Fair Housing and Criminal Background Checks

As landlords, you must balance protecting your property and tenants with complying with anti-discrimination laws. This episode explores how the Fair Housing Act intersects with tenant screening practices, focusing on HUD's 2016 guidance regarding criminal records.

We explain why a blanket “no criminal history” policy can lead to unintended discrimination, particularly under the concept of disparate impact.  We also break down state-specific laws, such as “ban the box” ordinances that restrict when and how landlords can inquire about criminal records.

Of course, we giving advice on documenting decisions, staying compliant with state and local laws, and common pitfalls to avoid.

If you’re a landlord navigating tenant screening, this episode will equip you with the knowledge to create a fair, legally compliant, and effective criminal background check policy. 

LINKS

👉 EZ Landlord Forms: Set up a FREE account. USE CODE 𝐒𝐓𝐀𝐂𝐈𝐄𝟏𝟓 to get 15% OFF ALL first-time purchases, EVEN THE ANNUAL FEE or LIFETIME FORMS!

👉 Episode 6: Creating Standard Operating Procedures for Your Business

👉 Episode 49: Analyzing Credit Reports for Tenant Selection

👉 Fair Housing Information: US Dept. of Housing and Urban Development. The primary source for federal fair housing laws and regulations.

👉The Fair Housing Act: This page from the Department of Justice outlines the full text of the Fair Housing Act.

👉Get certified in Fair Housing Laws: The Fair Housing Institute. Use code YLR2024 for 15% Off any course purchase.

👉 Equal Rights Center: For $50 you can take a course called Best Practices for Ensuring that Criminal Records Screening Policies & Practices Comply with Fair Housing Requirements

👉 Course Waitlist: From Marketing to Move In, Place Your Ideal Tenant
👉 Text Us a Question! Two ways: SMS text to 650-489-4447. OR

One way text only, you need to include your email for a response.

👉 Email us your questions! Stacie@YourLandlordResource.com, Kevin@YourLandlordResource.com
👉 Access all our Downloads (Forms and Docs)

👉 Please leave us a review of our podcast!

Apple Podcast or ITunes, go to the bottom of our main page (with logo) and click “Write a Review”.

Spotify, click the 5.0⭐ on the front of our podcast page.

👉 Want the podcast link emailed to you? Subscribe to our FREE newsletter! Check out a sample here

👉 Join our ...

Transcript

Stacie: 0:00

And we're not just talking about race here. What if you get a big ol burly guy with a bunch of tattoos applying, and one of those tattoos is a symbol for a gang, or one that's common to get when you've done time in jail? Because I think there's like 15 symbols just for jail. One being a teardrop next to their eye, and another is like the number five, like on a dice. You know, it's like four dots that make up like a square, and then there's one dot in the middle. And apparently, that symbolizes four walls, and the middle dot is the prisoner.

Kevin: 0:32

Wow, you sure know a lot about prison tattoos, Stace.

Stacie: 0:36

Hey, I know some stuff. You know, but seriously, what would you think if a guy who looked like Jelly Roll applied for your nice rental property?

Kevin: 0:44

I think, hey, pretty cool, Jelly Roll is living in our apartments.

0:53

Welcome to your landlord resource podcast many moons ago. When I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lack confidence in the hands on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping. After many failed attempts, fast forward to today. Kevin and I have doubled our doors and created an organized, professionally operated rental property business. Want to go from overwhelmed to confident? If you're an ambitious landlord or maybe one in the making, join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire. All while building a streamlined and profitable rental property business. This is your landlord resource podcast.

Stacie: 1:42

Hey everyone, welcome back to Your Landlord Resource. This is your go to podcast for everything self managing landlords need to know. I am Stacie Casella and always I'm joined here by my co host Kevin Kilroy.

Kevin: 1:57

Hey there everybody. This week's topic and it's actually a really important one, especially for landlords navigating the legal landscape of tenant screening. Because today we're discussing the topic of Fair Housing laws and how they intersect with criminal background checks for your rental applicants.

Stacie: 2:17

Yep, Kevin's right, this is an important topic.

