Criminal Background Checks - HUD's Published Perspective

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Criminal background checks - always a popular issue. Of course you can use them to screen prospective applicants, right? You may be surprised.

The use of criminal background checks in the residential housing rental and lease application process has recently become a hot button issue. Back on April 4, 2016, the U.S. Department of Housing And Urban Development's ("HUD") General Counsel issued a 10-page memorandum on "Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions" ("Guidance").

According to HUD, criminal background checks have a disproportionate impact on minority home seekers, largely due to disproportionate conviction and incarceration rates for minorities and others in protected classes. HUD's Guidance memo identifies methods of 'proof' that are used when analyzing a fair housing claim in the context of a housing provider who denies an applicant tenancy based in whole or in part on a criminal background check. .

In other words, even though tenancy is not denied based on direct discrimination against the applicant as a member of a protected class (race, religion, nation origin, etc.), background checks that reveal convictions could nevertheless, in HUD's view, have a disproportionately negative effect (disparate impact) on members of protected classes resulting in a discriminatory housing practice. HUD actually isn'toutlawing use of criminal background policies, but rather is aiming to prevent landlords, including Parks and Communities from using the background check information since use of these policies if that use ultimately has a discriminatory effect on people in a protected class.

HUD's New Guidance memorandum will certainly impact use of criminal background checks since many manufactured housing communities may learn that their own current policy on how to use applicant screening procedures may expose them to liability. This article will discuss two things: (1) how HUD evaluates denials based in whole or in part on use of a criminal background check; and (2) factors a community should keep in mind when formulating or employing a policy about criminal "history".

All communities are unique, and so too are the legitimate interests that a community must protect. A community's size, location, and its age all play a direct role in corresponding issues regarding safety, security, and/or criminal activity. A community's initial decision to even use a "criminal background check" policy in the first place rests largely on whether the policy will further that community's interests, be it safety, security, or crime prevention, and ultimately enhancing the living environment for all residents.

By and large, all communities share core interests. Among these are screening out financially unqualified applicants and minimizing risk to community residents by applicants convicted of recent violent crimes, drug related crimes, and/or crimes involving children,. Of course, the specific interest in maintaining a criminal background check policy varies depending upon the nature and characteristics of the community that justify the purpose.

If your community uses a "criminal background check,"here's how the typical scenario goes: Applicant seeks to lease a space, submits the required application with supporting documentation, and answers "yes" to having a prior felony conviction. Owner denies the application, on the conviction. Applicant, now angry, lodges a fair housing complaint alleging the community discriminated against him/her. Once that complaint is assigned, here's the 3-step analysis HUD will use to address the claim:

Step 1: The applicant must prove the background check policy has a discriminatory effect, meaning the policy results in a disparate impact on a group of persons in a protected class. Said applicant need only prove the policy "actually or predictably results" in a disparate impact. This will usually involve an extensive investigation of community residency applications reflecting a criminal conviction.

Step 2: If the applicant satisfies step 1, the community must then show the background check policy is justified, meaning the community must show: (a) that it has a substantial, legitimate, nondiscriminatory interest for screening an applicant's criminal background; and (b) running the criminal background checks achieves or furthers this interest.

Step 3: If the community establishes that the policy furthers a substantial interest, the burden shifts back to the applicant to prove the community interest could be served by another practice with a less discriminatory effect.

Simply put, it's a game of ping-pong with some vague standards of proof. So, what should communities do? Well, if you screen criminal backgrounds when deciding if an applicant qualifies, you should ensure that your policy stays within HUD's newly published requirements. Review your policies with your legal counsel to confirm this.

At a minimum, a community should keep the following important points in mind.

First, arrests are not sufficient. An actual conviction is required. There are also big differences between misdemeanor convictions v. felony conviction.

Second, blanket tenancy prohibitions for all convictions is not wise. Rather, a policy should focus on (1) what the conviction was for (i.e. nature and severity of the conviction); (2) when it happened (i.e. how much time has elapsed since the conviction, as recidivism risk decreases gradually); and (3) the applicant's post-conviction actions, particularly rehabilitation efforts. Keep a policy objective, with distinct standards.

Third, criminal background checks may be best when implemented as a final step in the application process, after a rental history overview, a credit check, and references. There may be applicants who do not meet a community's standards based on these other criteria, meaning a criminal background check may not be needed.

While HUD guidelines are national and set a base standard, some states may further regulate the application process by statute, meaning a community must comply with stricter standards. As always, it is important to work with your legal counsel to ensure you comply with specific standards applicable to your state.

No community wants to be on the receiving end of a discriminatory housing claim. To avoid the potential pitfalls of a "criminal background check" policy, communities should develop and employ policies in close consultation with legal counsel.

Ryan Egan is a litigation associate with the Southern California law firm, Hart King, and is a member of the firm's Manufactured Housing Industry Practice Group. You can reach Ryan directly at 714.432.8700 ext.332 or at This article is for general information purposes and is not intended to be and should not be taken as legal advice for any reader.

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