Skip to content

Compliant screening practices

Reduce your risk of fair housing violations

By Gwen Volk, CPM®

Rental housing managers working with the U. S. Department of Housing and Urban Development (HUD) or U.S. Department of Agriculture’s Office of Rural Development (RD) must be keenly aware of their responsibilities under the Fair Housing Act. The Act influences almost all aspects of their job, particularly when gathering data on their applicants and tenants, implementing marketing strategies compatible with their approved Affirmative Fair Housing Marketing Plan, and when their tenant selection plans are scrutinized by regulators.

But the Fair Housing Act also applies to managers of conventional rental properties, and a review of cases in 2023 from the websites of the U.S. Department of Justice (DOJ) and HUD’s Office of Fair Housing and Equal Opportunity (FHEO) reveals that a majority of the charges were against owners and managers of conventional rental properties.

Needless to say, fair housing should be at the forefront of the mind of everyone engaged in property management.

To reduce your risk of fair housing violations, it’s essential to understand how policies and practices that appear neutral on their face can have a discriminatory effect on a protected class, even if there was no intent to discriminate. This sort of inequity—known as “disparate impact” discrimination—occurs when a policy or practice has a disproportionate adverse effect on members of a protected class.

Policies and practices governing applicant screening can be susceptible to claims of disparate impact discrimination. Recently, FHEO has intensified its focus and enforcement initiatives around the use of criminal background, credit history, and source of income to screen applicants. While none of these are federally protected categories, all are potential fair housing minefields if applying them is found to have resulted in disparate impact discrimination.

Criminal background

Well-intentioned managers routinely run background checks on applicants and reject individuals with criminal records to protect the property, other residents, and site staff. FHEO cites data showing that persons of color and ethnic minorities are disproportionately represented in prison populations due to the well-documented systemic bias in our criminal justice system. FHEO also points to a 2016 study showing that 38% of incarcerated individuals are persons with disabilities, compared to only 15% of the general population—and their crimes are sometimes related to their disability.

To mitigate the disparate impact of criminal screening, FHEO recommends that properties not use criminal screening at all. If they choose to do so, however, they should adopt reasonable look-back periods, weigh the seriousness of the crime, and apply criminal screening on a case-by-case-basis—giving the applicant the opportunity to explain mitigating circumstances, provide proof of rehabilitation, or offer other evidence showing why their application should be accepted.

FHEO also says that if the individual is a person with a disability, they have the right to request a reasonable accommodation, which takes the form of setting aside or modifying the criminal screening policy. If a nexus can be established between their disability and the crime of which they were convicted, FHEO says this request should be evaluated for reasonableness in accordance with your reasonable accommodation policy.

Credit history

Another screening criterion that has received much attention is credit history. Advocacy groups argue that screening for poor credit and eviction records has a disparate impact on persons with disabilities and persons of color. In February 2023, according to a press release on the Federal Trade Commission (FTC) website, the FTC and the Consumer Financial Protection Bureau (CFPB) requested comments on how “background screening issues affecting individuals who seek rental housing in the United States […] may be driving discriminatory outcomes.” Subsequently, in October 2023, per an announcement on the CFPB website, the FTC and CFPB acted against a prominent credit screening company with thousands of rental property clients for hindering people from finding rental housing by producing tenant screening reports that were full of inaccuracies and based on undisclosed sources.

While property managers aren’t in control of how screening companies produce their data, they should be aware of this issue and take steps to ensure that the credit reporting companies they use have sound practices.

And finally, while some states and localities include source of income as a protected class, source of income is not protected under the federal Fair Housing Act. Nonetheless, the courts have demonstrated that using source of income as a screening criterion can have a disparate impact on the protected classes of sex, families with children, and persons of color.

Often these cases center on the refusal to accept Section 8 vouchers. According to the Center on Budget and Policy Priorities, in 2022, 74% of voucher holders were women and 43% were Black, compared to 24% white and 25% Hispanic. It should be noted that willingness to accept Section 8 vouchers does not obligate the owner to rent to the voucher holder, if the payment standard of the housing authority is less than the market rent. In addition, owners who accept vouchers retain the right to screen these applicants, using the same criteria as they would for any other applicant, with the exception of ability to pay the rent, as their rent will be subsidized by the housing authority should the property accept them.

Screening best practices

Based on my conversations with screening professionals, here are some “best practices” to reduce your risk of fair housing violations related to screening:

  • Make sure your written rental criteria or tenant selection plan is very clear as to how your screening procedures will be applied.
  • Create an internal document that is very detailed and specific so that your staff knows how to proceed when negative reports are received.
  • When sending a notice of denial based on criminal screening, be specific and have in the file the docket number and history with supplemental documents  to back you up on the rejection.
  • Give applicants the opportunity to explain before denying them.

The best way to reduce your risk of fair housing violations during screening is to review your screening criteria with a critical eye. What are the sound business reasons for having these policies and procedures? If there’s a less discriminatory way to satisfy these concerns, then it is your responsibility to use that less discriminatory option.

Journal of Property Management

Gwen Volk, CPM®, has been active in the affordable housing industry since 1983 as CEO of a Midwest management company, chief compliance officer for a Dallas-based firm, and president of Gwen Volk INFOCUS, Inc., a training and consulting firm. Since 2009, she has served on IREM’s Affordable Housing Advisory Council and is a past chair of IREM’s Ethics Hearing and Discipline Board. Gwen holds a B.A. in English and an M.S. in business and is a nationally recognized expert in HUD, LIHTC, bond, and fair housing compliance.

Similar Posts

Are HUD’s industry stakeholders ready for HOTMA?

An update on the implementation of the Housing Opportunity Through...

Compliant screening practices

Reduce your risk of fair housing violations

Hear our voices

The IREM Government Affairs team acts on issues critical to...