Kevin: 2:20

Whoa. Whoa, slow down Want to make sure I have that recorded, Kevin is right. Okay, go ahead.

Stacie: 2:25

Oh lord. All right Yeah, moving on. So there are a lot of misconceptions out there about how landlords can use criminal background checks when evaluating prospective tenants. If you're not careful, you could inadvertently violate Fair Housing laws, which could lead to significant legal consequences. So, Fair Housing laws are in place to prevent discrimination and there's a delicate balance between protecting your property and your community and avoiding discrimination in your tenant screening process. But don't worry, we will break it all down today so you can feel confident you're complying with the law while still protecting your investment. So let's start off by talking about Fair Housing laws. There are seven federally protected classes under the Fair Housing Act. These include race, color, religion, sex, national origin, disability, and familial status. Some states and local jurisdictions add more protections, like marital status, sexual orientation, or even source of income. Now, when it comes to the Fair Housing Act in criminal background checks, things get a little interesting. Because the Fair Housing Act doesn't specifically mention criminal background checks. But HUD, which is the US Department of Housing and Urban Development, issued guidance in 2016 on how landlords should handle criminal background checks. They made it clear that a blanket policy of refusing to rent to anyone with a criminal record could violate the Fair Housing Act due to disparate impact. And disparate impact means that even if a landlord doesn't intend to discriminate, their policy could disproportionately affect certain protected classes. For example, HUD pointed out that African Americans and Hispanics are arrested, convicted, and incarcerated at rates that are higher than their share of the population. So, if you have a policy that automatically denies anyone with a criminal record, you could unintentionally discriminate against them by way of race.

Kevin: 4:42

And let me point that out that this is coming from HUD and not from us. It's not just about intent, it's about the actual impact of your policies. So, landlords need to be careful to make sure their criminal background check policy is justified and doesn't unfairly impact any protected class. Basically, landlords just can't have a blanket, no criminal records policy. They need to have a legitimate reason for denying someone based on their criminal history. One that's based on the actual behavior of the applicant, not just their record on its own. So, this is where the individualized assessments come in. HUD does recommend that instead of automatically disqualifying an applicant with a criminal record, landlords should conduct an individualized assessment to determine whether the criminal history poses a legitimate risk to the property, other tenants, or the neighborhood. You'd want to consider factors like the nature and the severity of the crime. How long ago did the crime occur? What has the applicant done since then? Like have they been rehabilitated? Have they had stable employment or housing? What was the age of the applicant when the crime was committed? And whether the crime was violent or non violent? You see, they want you to understand that by vetting your applicants and digging down into their background, is important because not all crimes are created equal, right? And some offenses have little or no bearing on a person's ability to be a good tenant. consider someone with a nonviolent drug offense from 15 years ago. That shouldn't carry the same weight as a violent felony committed last year. So basically, a one size fits all policy just won't cut it anymore.

Stacie: 6:34

Nope. And that makes sense when you think about it. All right, let's talk about time frame. HUD recommends that landlords take into account how long ago the crime occurred. They feel that the older the conviction, the less relevant it is to the tenant's current ability to be a responsible renter. And I get it. You need to give people the benefit of the doubt in some cases. It is possible for people to change over time, and a conviction from decades ago may have no relevance to their current behavior. So do your best to be thoughtful about how far back you go when considering criminal history. Now, I want to address different kinds of crimes, because another big question that landlords often ask is, are there certain types of crimes that I should always consider when screening tenants? And are there others that I can ignore? So let's clear this one up. And here's one problem. The HUD guidance doesn't give landlords a specific list, but it does indicate that violent crime or those that pose a risk to the safety and security of others should carry more weight than a nonviolent or a petty crime. So violent felonies, sexual offenses, or crimes involving damage to property or fraud are the types of things that might be relevant in a rental decision. But nonviolent offenses, such as minor drug possession or traffic violations may not be relevant. It's also important to note that arrest records alone aren't sufficient grounds for denial. An arrest without a conviction does not prove guilt. HUD has been clear that denying someone based solely on an arrest that did not lead to a conviction could be considered discriminatory. So, landlords, you need to focus only on convictions when making your decisions.

