What the Latest Fair Housing Guidance on Criminal Background Checks Means for Real Estate

WASHINGTON (May 13, 2016) – The Department of Housing and Urban Development published Fair Housing Act guidance on April 4 that has raised concerns for housing providers who use criminal history screening processes to make decisions about sales, rentals financing and other real estate activity. Since then, real estate professionals have been asking what it means for them and their businesses.

Experts at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., answered audience questions and offered a number of helpful tips for staying in compliance with Fair Housing Act requirements, especially given that nearly a third of Americans—100 million people in all—have a criminal record, and an additional 650,000 are released from prison each year.

Caroline Elmendorf, chief compliance officer for Bozzuto Group, told Realtors® at a forum titled, “Criminal Background Checks, Fair Housing Compliance and You” that, “The three things we need to do when developing a program are have consistent procedures, uniform standards, and an explanation for criminal background check programs,” and that, “HUD has set a very high bar for what explanations we use.” 

HUD's guidance comes on the heels of a recent Supreme Court ruling that said a party may prove violations of the federal Fair Housing Act by either showing intentional discrimination or that a certain practice has an adverse or “disparate impact” on protected classes.

While persons with criminal records are not a protected class under the Fair Housing Act, HUD’s recent guidance maintains that criminal history-based barriers to housing have a statistically disproportionate impact on minority groups. Because minorities are a protected class under the Fair Housing Act, HUD’s guidance says that creating arbitrary or blanket criminal-based policies and restrictions could potentially violate the Fair Housing Act.

Elmendorf’s presentation looked broadly at the Fair Housing Act and disparate impact, and she advised members of the audience to examine their practices for compliance.

Although Elmendorf’s suggestions should not be considered legal advice, her general tips for real estate professionals, include:

  • Run a criminal background check last, and only after candidates have passed financial and other screening processes. In other words, do not complete a criminal check until credit checks come back clean.  However, she noted that there are timing and logistical issues related to splitting that process.
  • Consider the nature and severity of the crime, as well as how recently it occurred, when designing criminal screening policies. As an example, Elmendorf suggested that companies examine whether to exclude misdemeanors and non-violent felonies, like gambling or tax fraud.
  • Establish a look-back period that begins at the time of conviction. She noted that while the law is not crystal clear, HUD cited a study supporting a seven year look-back period, and that state Fair Credit Reporting Act laws also apply a maximum seven years look back.  
  • Allow individuals to present mitigating and extenuating reasons for why they should be considered in light of a conviction. Those may include facts and circumstances surrounding criminal conduct, age at the time of conviction, evidence of good tenant history, employment, or rehabilitation.

Elmendorf pointed to criminal background checks that focus on whether or not a potential tenant or homeowner has been arrested, rather than criminally convicted, as an example of policies that might be “tightened” for compliance. She also noted that there may be a benefit to policies that single out violent crimes, rather than all crimes, as doing so may be more demonstrably beneficial for resident safety.

NAR has summarized HUD’s guidance in a “Do’s and Don’ts” guide, with tips that urge real estate professionals to uniformly consider criminal history, regardless of an individual’s protected class status, while avoiding policies that exclude anyone based on arrest records alone.

“Part of being a Realtor® is committing to the belief that everyone has a right to live wherever they can afford, and that means strong support for the Fair Housing Act and its mission,” said NAR President Tom Salomone. “Today’s event was a chance to give our members a better understanding of the rules and regulations affecting their businesses so they can further strengthen the communities they serve, while ensuring equal housing opportunities for the people who live there.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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