Best Practices for Complying with HUD’s Criminal Background Check Guidance

This year, HUD and the courts have brought much attention to possible Fair Housing Act violations from criminal screening policies. In April, HUD issued guidelines that spell out how HUD will evaluate fair housing complaints in cases where a site rejects an applicant based on criminal history.

As an owner of an assisted site, HUD sets out specific grounds for denying admission to applicants based on certain drug-related and other criminal activity. The rules require you to add certain screening criteria to your resident selection plan and lets you add other optional criteria to screen out applicants with drug-related and criminal backgrounds.

We’ll discuss the mandatory and optional criminal background screening requirements. And if your site has adopted optional screening criteria, we’ll cover how to evaluate and possibly amend your criminal screening policy to avoid a successful challenge in a fair housing case based on its disparate impact on minority applicants.

One-Strike Rule Screening Requirements

HUD’s one-strike rule has both mandatory and optional criteria for screening out applicants based on drug-related and other criminal activity.

Mandatory screening criteria. The rule requires you to screen out applicants with histories of illegal drug use or who are registered sex offenders. Specifically, you must deny admission to an applicant household if:

• Any household member has been evicted from a federally assisted site for drug-related criminal activity within the past three years [HUD Handbook 4350.3, par. 4-7(C)(2)(a)];
• Any household member is currently engaging in illegal drug use [HUD Handbook 4350.3, par. 4-7(C)(2)(b)];
• You determine that there’s “reasonable cause to believe that a household member’s illegal use or a pattern of illegal use of a drug may interfere with the health, safety, or right to peaceful enjoyment of the premises by other residents” [HUD Handbook 4350.3, par. 4-7(C)(2)(b)];
• You determine that there’s “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.” Here, the screening standards must be based on behavior, not the condition of alcoholism or alcohol abuse [HUD Handbook 4350.3, par. 4-7(C)(2)(d)]; or
• Any household member is subject to a lifetime registration requirement under a state sex offender registration program [HUD Handbook 4350.3, par. 4-7(C)(2)(c)].

Optional screening criteria. The rule also lets you adopt optional screening criteria. Specifically, you may reject a household if, during a reasonable time before the date of the admission decision, a household member “is currently engaging in, or has engaged in”:

• Drug-related criminal activity [HUD Handbook 4350.3, par. 4-7(C)(3)(a)];
• Violent criminal activity [HUD Handbook 4350.3, par. 4-7(C)(3)(b)]; or
• Other criminal activity that would threaten other residents’—or site employees’, contractors’, or agents’—health or safety or their right to peaceful enjoyment of the premises [HUD Handbook 4350.3, par. 4-7(C)(3)(c)].

It’s up to you to decide what crimes warrant rejection. But once you decide, you must add those criteria to your resident selection plan and apply them consistently to every applicant. The owner may also deny admission to an applicant using his or her standard for admission screening if the criminal background check indicates the applicant provided false information. However, the owner must deny admission if the state sex offender registration record indicates the applicant provided false information.

If the determination is made by either the local housing authority or owner to deny admission to the applicant, the entity making the determination must notify the applicant of the proposed denial of admission; provide the subject of the record and the applicant with a copy of the information the action is based upon; and provide the applicant with an opportunity to dispute the accuracy and relevance of the information obtained from any law enforcement agency [HUD Handbook 4350.3, par. 4-27(E)(6)].

Owners differ on what types of crimes warrant rejecting applicants. Regardless of your criteria, you must consider your choices’ disparate impact on minority applicants. Whatever you decide, HUD says you must put your criteria in writing so that your staff knows when to reject applicants [HUD Handbook 4350.3, par. 8-14(B)].

CRIMINAL HISTORY SELECTION CRITERIA BEST PRACTICES

The following best practices are recommended so that any housing provider that uses criminal histories in its applicant screening process will consider disparate impact and review its criteria, adjusting as necessary.

Understand Key Terminology

If you review criminal records as part of your application process, being able to clearly understand the disposition of the record is critical in how you evaluate prospects for housing, says tenant screening expert Linda Richer. Here are some key terms used in criminal record screening:

Arrest. This word can be confusing or misinterpreted in the context of resident screening. Records of “arrest” refer to when a person is “picked up” or “cuffed” for a criminal event. He or she may be taken into custody (typically to a local police station), but a case has yet to be filed in a court. Richer said that most screening companies don’t include records of arrest in their criminal background service.

Pending case. Once sufficient evidence has been presented, typically the prosecutor will file charges. The charge filed opens a case at the appropriate court and the case remains pending until a final disposition, such as guilty or dismissed, has been rendered. HUD’s new guidelines warn against making housing decisions based on arrests, so it’s important to distinguish between arrests and charges filed (that is, pending cases).

Disposition. Disposition refers to how the case was resolved in the criminal justice system. Any criminal record that isn’t pending would have some type of disposition.

Deferred adjudication. Some states use the term, “deferred adjudication,” which is a criminal record showing conviction status, but the court had “deferred” the conviction to allow the offender to participate in some type of community service program. If completed, the conviction status would be removed; if not, the conviction status would stand.

Conviction. A record of conviction means the case resulted in the offender either pleading guilty or being found guilty.

