil rights

At least one NAR midyear conference attendee was unhappy with HUD’s guidance and said, “This is basically telling me I have to give up 75 percent of my business.”

The attendee said they worked with property owners who rented out properties and the guidance was “basically taking away their property rights” to rent to whomever they want to live in their property or next to them.

Elmendorf said she was “sympathetic,” but that HUD would say, “Property owners, you don’t have the unfettered right to decide who you’re going to rent to. We have the Fair Housing Act. That’s America. That’s civil rights.”

Email Andrea V. Brambila.

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