Guest view: How do recent HUD guidelines impact residential landlords?
On April 4, 2016, the United States Department of Housing and Urban Development published a 10-page guidance document on how the Fair Housing Act applies to use of criminal background records by private housing providers.
This controversial policy pronouncement has caused considerable consternation in the real estate community, particularly among residential landlords.
The Fair Housing Act prohibits the refusal to sell or rent a dwelling to any person because of race, color, religion, sex, disability, familial status and national origin.
Although having a criminal record is not one of the characteristics protected by the Fair Housing Act, HUD concluded that a blanket policy refusing to rent a dwelling to anyone convicted of a felony could have a “disparate impact” on racial and ethnic minorities. On the other hand, landlords have an obligation to protect other residents and their property, and a legitimate interest in protecting the landlord’s property.
The Supreme Court has concluded that barring a housing applicant because of an arrest without a conviction is not a legitimate reason for denying housing to the applicant.
As for criminal convictions, HUD has outlined three factors that housing providers must consider when assessing whether there is a link between a landlord’s policies and interests: severity of the conduct, nature of the crime and the amount of time that has passed since the conviction.
A blanket policy that excludes all potential tenants who have been convicted without considering the three factors above does not satisfy the burden of demonstrating a valid interest and may result in a disparate impact.
Lastly, if the housing provider can prove that its policy is necessary to fulfill its interests, the potential tenant or HUD may still attempt to show that the landlord’s goal may be accomplished by a different policy with a less discriminatory effect.
One safe harbor against a potential discrimination claim allows a private landlord to deny housing to any individual convicted of illegal manufacture or distribution of a controlled substance, even if a discriminatory effect may result from this practice.
So what should a private landlord do? Some guidance can be found in the long standing rules applicable to federally subsidized housing.
One of HUD’s core functions is funding public housing and the Section 8 voucher program, which subsidizes rent for low income residents in private housing owned by landlords participating in the program.
HUD provides extensive guidance to public housing authorities and Section 8 landlords on when they must, or when they can in their discretion, deny housing to individual convicted of certain crimes.
HUD provides that a Section 8 landlord or public housing authority is required to deny federally assisted housing to applicants under the following circumstances: if the applicant or any member of the applicant’s household has been evicted from federally assisted housing for a drug-related criminal activity within the last three years; if the landlord determines that any member of the household engages in illicit use of drugs; if the applicant or any member of the applicant’s household is subject to a lifetime registration requirement under a State sex offender registration program; or if the landlord has reasonable cause to believe that a household member’s abuse or pattern of abuse of alcohol interferes with the health, safety, or right to peaceful enjoyment of the premises by other residents.
A Section 8 landlord or public housing authority may, in their discretion, deny housing if the applicant or any member of the applicant’s household is currently involved in, or has engaged within a reasonable time before admission in drug-related criminal activity, violent criminal activity, other criminal activity that would threaten the health, safety or right to peaceful enjoyment of the premises by other residents or the landlord or related parties.
HUD did not incorporate the criteria applicable to public housing authorities and Section 8 landlords into the guidance applicable to private landlords, but the author submits that if a private landlord complies with HUD rules for Section 8 landlords and public housing authorities, prosecution for a violation of the Fair Housing Act should be extremely unlikely.
Further, although the guidance is still the stated policy of HUD, vigorous enforcement is unlikely under the current administration.
This being said, what is “reasonable” under the criteria applicable to public housing authorities and Section 8 landlords is open to argument.
A residential landlord with concerns in this area should consult with legal counsel for specific advice.
Tom Gacki is a Harrisburg real estate attorney with Eckert Seamans Cherin & Mellott.