Fair Housing and Background Checks: Avoiding Discrimination

Introduction

The Fair Housing Act (FHA) stands as one of the most important civil rights laws in the United States, fundamentally shaping how landlords, property managers, and housing providers conduct tenant screening. When it comes to fair housing background checks, understanding and complying with federal anti-discrimination laws isn’t just good practice—it’s a legal requirement that protects both housing providers and prospective tenants.

This comprehensive guide covers the intersection of fair housing laws and background screening practices. The Fair Housing Act applies to virtually all housing providers in the United States, with only limited exceptions. Whether you’re a property owner with a single rental unit or managing a large apartment complex, understanding these requirements is crucial for avoiding costly discrimination claims and ensuring equal housing opportunities for all applicants.

Compliance matters because violations can result in severe penalties, including compensatory damages, punitive damages up to $100,000, civil penalties, and attorney’s fees. Beyond the financial impact, fair housing violations can damage your reputation and business relationships. Most importantly, proper compliance ensures you’re contributing to equal housing opportunities while still protecting your legitimate business interests.

Legal Overview

Key Provisions Explained

The Fair Housing Act, enacted in 1968 and amended several times since, prohibits discrimination in housing based on seven protected classes:

Race
Color
National Origin
Religion
Sex (including sexual orientation and gender identity as of 2021)
Familial Status (presence of children under 18)
Disability

When conducting background checks, these protections mean you cannot use screening criteria that discriminate against individuals based on these characteristics, either directly or through disparate impact—policies that appear neutral but disproportionately affect protected groups.

Rights and Obligations

Housing providers have the right to screen tenants using objective, business-related criteria. However, they must:

Apply screening criteria consistently to all applicants
Ensure criteria are necessary for legitimate business purposes
Avoid blanket policies that may have discriminatory effects
Provide reasonable accommodations for applicants with disabilities
Maintain documentation showing non-discriminatory practices

Applicants have the right to:

Equal consideration regardless of protected class status
Challenge discriminatory screening practices
Request reasonable accommodations in the screening process
File complaints with HUD or pursue legal action

Enforcement and Penalties

The Department of Housing and Urban Development (HUD) enforces the Fair Housing Act. Penalties for violations include:

Administrative penalties: Up to $21,410 for first violations, $53,524 for second violations within five years, and $107,050 for subsequent violations
Civil lawsuits: Unlimited compensatory and punitive damages
Injunctive relief: Court orders to change policies and practices
Attorney’s fees: Payment of the plaintiff’s legal costs

Who Must Comply

Covered Entities

The Fair Housing Act applies broadly to:

Private landlords (with limited exceptions)
Property management companies
Real estate agencies
Homeowners associations
Municipalities and public housing authorities
Banks and lending institutions
Anyone involved in residential real estate transactions

Exemptions

Limited exemptions exist but are narrowly interpreted:

1. Owner-occupied buildings with four or fewer units
2. Single-family homes rented without a broker, if the owner owns three or fewer homes
3. Religious organizations giving preference to members for non-commercial housing
4. Private clubs providing lodging to members

Important: Even exempt landlords cannot make discriminatory statements or advertisements, and many state and local laws provide fewer exemptions.

Determining Applicability

To determine if you must comply:

1. Count your rental units
2. Consider whether you use a real estate professional
3. Review your advertising methods
4. Check state and local laws, which may be more restrictive

When in doubt, assume the Fair Housing Act applies—the exemptions are limited and strictly construed.

Requirements Breakdown

Specific Obligations

Housing providers must ensure their background check policies meet these requirements:

Criminal History Screening:

Cannot have blanket bans on applicants with criminal records
Must consider the nature, severity, and recency of crimes
Should assess whether the criminal conduct indicates a demonstrable risk to resident safety or property
Must consider evidence of rehabilitation

Credit History Evaluation:

Must apply credit standards consistently
Cannot use credit requirements that unnecessarily exclude protected groups
Should consider alternative evidence of financial responsibility

Rental History Review:

Must verify information consistently for all applicants
Cannot discriminate against first-time renters if this disparately impacts protected groups
Should consider explanations for past rental issues

Required Procedures

1. Written Policies: Maintain clear, written screening criteria
2. Consistent Application: Apply the same standards to every applicant
3. Individual Assessment: Consider each applicant’s specific circumstances
4. Documentation: Keep records of all screening decisions
5. adverse action notices: Provide proper notices when denying applications

Documentation Needs

Maintain thorough records including:

Screening criteria and policies
All applications received
Background check results
Decision-making notes
Communications with applicants
Adverse action notices sent
Reasonable accommodation requests and responses

Compliance Steps

How to Comply

Follow this systematic approach to ensure fair housing compliance:

1. Develop Written Screening Criteria
– Base criteria on legitimate business needs
– Ensure criteria relate to tenancy suitability
– Avoid unnecessary barriers

2. Train All Staff
– Educate on fair housing requirements
– Emphasize consistent application
– Regular refresher training

3. Standardize the Process
– Use the same application for everyone
– Run the same background checks
– Apply criteria uniformly

