HUD Guidance on Ex-Offenders Has Major Implications for All Apartment Owners

Published by Mark Shelburne on Tuesday, April 5, 2016 - 12:00am

As predicted in this space last summer, effects of the Supreme Court’s ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project Inc. (TDHCA and ICP, respectively) ripple through the affordable rental housing community. New questions stemming from the opinion, such as how disparate impact may be applied in different contexts, continue to arise.


When the U.S. Supreme Court handed down its ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project Inc., the affordable housing community took notice. Much of the attention was on what it meant for qualified allocation plans (QAP) and low-income housing tax credits (LIHTCs).

Despite this focus, TDHCA’s awards in Dallas were just the factual setting. The opinion actually was not about the QAP in Texas or anywhere else. Rather, the holding decided a narrow but very important legal issue: the Fair Housing Act recognizes disparate impact liability. In other words, it is possible to violate federal law even absent any proof of intent. The immediate impact was to allow litigation (including by ICP) and administrative actions to continue moving forward.

A recent announcement by the U.S. Department of Housing and Urban Development (HUD) demonstrates the extent of what TDHCA v. ICP really means going forward. The following is a summary discussion and not a substitute for reading the guidance itself. All rental housing property owners and managers should review HUD’s statements carefully.

HUD Guidance

In a document dated April 4, HUD’s Office of General Counsel (OGC) addresses how disparate impact applies to “an adverse housing action – such as a refusal to rent or renew a lease – based on an individual’s criminal history.”

In the guidance, HUD OGC recognizes being an ex-offender is not one of the seven protected classes under fair housing. However, because of the ruling in TDHCA v. ICP, “criminal history-based restrictions on housing opportunities violate [the law] if, without justification, their burden falls more often on renters” based on their protected class status. In other words, preventing someone from renting or renewing a lease because of their criminal history may have a disparate impact on members of protected classes.

Liability under disparate impact results from a three step approach.

1-The plaintiff or claimant must start by proving the discriminatory effect of certain screening criteria. HUD OGC says national statistics regarding relative rates of arrest and incarceration are sufficient, which allows essentially any claim to meet this first step.

2-Next the rental housing property owner has to provide a substantial, legitimate, nondiscriminatory reason. HUD OGC states that protecting buildings and residents are fundamental responsibilities, but the document goes on to say property owners must prove the challenged practice actually assists in doing so. “Bald assertions based on generalizations or stereotypes that any individual with an arrest or conviction record poses a greater risk… are not sufficient to satisfy this burden.”

There’s more. Normally legal statements in this context are couched in disclaimers about facts and circumstances, which makes the next part of the guidance very unique. HUD OGC flatly says

  • arrest records alone are insufficient to assess a potential resident’s risk, and
  • blanket prohibitions on convictions without considering when it happened, the underlying conduct, or what happened afterwards, cannot be justified.

Therefore, making a tenancy decision on either basis creates a real risk of being found in violation of federal law. The guidance goes on to explain even more nuanced criteria still may be problematic.

3-The third step applies if the property owner does provide an adequate reason. If so, the plaintiff or claimant has an opportunity to prove a less discriminatory alternative to accomplish the same objectives.

Other Considerations

As a side note, curiously there is no mention of how adverse housing actions apply to persons with disabilities. Rather the discussion and examples all relate to race and ethnicity. The only connection is a reference to “other protected characteristics.” Such an omission is difficult to understand considering certain diagnoses (e.g., mental illness) sometimes result in brushes with the law and the federal government’s many efforts to promote integrated supportive housing. Despite not being specifically included, HUD and others relying on this guidance (including courts) will apply its overall provisions to all protected classes.

Also of note, this change is similar to what’s happened in the hiring context. Some employers, including the federal government, no longer ask about criminal records. The practice is known as “ban the box,” meaning the employment application does not have a box to check for past convictions.


The bottom line is many rental housing property owners will have to seriously consider changing their policies and practices to include a more careful evaluation of criminal convictions. HUD’s guidance is not technically a regulation, but at a minimum will be given substantial deference by anyone responsible for considering a complaint. Of course the primary agency charged with enforcing fair housing is HUD itself.

The guidance applies to all rental complexes, but for several reasons the stakes are higher for those in federal programs, such as LIHTC properties:

  • The vast majority of ex-offenders are low income, making them more likely to be potential applicants and residents.
  • Government monitoring means a level of review not present in market rate apartments.
  • The consequences of noncompliance are far more severe, for example potentially including LIHTC recapture.

Please feel free to contact a Novogradac professional with questions. Also, Novogradac provides an extensive array of services to help owners and managers navigate the complexities of compliance.