The Impact of Disparate Impact – Your Screening Procedures May Need Revising NOW

April 4, 2016 at 3:17 pm 1 comment

The following is an email sent this morning (4/4/16) by AANC Executive Director Will Brownlee:

HUD Secretary Announces Guidance Regarding Excluding Persons with Criminal Records and Landlord Use of Blanket Bans/Denials

Dear NC rental industry leaders:

 It appears HUD is kicking off Fair Housing Month with a bang.  From the New York Times this morning (thank you Tom and Mary Gwyn for forwarding):   http://www.nytimes.com/2016/04/04/nyregion/federal-housing-officials-warn-against-blanket-bans-of-ex-offenders.html?emc=eta1

Ever since last summer’s U.S. Supreme Court decision in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project and the Court’s formal endorsement of a disparate impact fair housing standard, industry watchers have tried to anticipate what may be the next Fair Housing shoe to drop for the housing industry.  This appears to be it.   Based on the information contained in the article and in HUD’s Guidance (see link below), it would appear that criminal screening standards may, by necessity, need to become more nuanced to be viewed as fair housing compliant.

A full copy of the HUD Guidance, released this morning, can be found here:  http://portal.hud.gov/hudportal/documents/huddoc?id=HUD_OGCGuidAppFHAStandCR.pdf .

Key takeaways after reading the Guidance, which appears at first blush to be something of a frontal assault on the industry’s use of criminal screening for applicant denials:

Although the specific interest(s) that underlie a criminal history policy or practice will no doubt vary from case to case, some landlords and property managers have asserted the protection of other residents and their property as the reason for such policies or practices. Ensuring resident safety and protecting property are often considered to be among the fundamental responsibilities of a housing provider, and courts may consider such interests to be both substantial and legitimate, assuming they are the actual reasons for the policy or practice. A housing provider must, however, be able to prove through reliable evidence that its policy or practice of making housing decisions based on criminal history actually assists in protecting resident safety and/or property. Bald assertions based on generalizations or stereotypes that any individual with an arrest or conviction record poses a greater risk than any individual without such a record are not sufficient to satisfy this burden . . . .

 In most instances, a record of conviction (as opposed to an arrest) will serve as sufficient evidence to prove that an individual engaged in criminal conduct. But housing providers that apply a policy or practice that excludes persons with prior convictions must still be able to prove that such policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. 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 . . . .

 A housing provider with a more tailored policy or practice that excludes individuals with only certain types of convictions must still prove that its policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” 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. A policy or practice that fails to take into account the nature and severity of an individual’s conviction is unlikely to satisfy this standard. Similarly, a policy or practice that does not consider the amount of time that has passed since the criminal conduct occurred is unlikely to satisfy this standard, especially in light of criminological research showing that, over time, the likelihood that a person with a prior criminal record will engage in additional criminal conduct decreases until it approximates the likelihood that a person with no criminal history will commit an offense . . . .

Section 807(b)(4) of the Fair Housing Act provides that the Act does not prohibit “conduct against a person because such person has been convicted … of the illegal manufacture or distribution of a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802).”37 Accordingly, a housing provider will not be liable under the Act for excluding individuals because they have been convicted of one or more of the specified drug crimes, regardless of any discriminatory effect that may result from such a policy . . .

Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African Americans and Hispanics. While the Act does not prohibit housing providers from appropriately considering criminal history information when making housing decisions, arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification. 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.

At first blush, it would appear that this Guidance practically mandates that the housing providers consider adopting much more nuanced criminal screening policies, ones that take many different factors into account, as this HUD Guidance effectively renders blanket denials for criminal history a thing of the past – with the specific exception of a conviction involving the manufacture or distribution of illegal drugs.  At a minimum, this Guidance should be considered required reading by both industry professionals and their respective legal counsel for Fair Housing Compliance and risk assessments moving forward.

Will Brownlee
Executive Director & General Counsel
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Entry filed under: AANC, Government Affairs, Regulatory Issues. Tags: , , , .

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