On April 4, 2016, The Department of Housing and Urban Development (“HUD”) announced new guidance on the HUD’s interpretation of how the Fair Housing Act applies to would-be tenants with criminal convictions.

The Fair Housing Act (the “Act” or “FHA”) prohibits intentional housing discrimination and housing practices that give rise to unjustified discrimination based on race, national origin or other protected class. The HUD, in conjunction with the Supreme Court’s decision in Texas Dep’t of Hous. & Cmty. Affairs v. Project Inc., 135 S. Ct. 2507 (2015), has extended those protections to disparate impact claims in the context landlord prohibitions on renting to those with criminal records. Under a disparate impact analysis, the inquiry is not whether the specific policy is intentionally discriminatory but whether a facially neutral policy disproportionately impacts a protected class.

The regulations to the Fair Housing Act, and reinforced by the Supreme Court’s decision, state, “[a] practice has a discriminatory effect where it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin.” However, that is not to say landlords must rent to those who have criminal convictions. In order for a policy to be upheld, it must serve a substantial, legitimate, nondiscriminatory interest of the housing provider, and those interests could not be served by another practice that has a less discriminatory effect. The following steps, akin to “strict scrutiny” used in federal court review of claims typically involving protected classes of people, provide an analysis in determining whether a landlord’s use of criminal history results in a discriminatory effect under the Act.

The burden in the initial step rests with the aggrieved home seeker or the HUD to prove that the landlord’s criminal history policy has a discriminatory effect. What that means is that a complainant must show that the policy results in a disparate impact on a group of people because of their race or national origin. This can be proven by showing that the policy actually or predictably results in a disparate impact. If the plaintiff satisfies their burden under the first step of the analysis, the burden shifts to the defendant-landlord to show the policy was necessary to achieve a substantial, legitimate, nondiscriminatory interest.

In step two of the analysis the landlord must show that the substantial, legitimate, nondiscriminatory interest being protected is not merely hypothetical or speculative. The landlord must provide evidence that proves that the challenged policy actually achieves the substantial, legitimate, nondiscriminatory interest. Resident safety and protecting property have been found to be substantial and legitimate, but in order to satisfy the landlord’s burden in this step, those interests must be the actual reason for the policy.

The HUD, in its April 4, 2016 guidance, explained that blanket exclusions because of prior arrests cannot satisfy the burden that the policy furthers a substantial, legitimate, nondiscriminatory interest. The HUD’s reasoning was that “a housing provider who denies housing to persons on the basis of arrests not resulting in conviction cannot prove that the exclusion actually assists in protecting resident safety and/or property.”

Unlike prior arrests, prior convictions can serve as evidence that a person may engage in criminal conduct. However, the landlord must show that that the policy furthers a substantial, legitimate, nondiscriminatory interest. For example, a landlord with a blanket prohibition on anyone with a criminal conviction will not be able to satisfy the burden under this step of the analysis. Further, even narrowly tailored blanket policies will likely fail to satisfy the landlord’s burden of proof. For example, a policy that excludes all persons who committed a certain type of offense must still be shown to further an actual substantial, legitimate, nondiscriminatory interest. In order to satisfy their burden, a housing provider using a blanket prohibition for a certain type of crime must show that the policy distinguishes between the criminal conduct that presents a threat to resident safety and property and criminal conduct that does not. Moreover, a policy that fails to take into account the nature, severity, and recency of the applicant’s criminal conviction is unlikely to satisfy the standard.

The intention of these analyses under step two is to emphasize that blanket policies prohibiting those with criminal convictions will likely be illegal under the FHA and instead, a case-by-case determination must be used when relying on a person’s criminal convictions as a bar to housing.

In the third and final step of the analysis, if the landlord has shown that the policy actually serves a substantial, legitimate, nondiscriminatory interest, the burden shifts back to the plaintiff to show that a less discriminatory, alternative policy exists. The plaintiff can look to mitigating evidence not contained within the criminal record such as: facts or circumstances surrounding the criminal conduct; the age of the individual at the time of the conduct; evidence that the individual has maintained a good tenant history before and/or after the conviction or conduct; and evidence of rehabilitation efforts. When these or other factors are taken into consideration, it may lead to a more narrowly tailored, nondiscriminatory policy that serves the substantial, legitimate, nondiscriminatory interest of the landlord.

Now that it has been established that blanket prohibitions on home seekers with criminal convictions will almost certainly violate the FHA, as with most laws, there is an exception. A landlord may prohibit all prospective tenants with criminal convictions for the manufacturing or distributing of a controlled substance. Therefore, no claim may be brought by a complainant against a landlord for having a policy that bans anyone convicted of manufacturing or distributing a controlled substance, even if the prohibition results in a discriminatory effect. It is important to note that this exception only applies to those convicted of manufacturing or distributing controlled substances and not to those accused or arrested, but not convicted of manufacturing or distributing. Further, the exception does not allow for a blanket prohibition on those convicted for possession of a controlled substance. Therefore, a ban on any prospective tenant who has been convicted of possession of a controlled substance will likely violate the FHA. Whereas, a ban on any prospective tenant who has been convicted of manufacturing or distributing a controlled substance will not violate the FHA.

Lastly, nothing has changed in regard to intentional discrimination. If a landlord has a policy which bans all members of a protected class, that policy is facially discriminatory and is a per se violation of the FHA. However, the HUD and FHA are not just concerned about a discriminatory policy, evidence of intentional discrimination through actions may be used to show discrimination before a person applies for housing. For example, if a property manager told a Hispanic person that their criminal record will disqualify them, but failed to do so when speaking with a Caucasian person, that is evidence of discrimination.

If overt, direct evidence of discrimination does not exist, then the three-step analysis above must be engaged in order to show a violation of the FHA.

In conclusion, the Fair Housing Act prohibits both intentional discrimination and practices or policies that result in discrimination against a protected class. Because certain minority groups are disproportionately incarcerated, blanket prohibitions against renting to those who have criminal convictions will disparately impact those groups, which is a violation of the FHA. It is important to remember, nothing in the FHA prohibits a landlord from taking criminal convictions into consideration, but those considerations must not be overly broad or arbitrary and must actually serve to further a substantial, legitimate, nondiscriminatory interest.