In this episode, Rebecca Griffin (she/her), HOME's Director of Education, goes over the basics of recent HUD Guidelines on tenant screening. If you'd like to learn more or schedule a training on these issues, please contact Rebecca, at rebecca.griffin@homecincy.org or 513-977-2627.
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Disclaimer: The work behind this publication was supported by funding under a grant with the U.S. Department of Housing and Urban Development. The substance and findings of the work are dedicated to the public. HOME is solely responsible for the accuracy of the statements and interpretations contained in this publication. Such interpretations do not necessarily reflect the views of the Federal Government.
Any information or content provided by HOME is for educational purposes only and should not be construed as legal advice or a substitute for legal counsel.
Episode Transcript | Fair Housing Focus: Tenant Screening | July 2024
Introduction
Welcome to Fair Housing Focus, I’m Rebecca Griffin, HOME’s Director of Education and your host for this episode. Housing Opportunities Made Equal (HOME) is a private, nonprofit fair housing organization working to eliminate unlawful discrimination in housing in the Greater Cincinnati area. HOME advocates for and enforces housing regulations for all protected classes and promotes stable integrated communities.
In our last episode, Clementine Deck provided an overview of fair housing law, criminal records, and the individualized assessment. (Thanks, Clem!) Today, we are going to zoom out a bit to look at applicant screening more broadly. The goal of today’s podcast is to educate listeners about Fair Housing implications in the rental screening process and provide some general tips on preventing unlawful discrimination. I will be highlighting and reading excerpts from a document released by the Department of Housing and Urban Development (HUD) in April 2024 titled: Guidance on Application of the Fair Housing Act to the Screening of Applicants for Rental Housing. A link to the full guidance document will be provided in the notes of this episode. As always, this information is for educational purposes only.
Applicant Screening
Why do housing providers screen applicants? The general understanding is that housing providers have a legitimate business interest in selecting tenants who will pay their rent and otherwise comply with lawful requirements of their lease. However, some tenant screening practices do not serve these goals. In fact, tenant screening based on imprecise or overbroad criteria may unjustifiably exclude people from housing opportunities in unlawful ways. Additionally, housing providers are increasingly turning to third-party screening companies which has created some confusion about who is making the screening decisions and who is at fault when a Fair Housing violation occurs.
For background, there are hundreds of companies that offer tenant screening services. It is estimated to be a 1.3-billion-dollar industry. Companies obtain and analyze information about applicants from many sources and then generate a report about the person being screened, often including a recommendation for whether to accept or reject the applicant. Companies often market their screening services as a necessary, efficient, and effective tool to screen out problem tenants. Some also advertise that automated screenings are less likely to be discriminatory and that their services can help housing providers comply with Fair Housing law.
Tenant screening reports vary widely in features and accuracy. Many companies offer basic screening reports that include information from credit reports and court records. These court records tend to include eviction records regardless of the case disposition, as well as a broad swath of criminal records (e.g., administrative citations, bench warrants, and traffic tickets, along with misdemeanors and felonies). Some companies also offer screening reports with additional details, such as medical debt, foreclosures, student loans, and even the number of phone numbers an applicant has used. The inclusion of such wide-ranging and sometimes inaccurate information can result in qualified applicants being denied housing in violation of Fair Housing laws.
Fair Housing Compliance
The Fair Housing Act prohibits discrimination in the sale, rental, and financing of dwellings and in other housing-related services on the basis of race, color, religion, sex (including sexual orientation and gender identity), national origin, disability, or familial status (children under 18 being present, seeking legal custody of minor children, or pregnancy). As I just stated, some housing providers have been led to believe that they are less likely to violate the law if they outsource tenant screening or rely on reports from these companies to make decisions.
HUD clarifies that both the housing provider and the screening companies they use can be held liable for Fair Housing violations for their role in illegal discrimination. Housing providers should remember that they are responsible for avoiding discriminatory housing decisions, even when they use a tenant screening company to assist in the process. They should develop policies and practices to ensure that all denials reflect their own sound judgment. As a general matter, tenant screening companies should serve to help implement, rather than effectively set, a housing provider’s screening policies.
Housing providers and tenant screening companies need to have open transparent relationships. HUD states that“in selecting a tenant screening company, housing providers should inquire into the ways in which the company ensures its screenings are accurate and nondiscriminatory. Furthermore, "the more information a tenant screening company discloses, the easier it will be for housing providers to assess whether using a particular tenant screening service meets their needs and promotes compliance with their fair housing responsibilities."
Guiding Principles for Nondiscriminatory Screenings
HUD lays out six guiding principles for nondiscriminatory screenings. These principles can be used by housing providers and tenant screening companies to help comply with the Fair Housing Act.
Principle 1 - Choose Relevant Criteria.
