Proposed Rule Would Remove Criminal Conviction Restrictions for Fair Housing Testers

To investigate whether screening policies are discriminatory, HUD wants agencies to use testers with actual criminal backgrounds.

HUD recently published a Notice of Proposed Rulemaking in the Federal Register that would eliminate restrictions on the use of fair housing testers with prior criminal records. Fair housing testers working with Fair Housing Initiatives Program (FHIP) grantees and Fair Housing Assistance Program (FHAP) agencies are used to identify systemic biases in the housing industry. These testers mimic real-world housing transactions to uncover racial, gender, and other forms of discrimination.

HUD seeks public comment on this proposed rule and invites all interested parties and members of the public to submit their views, comments, and recommendations for improvement on this proposal. Comments may be submitted electronically by Dec. 29 through www.regulations.gov.

HUD’s recent announcement brings a renewed focus on applying Fair Housing Act (FHA) standards to the use of criminal records screening in housing‐related transactions. This proposed rule aligns with HUD Secretary Marcia Fudge’s April 12, 2022, Memorandum, “Eliminating Barriers That May Unnecessarily Prevent Individuals with Criminal Histories from Participating in HUD Programs.” Additionally, it would help ensure that FHIP- and FHAP-funded entities are able to fully investigate criminal background screening policies that are potentially discriminatory under federal civil rights laws by using testers with actual criminal backgrounds.

How Screening Policies Can Violate the FHA

The 2022 memo highlighted the need for investigators to be aware of the ways in which criminal background screening policies and practices can violate the Fair Housing Act. According to the memo, the FHA prohibits:

• Denying housing based on arrest records;
• Blanket bans on anyone with a criminal record; and
• Conducting background checks inconsistently, by performing them on some and not others based on stereotypes or fear.

Further, an owner must consider applicants on a case‐by‐case basis and evaluate the nature and severity of the crime; consider the length of time that has passed since that crime was committed; and make a determination based on facts and evidence, and not a perceived threat.

The memo also provides some examples of evidence that would support a finding of reasonable cause to believe that there was discriminatory intent or that disparate treatment occurred. Such a finding would make an owner liable for discrimination under the FHA. The following are examples and not an exhaustive list of evidence:

• A housing provider routinely advises Native American applicants about a criminal records screening policy but doesn’t advise white applicants about the policy.
• A housing provider applied a criminal background screening policy to a Black applicant but didn’t apply the policy to a white applicant.
• A housing provider rejected a Hispanic applicant based on his criminal record but rented to a white applicant with a comparable criminal record.
• A property manager discouraged a Black applicant with a criminal record from applying, saying their record would probably lead to a rejection, but encouraged a white individual with a comparable criminal record to apply, saying that it was possible their record wouldn’t turn up and offering them an application form.
• A housing provider evicted a Black tenant who was convicted of a crime but didn’t evict a white tenant who was convicted of a similar crime.
• After learning that an applicant was previously homeless and hospitalized for treatment of a mental health condition, a management company departed from its standard procedures and conducted a criminal background screening of the applicant.