On April 29, 2024, The US Department of Housing and Urban Development (HUD) released a new guidance document on compliance with fair housing laws when screening tenants for rental housing. HUD guidance documents are not law, but they are insights into HUD’s interpretation of the law.   

As a reminder, it is illegal under both federal and Virginia law to refuse to rent or sell or discriminate against any person in housing on the basis of the person being a member of a protected class. Under federal law, the protected classes are race, color, religion, sex, handicap, familial status, and national origin. Virginia law includes these protected classes and adds elderliness, source of funds, sexual orientation, gender identity, and military status. Additionally, even if your tenant screening policies are neutral as to these protected classes, if those policies result in a discriminatory outcome, you can be in violation of fair housing law.  

The new HUD guidance was prompted by an increasing reliance by housing providers on third-party tenant screening companies. These services sometimes rely on machine learning and other forms of artificial intelligence, which can be unreliable in obtaining accurate information.  

If you utilize the services of third-party tenant screening companies, you can still be held liable for fair housing violations committed by the screening service. Housing providers are ultimately responsible for their decisions on applicants they accept and deny. Therefore, housing providers need to develop their own policies and practices to ensure that all denials reflect their own judgment. Housing providers should not rely solely on a screening service to set the criteria for an approved applicant, but instead, should create their own criteria and independently check the records that come back to confirm if they are indeed disqualifying.  

Whether you utilize a third-party tenant screening service or not, the following guidelines still apply: 

Transparency  

Be transparent with applicants as to what criteria you require to qualify as a tenant. Make sure your criteria are in writing, public, and readily available to all potential applicants.  

Scope of Screening 

Ensure you look at only relevant screening criteria, and when you gather information about applicants, do not gather information outside the scope of your specific criteria. HUD recommends that you prioritize recent records over older records, and that the primary criteria is a tenant’s ability to pay rent and comply with lease requirements in the present.  

Opportunity to Present Mitigating Information 

A new key piece of guidance from HUD is that housing providers should provide applicants an opportunity to address any negative information that disqualifies them. This is to potentially provide mitigating information. Three types of screening criteria that HUD points out as particularly problematic for fair housing concerns are credit history, eviction history, and criminal records.  

Credit History 

When it comes to credit scores, overbroad screenings could have an unjustified discriminatory effect according to HUD. There are likely other methods to determine an applicant’s ability to pay rent.  

Eviction History 

Regarding eviction history, HUD states that housing providers should not rely on eviction records that are old, incomplete, irrelevant, or where there is a better measure of an applicant’s behavior. Importantly, cases where an unlawful detainer was filed, but the tenant prevailed should never be used as a reason to deny an application. Also, even if there is a past eviction, the housing provider should allow the tenant to present mitigating circumstances, like an acute job loss, or past domestic violence issues to explain the eviction history.   

Criminal Records 

For criminal records, HUD recommends not using overbroad screenings that fail to differentiate between the types of offenses, how long ago they occurred, and whether there was an actual conviction. HUD recommends excluding criminal records that are old or related to offenses not directly relevant to being a tenant. Additionally, misdemeanors and civil offenses should never be considered.  

Lastly, if a disability caused an issue in an applicant’s credit history, eviction history, or criminal background, a reasonable accommodation to those criteria may be required if the tenant is otherwise able to meet the tenancy obligations currently.  

These are just some of the major highlights from this new HUD guidance. We recommend reviewing the entire guidance document at the following link: 

https://www.hud.gov/sites/dfiles/FHEO/documents/FHEO_Guidance_on_Screening_of_Applicants_for_Rental_Housing.pdf 

As always, if you have questions about tenant screening, you can always contact us on the Virginia REALTORS® Legal Hotline.