Look-back period. This refers to the amount of time a site will consider when evaluating criminal histories. According to the Handbook, the owner may define the length of time prior to the admission decision during which the applicant must not have engaged in the criminal activity. The owner shall ensure that the relevant “reasonable” time period is uniformly applied to all applicants in a non-discriminatory manner and in accordance with applicable fair housing and civil rights laws [HUD Handbook 4350.3, par.4-7(C)(3)(c)].

Exit from incarceration. The date of exit from incarceration, parole, or release date if the sentence included jail time.

Review Your Criminal Screening Criteria

If you haven’t done so already, you should pull out your tenant selection criteria and take a close look at the evaluation standards for applicants with criminal records. Depending on what it says, you may need to make some changes right away. Then review it in detail—and get help from your attorney, resident screening company, and other advisors to ensure that it complies with HUD guidelines. Follow these suggestions to ensure your screening criteria is compliant with the new HUD guidelines:

Remove any ban based on arrests. The first thing to do is to check whether your policy includes any ban based on arrest records, Richer said. HUD’s guidance clearly states that records of arrest should not be used to deny housing or terminate a lease. There may be circumstances where a criminal event has occurred and the arrest record might justify further research into the behavior, but an arrest alone can’t be used to deny housing eligibility.

Include statement of the purpose served by criminal screening. When documenting your resident selection policies, include a statement that the policies serve to reduce risk to your communities and residents. As you review your policies and make adjustments, be prepared to show that your policies are set to improve your communities’ and residents’ safety, and that the policy is substantial, legitimate, and has no discriminatory interest.

Remove blanket/generalized felony bans. Check whether your policy includes any “blanket” exclusions for all convictions or all felonies. Those policies are likely to be challenged by disparate impact claims.

Determine most serious and violent crimes. Replace any generalized felony or conviction bans with only the most serious or violent crimes that accomplish your goal of reducing risk. These may include both felony and misdemeanor crimes as long as consideration has been given to the nature of the crime.

Include look-back periods and exit from incarceration. Keep recidivism rates in mind when setting look-back periods. Look-back periods may be based on the conviction date or the date of exit from incarceration.

Address applicants with multiple unrelated violent and nonviolent felony convictions. A pattern of criminal activity may present a risk to your site (especially if it’s recent), so you may want to consider the number of criminal events within a period of time. The events may be unrelated, but a pattern of crimes may show a propensity toward risky behaviors over a short period of time or within a recent period of time.

Remember the Fair Credit Reporting Act (FCRA). Add language that informs applicants that when criminal records are found, they may have an opportunity to appeal and provide circumstances surrounding the criminal events.

The FCRA is the main compliance law for all screening providers (known as consumer reporting agencies), says Richer. This federal law provides guidance and obligations for screening providers, users of consumer reports (including owners), and consumers (including housing applicants). Once the criminal records are obtained, screening providers can deliver the information only in accordance with FCRA requirements These include an adverse action requirement in which if you determine that an applicant isn’t suitable for housing, or you decide to offer housing with a conditional offer, based on the consumer report, then an applicant is directed to the screening company to find out what information was delivered to the owner and informs the applicant that he or she may dispute any inaccurate or non-updated information.

As you review your policies and make adjustments, keep in the back of your mind the goal you have: to demonstrate that your policies are set to improve your site’s and resident’s safety, and that the policy is substantial, legitimate, and has no discriminatory interests, Richer says. You’ll also want to consider if there’s any less discriminatory practice that could achieve the same goal.

And don’t forget, your policies may come under scrutiny from testers, she warned. Take the time to train your staff properly, and for them to properly communicate your policy regarding criminal records. You want to be sure your policy isn’t being communicated in an abbreviated fashion, and that your staffers aren’t discouraging applicants with criminal histories from applying to your sites.

Appeals of Rejections/Individualized Assessments

In addition to developing a complex policy that includes a graduated tier of look-back periods that relate to the seriousness of the crimes, fair housing attorney Kathelene Williams says that another way to defend your criminal history policy is to include in the policy a description of an applicant’s right to appeal a rejection.

Each rejection should inform the applicant that she has a right to obtain a copy of the criminal record on which the rejection is based. If you use a third-party screening company, these records should be provided by your screening company.

Decide who in your company will conduct these appeals, Williams suggested. It often proves useful to assign appeals to the same person or persons so they can develop some expertise in how to conduct these hearings, including the factors that prove to be the strongest to indicate a rejection should be maintained or reversed. 

Williams often uses the term “individualized assessment” when reviewing whether an applicant is able to explain mitigating circumstances that may change the original determination to reject an application due to a criminal record. There are a number of factors that can be considered during the appeal, including:

• The seriousness of the criminal offense;
• The relationship between the criminal offense and the safety and security of residents, staff, or property;
• The length of time since the offense, with particular weight being given to significant periods of good behavior;
• The age of the household member at the time of the offense;
• The number and nature of any other criminal convictions; and
• Evidence of rehabilitation.

For further information: You can download the recent one-hour webinar, “Applicant Screening and Criminal Histories: Addressing Disparate Impact Liability Under the Fair Housing Act,” here.

Insider Sources

Linda Richer: Vice President, AmRent, Inc., www.Amrent.com.

Kathelene Williams, Esq.: The Law Firm of Williams & Edelstein, P.C., www.fairhouse.net.