Kevin: 8:31

And yeah, that has been and should be the focus anyway, right? I mean, way back when, our applications had a section that asked if the applicant had ever been convicted of a felony crime, and our joke always was, convicted? No. So now that section I believe has been removed from most of the California rental applications. So, here's a tip. If you are still using old applications, you might want to take the time to get new updated ones that are specific to your state and even locality if required. I mean, there have been several updates to applications, leases, addendums, and forms to implement new laws and regulations. So, as we often stress to you guys, please make sure your application, forms, and leases are all up to date. We know you can get applications anywhere, like Zillow or your landlord management software so, just make sure they are state specific and have been updated with the most recent laws. EZ Landlord Form does everything state specific, so you should be good to go if you have an account with them. If you want to set up a free account, we will link them in the show notes for you. Okay, so now that we've covered the basics, let's talk about how landlords can create a policy that complies with Fair Housing laws while still protecting their property. And it all starts with having a written policy. This policy should outline the specific types of criminal behavior that will be considered and the factors that will be taken into account during an individualized assessment. And once again, as with all your policies, transparency is key. I mean, we've discussed creating your standard operating procedures or SOPs numerous times on the show, and this is just another example of why they are so important. Your standard operating procedures are where you create policies and rules about how your business is handled. You are essentially making the decision in advance so that anyone who works with or for you can make sure that the business is operated in a consistent manner. And this is one policy where consistency needs to be applied to all applicants. If you apply your policy differently to different applicants based on their race, national origin, or any other protected class, you could be facing a Fair Housing complaint. And you guys, it's also a good idea to provide applicants with an opportunity to explain their criminal history. Maybe they've completed a rehabilitation program or they've maintained steady employment for years since their conviction. Giving applicants a chance to provide context shows that you're being fair and reasonable. And there isn't really a specific form out there that we can suggest you use. Maybe this is a time where you sit down and have a heart to heart or just ask them to provide a letter explaining their criminal history and, if available, some sort of proof that they went through a program or paid rent on time for the last X number of years. I mean you kind of get the point here.

Stacie: 11:37

Yeah, that's a good idea. I mean everyone deserves a chance to explain themselves and if you feel this person is not a good fit for your unit, then just move on. Oh and the episode on creating standard operating procedures is episode 6, so we'll make sure we link that in the show notes for you. But let me talk about what should be included in your written policy with regards to criminal backgrounds. You're going to want to address the following areas. Directly Related Convictions. So the policy should focus on whether a criminal conviction is directly related to the applicant's ability to be a good tenant and not a threat to others or your property. Mitigating Information. The policy should allow applicants to present mitigating information such as rehabilitation efforts or steady employment. Written notice. Your policies should provide written notice to applicants of their right to present mitigating information. Criminal History Accuracy. The policy should ensure that the criminal history information is accurate and that it's not outdated, incorrect, or falsified. And Consideration Order of Acceptance or Denial. Your policy should delay considering criminal history information until after an applicant's financial and other qualifications have been verified. And the reason why you want to do this is because if they don't qualify financially, you cannot accept them based on that and not even have to worry about the whole criminal background information. You also want to make sure that your written policies regarding vetting, accepting and denying rental applications is available for everyone should they ask for it. And lastly, use an Adverse Action Notice. The policy should include providing an adverse action notice to applicants if their housing is denied based on a consumer report. Now this can be your credit report, this could also be a criminal background check, it can also be an eviction report. And when you send this out, sometimes it's a good idea to include the criminal background report as well as your policies along with it, so they can understand how you came to your conclusion of denying their application to rent. All right, you guys I want to take a minute to talk about common mistakes that landlords make when it comes to using criminal background checks. Now, again, whether you do or do not decide to run formal reports, you must be consistent and run them on everyone, not just whom your gut gives you that vibe about. And for our criminal background checks, as well as the credit checks, we like to use TenantAlert. And here's our little spiel on them. TenantAlert provides the only instant tenant screening service with what they call Lease Guarantee. Which means they rate an applicant on a scale of a hundred and offer a lease guarantee up to$10,000 of protection against damages, lost rent, or legal fees. And that guarantee starts at$199 a year. And that's for their highest rated report on a client of a hundred. And that can be paid by you or the tenant. I mean, think about that for$200 bucks, you get$10,000 of insurance on your tenant.

