Convicted felons and registered sex offenders have to live somewhere once they’ve been released. However, is renting to rental applicants with criminal histories worth the potential risk to your residents and staff staff?
It’s impossible to determine whether or not rental applicants with criminal histories will reoffend. Recidivism rates vary based a tangled web of factors, from their specific criminal history to their demographic characteristics. Not everyone who’s made a few mistakes in the past is going to be a criminal in the future-but landlords can’t be expected to separate risky applicants from those who deserve a second chance.
With incarceration rates being as high as they are, property managers in many communities are making tough decisions about whom to rent to. 1 in 4 Americans has a criminal conviction on their record-and in some areas, that proportion is much higher. Renting only to people whose background check is pure as the driven snow often isn’t an option.
Nevertheless, the primary responsibility of landlords and property managers is to protect their residents. In addition, landlords and their agents may be held liable for the actions of criminals who live on their property, and the financial or physical damage they do to other residents and their property. For example, say that a resident is injured by shady guests of a tenant who’s dealing drugs. The victim could sue the landlord and report the property to authorities as a public nuisance; and as a result, you could be fined, or your property could be seized.
So does this mean that you should simply decline all rental applicants with criminal histories?
“Not so fast,” say the Feds. Last year, the federal Department of Housing and Urban Development (HUD) fired a shot across the bow of property managers and landlords nationwide, warning that refusing to rent to applicants solely on the basis of their criminal history could constitute a violation of the Fair Housing Act.
The reason: Such a refusal has a disparate effect on Black Americans, who are more likely than other demographics to have a criminal conviction on their record. During Obama’s presidency, it was HUD’s position that an outright ban on rental applicants with criminal histories constitutes de facto discrimination against Black Americans.
A statement from former HUD secretary Julian Castro noted that some 100 million Americans have a criminal conviction on their record. That’s nearly 1 in 3 adults. Furthermore, HUD asserted a public policy interest: When “individuals are released from prisons and jails, their ability to access safe, secure and affordable housing is critical to their successful reentry to society.” (You can read Secretary Castro’s statement in its entirety here.)
Convicted criminals are not themselves a protected class under the Fair Housing Act. However, HUD’s position is that if the effect of a rental policy has a disparate effect on a protected class (i.e., race, color, creed, handicap, or national origin), then the landlord could be guilty of illegal discrimination-even if they had no intent to discriminate. The disparate impact theory of discrimination as it relates to housing has recently been upheld by the Supreme Court.
When former mayor Rudy Giuliani and police commissioner William Bratton cleaned up the city of New York, they credited a great deal of their success to their willingness to enforce laws against nuisance crimes. They posited that many small-time criminals, such as graffiti artists and squeegee men, were also committing more serious crimes. By taking them off the streets, therefore, crime would decrease significantly-a problematic theory known as “broken windows policing.”
Landlords don’t get to use that strategy anymore. HUD warned that a blanket ban on rental applicants with criminal histories likely violates the FHA “if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the housing provider, or if such interest could be served by another practice that has a less discriminatory effect.”
If your rental leases or CC&Rs contain language expressing similar policies, it’s probably time to remove them-before a plaintiff’s attorney finds a case and files a suit.
In deciding whether or not to rent to rental applicants with criminal histories, landlords must take into account the severity of the crime and the length of time that has elapsed. HUD did carve out an exception for those convicted of manufacturing or distributing drugs; landlords and property managers are still free to refuse to rent to this population if they choose. They’ve also exempted buildings with 1-4 units where the landlord lives on-site.
As of now, landlords should tailor their rental criteria and documents very carefully. “Arbitrary and overbroad” prohibitions are red flags. Landlords should apply the minimum restrictions necessary to ensure the protection and safety of their residents, neighbors, and staff.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.