QUESTION
I understand that the U.S. Department of Housing and Urban
Development recently released “Guidance on the Application of the Fair Housing
Act Standards to the Use of Criminal Records by Providers of Housing and Real
Estate-Related Transactions” (the “HUD Guidance”). Can you please provide an
FAQ on the content of the HUD Guidance?
ANSWER
The following are some important FAQs.
Q: What does the HUD Guidance address?
A: The HUD Guidance addresses how the “disparate impact”
theory of liability applies “in Fair Housing Act cases in which a housing
provider justifies an adverse housing action–such as a refusal to rent or renew
a lease–based on an individual’s criminal history.”
Q: What is the “disparate impact” theory of liability?
A: “Disparate impact” occurs when a housing or lending policy,
which appears facially neutral or seemingly non-discriminatory, has a
disproportionate adverse effect or impact on members of a protected category
under the Fair Housing Act and there is no legitimate, non-discriminatory
business need for the policy or practice. The United States Supreme Court (the
“Supreme Court”) in Texas Department of Housing and Community Affairs v.
Inclusive Communities Project, Inc. (the “Texas Dep’t of Housing”)
upheld “disparate impact” as a viable theory of liability under the Fair
Housing Act.
Q: Are persons with a criminal history a protected category
under the Fair Housing Act?
A: No, persons with a criminal history are not a protected
category under the Fair Housing Act. Rather, race is the relevant protected
category addressed in the HUD Guidance. This is because certain racial groups
are “arrested, convicted and incarcerated at rates disproportionate to their
share of the general population.” Thus, “criminal records-based barriers to
housing are likely to have a [disparate] impact” on these racial groups.
Q: Must there be intent to discriminate in order for a court
to impose liability under the Fair Housing Act based on a “disparate impact”?
A: No. In Texas Dep’t of Housing, the Supreme Court
ruled that a consumer may bring an action claiming fair housing discrimination
based on “disparate impact” even if no intent to discriminate exists.
Further, the Supreme Court upheld that liability may be found where a
legitimate business interest for the policy or practice exists but there was a
less discriminatory option available. Thus, a housing provider may violate
the Fair Housing Act if his or her “policy or practice has an unjustified
discriminatory effect, even when the provider had no intent to discriminate.”
Q: Does the Fair Housing Act completely prohibit housing
providers from considering an individual’s criminal history?
A: No. The Fair Housing Act only prohibits arbitrary and over-broad bans related to criminal history. Thus, housing providers should
revise the policies they have in place in order to undertake a holistic
approach to evaluating candidates. Any policy that prescribes for an absolute
ban on applicants with a criminal history will violate the Fair Housing Act.
According to the HUD Guidance, “Policies that exclude persons based on criminal
history must be tailored to serve the housing provider’s substantial,
legitimate, nondiscriminatory interest and take into consideration such factors
as the type of the crime and the length of the time since conviction.”
Q: What must a housing provider show in order to establish
that its policy does not violate the Fair Housing Act?
A: The HUD Guidance explains that there is a three-step
framework used to judge claims against a housing provider’s allegedly
discriminatory policy. Within this framework, the housing provider only has the
burden of proving the second step. In the first step, the claimant must show
that a disparate impact has actually resulted from the policy. Then, in the
second step, “the housing provider must be able to provide evidence proving
both that the housing provider has a substantial, legitimate, nondiscriminatory
interest supporting the challenged policy and that the challenged policy
actually achieves that interest.” Finally, “In the third step, the burden
shifts back to the [claimant] to prove that such interest could be served by
another practice that has a less discriminatory effect.”
A: Yes. The HUD Guidance explains that a housing policy which excludes individuals because of an arrest history is never “necessary to achieve a substantial, legitimate, nondiscriminatory interest.” Thus, housing providers may not use prior arrest history as a proper basis for denying an individual access to housing.
Neil Garfinkel
Executive Director
Realty Compliance Group
Title Services Compliance Group
Director
Legal & Regulatory Compliance
Lenders Compliance Group
