Ask a Lawyer: HUD

By: Steven M. Williams

I always do criminal background checks on new tenants. I was recently told that a new United States Department of Housing and Urban Development (HUD) directive changes how I can use background checks, but I have not found anything new from HUD. I want to be sure that I am complying with all fair housing laws. Can you enlighten me?

There is no new guidance from HUD. Rather, in June 2022, the Secretary of HUD issued a memorandum confirming HUD’s commitment to ensuring that previously-incarcerated individuals have access to affordable housing. In the memo, the Secretary referenced HUD’s 2016 Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions (the Guidance). The memo did not add anything new; it just reiterated HUD’s reliance on the Guidance and encouraged housing providers to follow it.

Contrary to many landlords’ beliefs, HUD does not prohibit landlords from conducting criminal background checks on its applicants. However, it cautions against unreasonable reliance on criminal histories. In short, HUD’s position is that having a criminal background does not always indicate whether an applicant will be a bad tenant. Because of this, HUD is quick to process and investigate complaints relating to landlords’use of criminal background checks. In addition, fair housing laws prohibit indiscriminately using criminal background checks to deny applicants.

So, what does HUD require?

Initially, it is important to note that being a previously-incarcerated person is not a protected class for fair housing purposes. And in some circumstances, landlords can deny an application based solely on an applicant’s criminal record. But this is the exception, not the rule. HUD has declared that misusing criminal background checks can result in disparate treatment discrimination and is unlawful.

According to HUD (and I agree), landlords should have a criminal background check policy. The policy should not be overly broad and should be designed to achieve the “substantial, legitimate, nondiscriminatory interests”of the landlord. HUD has stated that protecting people and property is a legitimate business interest that landlords can consider when evaluating an applicant’s criminal background. Generally, landlords should not consider a crime that does not involve danger to people or property.

HUD’s Guidance is somewhat vague, not providing many “hard and fast” rules. Rather, much of the Guidance is “grey,” leaving broad discretion for landlords. Two things are clear, though: landlords cannot refuse to rent to applicants simply because they have a criminal history. Also, landlords cannot even consider arrest records—only convictions or guilty pleas can be considered. An arrest does not mean that a crime was committed, and the consideration of an arrest is barred.

In developing and implementing a criminal background policy, landlords should:

• Have a narrowly tailored policy that addresses the real concerns—the kinds of crimes that would impact an applicant’s ability to be a good resident.
• List the interests that the landlord is protecting.
• Consider what crimes truly threaten the safety of people and the protection of property.
• Not use the classifications of crime (i.e., felony or misdemeanor) in the policy, and not list specific crimes. Instead, landlords should describe the crimes that will be considered in words such as “crimes involving injury or death or property damage.”
• Consider the length of time since the conviction. Landlords should focus more on recent crimes, and less on older crimes.
• Consider the nature and severity of the offense. Less serious crimes will not impair an applicant’s ability to be a good resident like more serious crimes might.
• Conduct individualized assessments for each applicant, allow the applicant to explain any mitigating factors, and consider these factors when deciding whether to deny an application. Like a disability accommodation situation, landlords must engage in the “interactive process” when an applicant wishes to explain a criminal history.

When it comes to illegal drugs, HUD is more definitive. Simply, landlords can refuse to rent to an applicant based on a conviction for illegal manufacturing or distribution of illegal drugs. Note that this does not apply to the mere use or possession of illegal drugs. Whether a conviction for simple use or possession of illegal drugs will suffice to deny an application is not clear, and landlords need to evaluate such convictions in the same way they evaluate any other criminal history.

While it is important to have a criminal background policy, it is vital that it can pass the scrutiny of HUD’s eyes. A bad policy can result in fair housing liability just as having no policy can. Landlords are advised to seek the assistance of their attorneys when developing these policies.