Screening applicants only for information relevant to the likelihood that they will comply with their tenancy obligations can help ensure that screenings are fair and nondiscriminatory. Past actions unrelated to tenancy and past incidents unlikely to recur (e.g., eviction due to job loss) should not be the basis for denials. Screening criteria should be waived if they are not relevant for an applicant’s individual circumstances, even if the criteria might be relevant in general (e.g., minimum income for an applicant whose rent will be paid by someone else). Records without a negative outcome are not relevant. For example, the record of an eviction proceeding has no relevance if the tenant prevailed.
Principle 2 - Use Only Accurate Records.
Ensuring records are accurate can help avoid discriminatory screenings. Certain types of inaccuracies are more likely to occur for members of some demographic groups than others. Datasets used for tenant screenings are often incomplete, missing key personal identifiers, or updated infrequently. Often records of people bearing the same or similar names are erroneously attributed to the wrong person, a problem that is more common for last names more prevalent among Hispanic, Asian, or Black individuals.
Principle 3 -Follow the Application Screening Policy. This may seem obvious to some, but records outside the scope of a housing provider’s stated screening policy should not be considered. For example, misdemeanors or civil violations should not be considered under a policy of screening for felony convictions. Housing providers should not ask applicants about any criminal, credit, or housing history that falls outside the scope of their screening policies.
Principle 4 - Be Transparent with Applicants.
I believe this principle is so important that I want to read directly from the HUD guidance:
Transparency helps ensure consistent, nondiscriminatory results by making sure everyone has clear, complete information. Applicants need to know how they will be screened to decide whether to pay an application fee and take the time to fill out an application. This challenge is particularly acute for low-income applicants who cannot afford to pay multiple application fees, as well as for applicants with inflexible work or caretaking schedules since some housing providers only accept applications in-person during business hours. Moreover, systematically giving applicants complete, detailed information ensures that some applicants are not more likely to pass the screening than others simply because they are better informed about how to navigate the process. Transparency is important throughout the application process so that applicants know beforehand how they will be screened and afterwards why they were denied.
Tenant screening policies should be in writing, made public, and readily available to potential applicants. Prior to applying, potential applicants should be given a copy of the screening policies or told where they can find them (e.g., the link to a website). Screening policies should contain enough detail for an applicant to tell whether they are likely to qualify (e.g., what records will be considered, what incidents will be disqualifying, and how far back the screening will look). Applicants should also be given information about how evidence of mitigating circumstances can be submitted and will be treated, how to request a reasonable accommodation for a disability, and how to contest an inaccurate, incomplete, or irrelevant record. Publicizing this information can increase the number of qualified applicants by attracting those who might have assumed different standards apply. Transparency up front can also reduce the number of unqualified applicants, saving housing providers and applicants time and expense.
Denial letters should contain as much detail as possible as to all reasons for the denial, including the specific standard(s) that the applicant did not meet and how they fell short. For example, rather than saying “you were denied because of your credit score,” the letter should say “you were denied because we require a credit score of XXX and you have a credit score of XXX according to XXX service.” If an applicant fails multiple screening criteria, all of those criteria should be included in the denial letter. All records relied on should be attached, including any screening reports. Denial notifications should also instruct applicants how to submit an appeal if a record is inaccurate, incomplete, or irrelevant; mitigating circumstance exists; or a reasonable accommodation for a disability is needed.
Principle 5 - Allow Applicants to Challenge Negative Information.
Applicants should be allowed the opportunity to challenge any potentially disqualifying information. The applicant should be sent any information reviewed (e.g., their screening report) along with the precise standards at issue. This information should be provided in a way that makes it easy for the applicant to understand why they were denied. The applicant should then be given the opportunity to dispute the accuracy or completeness of any negative information, for example by demonstrating that a record belongs to another person with a similar name or omits a court decision in their favor. The applicant should also get the chance to show – even if a negative record is accurate – that they will comply with their tenancy obligations regardless. Applicants may do this by disputing the relevance of a standard to their particular circumstance (e.g., minimum income requirements for those with Housing Choice Vouchers). Applicants may also demonstrate that any negative behavior is unlikely to recur by providing evidence of mitigating circumstances (e.g., participation in a rehabilitation or financial literacy program, a change in education or employment status, or a positive reference from a social service provider or another person who knows the applicant).
Principle 6 - Design and Test Complex Models for Compliance.
The Fair Housing Act applies broadly, including to housing decisions made using machine learning and other forms of AI. Housing providers and tenant screening companies may find it difficult to be sure they are complying with the Act when the reasoning behind automated decisions is not transparent. Evaluating the data used by a model, creating test data, and rigorously testing to validate the model can reveal whether it has disparate outcomes and what less discriminatory alternatives might exist.
Now let's talk about three types of screenings particularly likely to pose fair housing concerns: credit, eviction, and criminal records.
Special Consideration: Credit, Eviction, and Criminal Records.
Over broad screenings in these areas, including screenings that fail to account for individual circumstances, are especially likely to have an unjustified discriminatory effect based on race, national origin, sex, disability, or another protected characteristic.