Kevin: 15:01

You know, that's not bad. I mean, especially if you're in a position where you're having trouble finding someone to rent your place and you start to get that desperate feeling. And you know, we've all been there where you get someone who applies who might not be perfect, but you really want to get the place rented and move on. So you kind of panic and accept someone who doesn't meet all your criteria. And usually the tenant ends up being a problem on some level. But with this lease guarantee that TenantAlert offers, you can have them pay, pay yourself or, you know, meet somewhere in the middle and get insurance to cover your butt, you know, just in case.

Stacie: 15:38

Yeah, exactly. All right, so let me finish quickly, so I can talk about the mistakes people make. You know guys, with TenantAlert, you can select from a number of reports including credit background checks, national wide criminal checks, and nationwide eviction checks. You have the option to add up to four applicants in one order, so you can screen multiple roommates. You can pay for the credit screening yourself, or you can send a link to your applicant for them to pay for the service. And I can definitely say that TenantAlert has very easy to read reports with summaries to help you determine if the applicant meets your qualifications or not. You know, in episode 49, where we did a podcast teaching you all how to read a credit report. It's a TenantAlert report that we work through on the episode. So we'll link that episode as well as more information about TenantAlert in our show notes. All right, back to what landlords can do wrong in their criminal background check reports. And as mentioned earlier, the worst mistake you could make is to have a blanket policy that automatically denies anyone with a criminal record. Again, this can lead to disparate impact discrimination, and it's a surefire way to get yourself in legal trouble. Also as mentioned before, is to consider arrests that did not lead to conviction. You guys, this is a huge no no. An arrest alone does not prove anything, and denying someone based on an arrest record is a violation of Fair Housing laws. And the next one should be obvious, maybe not for some, but landlords need to avoid treating applicants differently based on their race, ethnicity, or any protected classes. If you're more lenient with some applicants and stricter with others, you're opening yourself up to a discrimination claim. And we're not just talking about race here. What if you get a big ol burly guy with a bunch of tattoos applying, and one of those tattoos is a symbol for a gang, or one that's common to get when you've done time in jail? Because I think there's like 15 symbols just for jail. One being a teardrop next to their eye, and another is like the number five, like on a dice. You know, it's like four dots that make up like a square, and then there's one dot in the middle. And apparently, that symbolizes four walls, and the middle dot is the prisoner.

Kevin: 17:59

Wow, you sure know a lot about prison tattoos, Stace.

Stacie: 18:03

Hey, I know some stuff. You know, but seriously, what would you think if a guy who looked like Jelly Roll applied for your nice rental property?

Kevin: 18:12

I think, hey, pretty cool, Jelly Roll is living in our apartments.

Stacie: 18:16

Yeah, listen, I'm not a fan of tattoos, especially ones on the face and neck, but hey, if the tenant qualifies, what are you going to do? If they're your best applicant, you're going to accept them. Another thing landlords can get in trouble for is going too far back in an applicant's criminal history. Again, the further back the conviction, the less relevant it is. HUD recommends that landlords focus on more recent convictions that are directly related to the safety of the property and the other tenant. For example, in California, landlords can only consider convictions within the last seven years. If an individual was convicted but has completed their sentence more than seven years ago, this information cannot be used against them when they're applying for housing. And the last mistake landlords make is not giving the applicant a chance to explain their criminal history. If you're too rigid with your policy and you don't allow for any exceptions or any explanations, you could be seen as unfair and discriminatory.

