Best Practices for Running Background Checks

By Megan Milne, Associate Attorney, Hart Kienle Pentecost

Landlords should exercise caution in establishing their procedure for approving or denying an applicant for residency, specifically with regard to criminal background checks. Criminal background checks should not be used as a basis to deny approval of someone for residency. Such consideration of one’s criminal background history creates the risk that a landlord is in violation of the Fair Housing Act, even if the landlord is unaware of such violation.

If a landlord treats applicants with comparable criminal histories differently because of a protected class, then that could constitute intentional discrimination in violation of the Fair Housing Act. Unless a landlord has a specific intent to treat applicants differently on the basis of race, religion, sex, disability, familial status, national origin, etc., a landlord should not be determined to be in violation of this form of intentional discrimination.

However, even if there is no intent by the landlord to discriminate based on an individual’s race or national origin, criminal history-based restrictions violate the Fair Housing Act if the negative impact of the restriction could affect renters or housing market participants of one race or national origin over another (i.e., discriminatory effects liability). Discriminatory effects liability is assessed under a three-step burden-shifting standard requiring a fact-specific analysis. See 24 C.F.R. § 100.500. The three steps include 1) evaluating whether the criminal history policy or practice has a discriminatory effect; 2) evaluating whether the challenged policy or practice is necessary to achieve a substantial, legitimate, and nondiscriminatory interest; and 3) evaluating whether there is a less discriminatory alternative.

For evaluating whether a criminal history policy has a discriminatory effect, the burden is satisfied if there is a showing of a disparate impact. Such evidentiary proof can vary depending on the nature of the claim alleged and the facts of that case. For example, one can use national or local statistical evidence, and supplemental evidence such as applicant data, tenant files, census demographic data, and localized criminal justice data to determine whether there is, in fact, a disparate impact. A landlord may offer evidence to refute the claim that a disparate impact exists.

For the second step, the landlord must be able to provide evidence that there is a substantial, legitimate, nondiscriminatory interest supporting the challenged policy and that the challenged policy actually achieves that interest. See 24 C.F.R. § 100.500(b)(2); see also 78 Fed. Reg. 11460, 11471 (Feb. 15, 2013). Ensuring resident safety and protecting property for example could qualify as substantial and legitimate interests, but the landlord must prove that the policy or practice actually assists in protecting resident safety and/or property. Landlords cannot rely on the broad generalization that an individual with an arrest or conviction record poses a greater risk than one without. Essentially, a policy or practice that fails to consider the nature, severity, and recency of criminal conduct, and instead places broad, blanket bans on anyone within a generalized group of individuals (i.e., anyone with a criminal conviction), is unlikely to serve a substantial, legitimate, and nondiscriminatory interest.

With the third step, the burden shifts back to the landlord to prove there is no other practice that can serve the same interest and have a less discriminatory effect. 24 C.F.R. § 100.500(c)(3); accord Inclusive Cmtys. Project, 135 S. Ct. 2507. Before factoring in someone’s criminal history, a landlord should aim to take into account other factors that indicate the type of resident the applicant would be, i.e., tenant history, evidence of rehabilitation efforts, etc.

On April 4, 2016, HUD published its “Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions.” Among other things, this guidance memorandum concluded that if criminal background checks are going to be used, after going through the above 3-step process, such information should be held until after an applicant’s financial and other qualifications are verified.

Conclusion: Criminal background checks should be avoided as a basis for denying approval of someone for residency because the landlords have a high burden in satisfying the above heightened three-step process standard. Landlords should also exercise caution in establishing their application approval/denial process to conform with the Fair Housing Act and applicable law and check with their legal advisor to make sure they are complying.