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Monday, April 04, 2016

New HUD Guidance - The Intersection of Disparate Impact Discrimination and Criminal Background Checks

Last year, the Supreme Court ruled that disparate impact discrimination claims are cognizable under the Fair Housing Act. For a refresher, read my blog post about the decision here. In sum, landlords may be liable for discrimination if the effect of a facially neutral housing action has a disproportionate impact on a protected class.

Today, the office of general counsel to the U.S. Department of Housing and Urban Development issued a memorandum offering guidance regarding the potential discriminatory effects of taking an adverse housing action against a tenant based upon their criminal history. A link to the memorandum can be found here. The logline for this memorandum is that HUD believes taking an adverse housing action based upon criminal history may constitute discrimination on the basis of race or national origin because of its disparate impact on those protected classes.

The memorandum examines the three-step burden-shifting test a court would analyze in a claim brought by a tenant who alleges they were discriminated based upon their criminal history. The stated purpose of the memorandum is facially neutral, addressing “how the discriminatory effects and disparate treatment methods of proof apply in Fair Housing Act cases in which a housing provider justifies an adverse housing action… based on an individual’s criminal history.” The practical effect of the memorandum, however, is that HUD has armed plaintiff’s attorneys with a new theory of liability that all landlord’s should understand.

The three-step burden-shifting test requires that a plaintiff first prove that the complained of practice has a discriminatory effect. If the plaintiff is successful, the defendant must then prove that the challenged practice has a legally sufficient justification. Finally, if the defendant proves a legally sufficient justification, a plaintiff must then prove that there is a less discriminatory alternative available. The HUD memorandum examines each question and attempts to offer guidance in turn.

Discriminatory Effect

HUD submits that national statistics stand for the conclusion that “[n]ationally, racial and ethnic minorities face disproportionately high rates of arrest and incarceration. Without drawing its own conclusion, HUD posits that these statistics, along with other evidence, could provide sufficient proof for the legal position that taking an adverse housing action, such as refusing to enter or renew a lease based upon criminal history, has a disparate impact on African Americans or Hispanics.

Legally Sufficient Justification

If a plaintiff is successful in proving that an adverse housing action on the basis of criminal history has a discriminatory effect on racial or ethnic minorities, a defendant would then be compelled to provide a legally sufficient justification for the action. In analyzing this factor, HUD acknowledges that “resident safety and protecting property are often considered to be among the fundamental responsibilities of a housing provider”. However, HUD does push back by requiring that a defendant submit evidence supporting the conclusion that a policy of discriminating on the basis of criminal history furthers the stated purpose of protecting residents and property. That is, a landlord cannot blindly rely upon this justification in every situation. HUD suggests that landlords consider each potential tenant on a case by case basis instead of having a blanket policy of refusing to lease to anyone with a criminal history

For example, HUD submits that the existence of a prior arrest, which does not carry a subsequent conviction, “has very little, if any, probative value in showing that he has engaged in any misconduct. An arrest shows nothing more than that someone probably suspected the person apprehended of an offense.” HUD concludes that “because arrest records do not constitute proof of past unlawful conduct… the fact of an arrest is not a reliable basis upon which to assess the potential risk to resident safety or property posed by a particular individual.”

Moving further, HUD submits that even a criminal conviction does not automatically create a legally sufficient justification. “A housing provider that imposes a blanket prohibition on any person with any conviction record – no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then – will be unable to meet this burden [of proving a legally sufficient justification].” HUD suggests that a “housing provider must show that its policy accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.”

Less Discriminatory Alternative

If a landlord proves a legally sufficient justification for the challenged policy or act, the plaintiff may still prevail by proving that a less discriminatory alternative exists. Here, HUD offers no substantiated guidance but submits that the analysis must be performed on a case by case basis. The only suggestion proffered by HUD is that a landlord may consider delaying a criminal history investigation until after a tenant has already qualified financially.


In the end, HUD has taken an aggressive position that all landlords must remain cognizant of when making housing decisions. When forming a policy of utilizing criminal background checks, a landlord should ensure that their policy is “tailored to serve the housing provider’s substantial, legitimate, nondiscriminatory interest and take[s] into consideration such factors as the type of the crime and the length of the time since conviction.” A landlord who has no evidence that its policy or action is grounded in nondiscriminatory justification will be vulnerable to complaints. 

At the very least, HUD has made it clear that blanket prohibitions on any person with a criminal history will face legal challenges based upon the Supreme Court’s upholding of the disparate impact theory of discrimination.