HUD Considers Amending How Disparate Impact Claims will be Investigated

Matt Nelson
Matt Nelson

HUD Considers Amending How Disparate Impact Claims will be Investigated

A recent proposal from HUD is targeting disparate impact, otherwise known as unintentional discrimination. This proposal would add more hurdles to prove housing discrimination due to disparate impact.

HUD is seeking feedback from the public regarding the amended procedures.

Landlords! Make sure your voice is heard and send feedback directly to HUD. Here’s how:

Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0500. Due to security measures at all federal agencies, however, submission of comments by mail often results in delayed delivery. To ensure timely receipt of comments, HUD recommends that comments submitted by mail be submitted at least two weeks in advance of the public comment deadline.

Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at http://www.regulations.gov.HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through the http://www.regulations.gov website can be viewed by other commenters and interested members of the public. Commenters should follow instructions provided on that site to submit comments electronically.

Let’s start with a little background:

In 2015, the Supreme Court ruled in the case of Texas Dept of Housing & Community Affairs vs. The Inclusive Communities Project, Inc. that under the Fair Housing Act some otherwise lawful activities, while free of discriminatory intent, may have a “disparate impact” on minority groups.

More recently, HUD announced that (in HUD’s opinion) denying a rental applicant on the basis of their criminal history may be a violation of fair housing law.  HUD’s observation is that more people of color have a criminal history than do white people so the use of a criminal record to determine an applicant’s ability to fulfill a lease obligation would have a disparate impact on applicants of color.   If a landlord or property manager is going to perform a criminal background check on an applicant and use the results of that screening result to deny the applicant, the landlord needs to be able to show that the criminal conduct that occurred in the past would have a direct impact on the applicant’s ability to honor the lease.

In June of 2019, HOME (Housing Opportunities Made Equal of Virginia) filed a lawsuit in the U.S. District Court for the Easter District of Virginia that argues that the screening policy used by Sterling Glen Apartments, Wisely Properties, LLC, and Multifamily Management Services, Inc., discriminated against people on the basis of race.

From an August 2019 news release from HOME:

“The lawsuit, filed June 4 in the U.S. District Court for the Eastern District of Virginia, argued that the screening policy used by Sterling Glen Apartments, Wisely Properties, LLC, and Multifamily Management Services, Inc., discriminated against people on the basis of race.

The revised policy only considers felony convictions for specific categories of offenses, excludes misdemeanor convictions, and does not treat people differently based on whether the applicant is on probation or parole. Most importantly, the policy assures individualized consideration for every applicant, allowing a prospective tenant to share information as part of the application review process, including the facts or circumstances surrounding their criminal conduct, proof of rehabilitation efforts, and evidence of a good tenant or employment history before or after the conviction or conduct.

“By adopting this new policy, Wisely has become a model and example for all housing providers in Virginia who do not conduct an individualized criminal background screening,” said Heather Mullins Crislip, president and CEO of HOME. “A policy that first screens applicants on their income and credit, then allows for a limited and relevant criminal background screening creates a more diverse community and helps many people who are trying to get their lives back on track be members of their community of choice. We’re grateful that Wisely took our concerns for equity in the process seriously and that we were able to work out an ideal policy.””

According to Roger Clegg, President of the Center for Equal Opportunity, “There are always going to be racially disproportionate results for any policy.”

“If you have a landlord who says, ‘I’m not going to rent to people with a history of violent crime,’ ” Clegg says. “The fact that that has a racially disproportionate result does not make it discrimination.” (Source)

Excalibur’s Technique – Don’t conduct criminal background checks on applicants.  Generally speaking, criminals are not financially responsible.  It is likely that the applicant you want to deny, while they may have a criminal background, it is likely they also have bad credit and/or a bad landlord reference.  There are two benefits to NOT conducting the criminal background check.  First, you reduce the chances of having to defend an accusation of housing discrimination.  Even if the landlord can prove that there was no intent to discriminate, or if the investigation determines that there was no evidence of any violation of the Fair Housing law, undergoing the investigation process is very expensive and time consuming.  Second, you reduce your liability regarding the actions or conduct of your tenant with respect to neighbors.  You have probably read or seen a news story where some tenant was attacked in their apartment and they sue the landlord because a security light was inoperative on the other side of the apartment complex.  Example – you offer a property as available for rent and you get an application.  You conduct a background check, including a criminal check, and find that the applicant was found guilty of car theft 10 years earlier.  Because it was a non-violent, non-drug related crime, and the applicant has good credit now, you rent them the property.  Months later your tenant attacks a neighbor and causes them severe injury.  It turns out your tenant has been a career criminal all along, they just never got arrested after their earlier car theft conviction.  Because your tenant is “judgment proof”, the neighbor sues YOU claiming that you were liable for their medical bills because you allowed this tenant to move in.  And during the Discovery process, your records indicate that you knew the applicant had a criminal record but you approved their application anyway.  Would the plaintiff’s attorney use that information against you?

To reduce the chance of having someone actively involved in criminal activity, during the showing of the property, and during the application process, make sure the applicant understands that you are a proactive manager and you WILL be coming by the property to conduct periodic inspections.  If the applicant is really engaged in criminal activity, the last thing they want is a landlord coming around all the time and they will look for somewhere else to live.

Excalibur Homes is more than just another property management company. We are an investment real estate firm that specializes in helping investors with buying, renovating,, leasing, managing, and selling single-family rental homes throughout Metro Atlanta.

We are Atlanta’s Rental Home Experts.

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