So You Didn’t Rent to an Ex-Con… Can They Sue for Discrimination?

U.S. Department of Housing and Urban Development (“HUD”) Secretary Julian Castro announced in early April 2016 that the blanket use of criminal histories to deny housing may, in effect, be discriminatory and a violation of the Fair Housing Act.

According to HUD, broadly using criminal histories to deny the lease, sale or finance of real estate to an individual may lead to a lawsuit or administrative action by HUD. The new guidance is of particular concern for landlords, who often have a responsibility to provide a safe environment for tenants and who may deny leases to ex-convicts as a result.

Since 2004, more than 650,000 individuals annually have been released from federal and state prisons. Over 95 percent of current inmates will be released at some point, according to the U.S. Department of Justice. Unsurprisingly, then, a background check on a potential tenant may reveal an arrest, a conviction, or jail time. But landlords and property managers can no longer broadly refuse to rent property because of criminal records without risking a discrimination claim. Per HUD, “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…”

The Fair Housing Act has long protected against denying rentals based on race, gender, religion, national origin, disability, and familial status. Discrimination can be overt – where a landlord doesn’t rent to women, for example – or inferred from actions or the outcome – say, if a landlord refused to rent to anyone without a college degree and intended thereby to exclude minorities or, even if the landlord doesn’t intend to discriminate, statistics show that the policy discriminates because the vast majority of minorities don’t have college degrees. Citing disparities in the US Justice system and disproportionately high rates of incarceration for – and criminal records among – minorities, HUD’s new guidance aims to combat the “disparate impact” of what would otherwise seem non-discriminatory: denying housing to those with criminal records.

While the Equal Employment Opportunity Commission has long considered carte blanche denial of employment because of a criminal record discriminatory, the new guidance is part of a developing trend. Excluded tenants recently sued the owners of a New York apartment complex because of a policy automatically excluding anyone with a criminal record. The apartment complex defended itself saying they were protecting residents. According to the civil rights firm representing the plaintiffs, the 2 year old case was “one of the first to challenge a blanket ban on housing imposed by a private landlord as a civil rights violation.” Don’t expect it to be the last.

Notably, HUD’s new guidance also prevents landlords from adopting broad-based policies that differentiate between certain types of crimes over others without more. Simply excluding those with a theft conviction wouldn’t work. So how does a landlord looking to safeguard its community comply with the law?

Interestingly, by being subjective: instead of blanket bans, landlords must consider the nature, severity, and recency of criminal conduct along with the rental history of the individual. If a policy would exclude someone with a 20-year-old conviction for theft received at the age of 18, it may be problematic. If a policy denies an apartment to a burglar released from jail last month, it is probably acceptable. Policies should also draw a contrast between arrests, convictions, and jail time – an arrest by itself isn’t proof of criminal conduct whereas convictions and jail time are much stronger. Even so, the principal question in a non-discriminatory policy is whether the individual poses a potential risk to resident safety or property, not whether they have a 10 year old conviction for DWI. Expect future disputes about “sex offenders.”

Naturally, there are some exceptions. Under the FHA, landlords can deny tenancy to persons with a conviction (not arrest) for drug manufacturing and distribution (but this does not extend to DRUG POSSESSION). Generally speaking, the FHA also doesn’t apply to small, owner-occupied buildings (with 5 apartments or less); single family homes rented without a broker; religious organizations providing non-commercial housing to a religious subset; certain private clubs (that favor club members over others); and certain areas designated for senior housing. But landlords should be cautious in relying on these very narrow exceptions.

Landlords and property managers should revisit their screening process to verify how tenants are denied housing if they have a criminal record. This is still a developing area of the law, and landlords would be wise to consult with a lawyer to determine if their policy could yield a discrimination claim.

If you need legal advice, schedule a meeting with Tiwari + Bell PLLC through our website or by calling (210) 417-4167.