Credit History
Credit scores are calculations made based on a consumer’s credit report designed to assess the relative risk of consumers defaulting on a loan (i.e., not the risk that a tenant will fail to pay rent). To construct this score, national credit bureaus assemble information about a consumer’s credit history for their credit file, place information in the consumer’s credit report, and then use that information to calculate a numerical score. The vast majority of housing providers and tenant screening companies run credit checks on applicants. Some tenant screening companies go a step further, incorporating credit information into models that obscure how the information is used.
Why is this a problem? Black and Brown persons are more likely to have inaccurate credit reports or have had experiences that resulted in low or no credit scores. Residents of majority-Black areas are more than twice as likely to dispute items in their credit report as errors than residents of majority-White areas. As of August 2021, Native American, Black, and Hispanic individuals had median FICO credit scores of 612, 627, and 667 respectively, while White individuals had a median credit score of 727. In fact, more than half of White households have FICO credit scores above 700 compared to 21% of Black households. Additionally, individuals with disabilities are more likely to report they have a “bad” or a “very bad” credit score than individuals without disabilities. Survivors of domestic violence are disproportionately women and also more likely to have had credit ruining experiences.
HUD is unaware of any studies showing that credit reports and scores accurately predict a successful tenancy, and as mentioned above they were not designed for this purpose. Many households prioritize paying the rent over other debts during times of financial hardship, yet their choice to do so — which should indicate they will continue to prioritize paying rent — is generally not included in credit reports.
Eviction History
Eviction records are one of the most commonly marketed tenant screening components, and they are standard features of many screening reports. Tenant screening companies have built private databases from court records of eviction cases individuals have been involved in. The quality of the records in these databases varies, as does whether they speak only to the existence of a filing or include its ultimate resolution. Court records of evictions are notably unreliable: 22% of the eviction records evaluated in a large study contained ambiguous information on how the case was resolved or falsely represented a tenant’s eviction history.
Eviction disproportionately affects Black and Hispanic renters, women, families with children, and individuals with disabilities. Even though fewer than one in five renters are Black, over half of all eviction cases are filed against Black renters. Black and Hispanic renters have eviction cases filed against them at higher rates than White renters, with women of those groups bearing even higher disparities. Evictions are filed against adults living with children at more than twice the rate than for adults living without children.
In certain circumstances, it would be particularly problematic to hold a past eviction against a tenant, for example an eviction filed against a tenant in retaliation for asserting their rights (e.g., to remedy conditions violations). An eviction that is due to an underlying experience of domestic violence, dating violence, sexual assault, or stalking (e.g., for related noise violations) should not be held against the survivor. In addition, reasonable accommodations to the screening policy may be necessary if the eviction was related to the applicant’s disability, for example, an eviction for delinquent payment of rent because of the timing of an SSI or SSDI payment or a medical emergency.
Criminal Records
And this brings us back around to criminal records, which was the topic of our last podcast. Persons who have been involved with the criminal justice system are disproportionately individuals with disabilities and Black and Brown persons. As discussed at length in prior guidance from HUD, overbroad criminal records screenings are likely to have an unjustified discriminatory effect because of systemic disparities in our criminal justice system; Overbroad criminal records screenings include those that do not differentiate between offenses based on their nature, severity, or how long ago they occurred; those that consider records, such as arrest records, that did not result in a conviction; and those that do not provide an opportunity for the applicant to provide evidence of rehabilitation or other mitigating factors. As a best practice, tenant screening companies should ensure that screening reports, recommendations, grades, and algorithmic models differentiate between criminal records on these bases — such as by excluding records that are old or for offenses not directly relevant to tenancy — and housing providers should account for these considerations when formulating screening policies and reviewing applications. When considering the criminal record of an individual with a disability, a reasonable accommodation may be required. This can include making exceptions to admissions policies and disregarding certain criminal records. Such an accommodation may be required, for example, if the individual’s disability makes it unlikely that they would reoffend (e.g., a record of assault by someone who has since developed a severe mobility impairment). An accommodation may also be required if the criminal activity was related to the individual’s disability and is unlikely to recur (e.g., criminal activity related to a mental health disability that has since been treated). In addition, criminal activity should not be taken into account if it was due to an underlying experience of domestic violence, dating violence, sexual assault, or stalking (e.g., property damage during a violent incident, or a victim being forced to write bad checks under threat of violence).
Conclusion
I know I went through that quickly, but that’s all we have time for today! Remember, housing providers and tenant screening companies both have a role to play in ensuring that tenant screenings are transparent, accurate, and fair. Doing so not only promotes compliance with the Fair Housing Act, but also ensures that all applicants are given an equal opportunity to be evaluated on their own merit when seeking to fulfill a need as fundamental as housing.
Please let us know if there is a particular topic you are interested in learning more about so we can provide more features in the future. In the meantime, I encourage you to visit our website, www.homecincy.org, for more resources. Check the show notes for links.
If you have any questions don’t hesitate to call HOME – we’re here to help you. That number is 513-721-HOME or 513-721-4663.
Thank you very much for listening to this Fair Housing Focus!
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