Kevin: 19:17

And a side note here, if you decide to deny an application based on information in a criminal background report, as Stacie mentioned earlier, you must provide the applicant with what is called an Adverse Action Notice. Which is basically a formal notice of why you denied the applicant to rent from you. This notice should include the reason for the rejection and the applicant's right to receive a copy of the report. All right one more thing that you all must really pay attention to is the laws of your state and the local government laws on criminal background checks. Because when it comes to state laws, they can vary widely. So, while the Federal Fair Housing Act sets the baseline for preventing discrimination, many states and local jurisdictions have additional laws that landlords need to follow when screening tenants, especially regarding criminal background checks. And those laws can be even stricter than the federal regulations. Some cities have ban the box laws, which prevent landlords from asking about criminal history in a rental application. And actually, those quote unquote ban the box laws are gaining traction around the country. These laws generally prohibit landlords from asking about criminal history on the initial rental application. Instead, they can only conduct a criminal background check after the applicant has passed other aspects of the screening process. You know, like credit and income verification. These laws were initially focused on employment applications, but now many jurisdictions are applying them to housing as well. So, for instance, states like California, Oregon, I believe Illinois, as well as cities like Seattle have adopted these type of laws. And here in California, landlords are allowed to consider criminal history, but we can do so only after making a conditional offer to the applicant. And I will tell you that we pull a criminal background report on every applicant regardless, and not once have we had one come back with anything. The main thing we're looking for, honestly, is if someone is convicted of a sexual crime. And thankfully we have not had to deal with that as of yet. But I should say that these laws are designed to give people with criminal records a fair shot at housing. Studies have shown that when the landlords see a criminal history up front they're often inclined to reject the application outright. Ban the box laws try to mitigate that bias by delaying when the criminal background check can be done.

Stacie: 21:55

And you guys, I see both sides here. And all we're trying to do today is make sure that landlords are aware that violating these laws can lead to significant penalties. For instance, in places with ban the box laws, if you reject an applicant because of their criminal history before you're allowed to check it, you could face fines, legal action, and even a civil rights complaint. And that is something you absolutely do not want to deal with. It's also important to note that some states and cities have gone even further than the ban the box law. New Jersey, for example, has the Fair Chance and Housing Act which not only bans landlords from asking about criminal history on an application, but also limits the types of criminal records that can be considered once you're allowed to look at them. Under New Jersey's law, landlords cannot consider arrests that didn't lead to convictions, expunged or pardon convictions, or even juvenile records. They can only consider serious criminal offenses. And even then, there are limits on how far back they can go. Like we said, in California, you can only go back seven years. Same goes in Washington state. Now, I think it's worth noting that the Fair Credit Reporting Act, also known as the FCRA applies in all 50 states and mandates a seven year restriction on reporting certain background check information like civil suits, civil judgments, and arrest records. The Fair Credit Reporting Act does not have a timeline restriction on criminal convictions. This is why you need to know if your state or local authority does. Another example is Illinois, which passed the Just Housing Amendment in Cook County. It requires landlords to perform an individualized assessment for any criminal conviction before rejecting a tenant based on their criminal record. Similar to HUD's guidance, it requires landlords to consider factors like the nature of the offense, how long ago it occurred, and whether the applicant has been rehabilitated. And in many cases, these individualized assessments are required by law, not just recommended best practices. If a state or local law requires it, landlords who fail to conduct a thorough assessment could be violating the law, even if they think they're complying with federal guidelines.

Kevin: 24:27

Now, of course, not every state has these additional restrictions. In some places, landlords still have broad discretion to consider criminal records, as long as they comply with federal Fair Housing laws. But even in those states, landlords should be cautious. Remember, the Fair Housing Act still applies, and the risk of disparate impact discrimination is real.

Stacie: 24:51

Yeah, that's a good point.

Kevin: 24:53

And just because your state doesn't have specific protections around criminal background checks, doesn't mean your city or county won't. Local ordinances can sometimes be stricter than state law, so landlords need to stay up to date on the laws that apply to their rental properties. And let's not forget laws change all the time. I mean, states and cities are constantly updating their housing laws, especially as more attention is given to criminal justice reform. That means us landlords need to stay informed about new laws that might affect their tenant screening practices. And a great way to stay informed is to regularly check with your local housing authority or your legal counsel. There are also landlord associations and online resources to keep landlords updated on any new regulations.

Stacie: 25:43

Yeah, you know we've said this before, joining your local rental housing association is a really good idea. And this here is another example of why. Because as laws are presented to the government, oftentimes those rental housing associations will reach out to let members know so people can vote for or against something. And a prime example is here in California. We have a rent control bill on the ballot this November, and I have been able to follow its progress from information sent out in the mail over email, and in newsletters too.

Kevin: 26:18

Yeah, we need to make sure we read that thoroughly and vote the right way on that one. I mean, the way it's written is kind of confusing and appears to help tenants when in reality, history has shown over and over these rent control laws have done the exact opposite. Okay, so with all this in mind, let's talk about how landlords can create screening policies that are fair, compliant, and still protect their rental property. And what it really comes down to is having a well thought out written policy, that complies with federal, state, and local laws. Make sure your policy includes an individualized assessment of any applicant with a criminal history. And ensure that you're only considering relevant factors, you know, such as the nature of the offense and how much time has passed. And don't forget transparency. Your screening policy should be clearly communicated to applicants up front so they know what to expect. If you need to deny someone based on their criminal record, explain why, and make sure you're providing them with any rights they have under the law. You know, like the right to dispute errors on their background check. As we consistently emphasize, document, document, document. You want to always keep thorough documentation on every decision you make. If you're ever challenged on a denial, you'll want to have a clear record showing that you followed your policy consistently and in a non discriminatory way. The bottom line is that Fair Housing laws and criminal background checks can be tricky, but with the right approach landlords can protect themselves from legal risks while treating all applicants fairly. I mean, it's all about having a clear, consistent, and transparent policy.

Stacie: 28:10

Yep, that's right. And remember, if you're ever unsure about your screening process It's always a good idea to consult with an attorney who specializes in landlord tenant law. It really is better to be safe than sorry. All right, you guys, we're about ready to wrap this up. But before we go, I want to give you some resources where you can learn more about criminal background checks. And we'll link all of these in the show notes for you. The first one is for Fair Housing information, you can go to the website for the US Department for Housing and Urban Development. Now this is your primary source for federal Fair Housing laws and regulations, including HUD's 2016 guidance on the use of criminal background checks. Second is the Fair Housing Act. Now this page from the Department of Justice outlines the full text of the Fair Housing Act and includes information on the enforcement of Fair Housing laws. Third, if you want to learn more about your local landlord tenant laws, check out websites for your state and your local housing authorities. Many states and cities have housing authorities that provide updated information on local regulations, such as that ban the box law or additional protected classes. And if you're looking to get certified in Fair Housing, we can recommend the Fair Housing Institute. If you use our code YLR2024, they will give you 15 percent off any course purchase. And lastly, there is a website called the Equal Rights Center. For$50, you can take a course called Best Practices for Ensuring That Criminal Records Screening and Policies and Practices Comply With Fair Housing Requirements. And per their website, this course will give housing providers the best practices for ensuring that their housing related criminal records screening policies and practices align with the Fair Housing Act and recent guidance from HUD. Again, we're going to link all that information in our show notes for you, so you can just tap and go. Alrighty, that is our show for today. And we hope you now have a little better understanding about Fair Housing and criminal background checks. And hey guys, if you like what you hear on this podcast, would you do us a favor and subscribe or follow on your favorite podcast platform? That way our episodes will be there waiting for you each week so you can enjoy all we have to say about landlording and owning rental properties. And we would be super appreciative if you could leave us a kind review. Those reviews really help other landlords, like you, know that we are the real deal and hopefully they'll listen to. Links to review sites are in our show notes. If you'd like to download any of the free forms that we offer, or if you want to sign up for our weekly newsletter, you can access those in the show notes as well. And if you'd like to follow along with what we put out daily, you can find us on Instagram, Facebook, and YouTube. And we also have a private Facebook group as well. You can find all the links in our show notes. Thanks again for taking time out of your day to listen to our podcast. Until next time, you've got this, landlords.