4. Document Everything
– Keep detailed records
– Note reasons for decisions
– Maintain files for required periods

Implementation Checklist

[ ] Review and update screening policies
[ ] Remove any blanket bans or arbitrary requirements
[ ] Create standard forms and checklists
[ ] Establish a reasonable accommodation process
[ ] Train all staff on fair housing requirements
[ ] Implement consistent documentation practices
[ ] Set up regular compliance reviews
[ ] Consider using professional screening services

Best Practices

1. Use Objective Criteria: Focus on verifiable, business-related factors
2. Be Transparent: Clearly communicate your criteria to applicants
3. Stay Current: Regularly review HUD guidance and case law
4. Seek Legal Counsel: Consult with fair housing attorneys when updating policies
5. Consider Individual Circumstances: Avoid rigid automatic disqualifiers

Common Violations

Mistakes to Avoid

1. Blanket Criminal Record Bans
Many landlords automatically reject applicants with any criminal history. This violates HUD’s 2016 guidance requiring individualized assessments.

2. Discriminatory Advertising
Using phrases like “perfect for young professionals” or “great for families” can indicate illegal preferences.

3. Inconsistent Application
Requiring additional documentation or different criteria for certain applicants based on assumptions about protected characteristics.

4. Refusing Reasonable Accommodations
Denying assistance animals or refusing to modify policies for tenants with disabilities.

5. Familial Status Discrimination
Limiting the number of children or refusing families with children in certain units.

Case Examples

Example 1: A property management company had a policy refusing all applicants with felony convictions. After a fair housing complaint, they paid $25,000 in damages and revised their policy to consider individual circumstances.

Example 2: A landlord required Hispanic applicants to provide additional documentation not required of other applicants. This resulted in a $50,000 settlement and mandatory fair housing training.

Example 3: An apartment complex refused to allow an emotional support animal despite proper documentation. They faced a lawsuit resulting in $40,000 in damages plus attorney fees.

How to Fix Issues

If you identify compliance problems:

1. Immediately stop the discriminatory practice
2. Revise policies to ensure compliance
3. Retrain staff on new procedures
4. Consider remedial actions for affected applicants
5. Consult legal counsel about potential liability
6. Implement monitoring to prevent recurrence

State Variations

Notable State Differences

Many states provide additional protections beyond federal law:

California: Prohibits discrimination based on source of income, citizenship status, and criminal history (with specific limitations)

New York: Includes lawful source of income as a protected class and has strict limits on criminal background use

Massachusetts: Protects based on source of income, military status, and sexual orientation (before federal recognition)

Washington: Prohibits source of income discrimination and has specific criminal history assessment requirements

Illinois: Recently limited use of criminal records and protects based on arrest records

Stricter Requirements

Several jurisdictions impose additional requirements:

Seattle: Requires “first-in-time” rental policies
Portland: Limits security deposits and screening criteria
San Francisco: Extensive protections for tenants with criminal records
Washington, D.C.: Source of income protection includes housing vouchers

Multi-State Considerations

For property managers operating across state lines:

1. Apply the most restrictive standard company-wide for simplicity
2. Track state-specific requirements carefully
3. Use technology to manage different criteria by location
4. Regular legal reviews as laws change frequently
5. Standardize training while highlighting local variations

FAQ

Q: Can I refuse to rent to someone with a criminal record?

A: You cannot have a blanket ban on all criminal records. You must conduct an individualized assessment considering the nature and severity of the crime, how long ago it occurred, and what the person has done since. The criminal history must pose a demonstrable risk to resident safety or property.

Q: How long should I keep records of rental applications and screening decisions?

A: Keep all records for at least two years, though some attorneys recommend longer. If you face a complaint or lawsuit, preserve all related records immediately. Some states may require longer retention periods.

Q: Can I charge different security deposits based on credit scores?

A: While you can vary security deposits based on objective financial criteria, ensure your policy doesn’t have a discriminatory impact on protected classes. Document your criteria clearly and apply them consistently to all applicants.

Q: What if an applicant doesn’t meet income requirements but has a co-signer?

A: You should accept co-signers if that’s your policy, but you must apply this option equally to all applicants. You cannot refuse co-signers from certain applicants while accepting them from others based on protected characteristics.

Q: How do I handle requests for emotional support animals when I have a “no pets” policy?

A: Emotional support animals are not pets under fair housing law. You must make reasonable accommodations for tenants with disabilities who need support animals, even in “no pet” properties. You can request documentation of the disability-related need but cannot charge pet deposits or fees.

Conclusion

Fair housing compliance in background screening requires careful attention to both federal requirements and state-specific laws. By developing clear policies, training staff properly, and maintaining consistent practices, housing providers can effectively screen tenants while avoiding discrimination. Remember that fair housing laws exist to ensure equal opportunity in housing—a goal that benefits everyone in our communities.

The key to compliance is treating all applicants equally, basing decisions on legitimate business criteria, and maintaining thorough documentation. When in doubt, err on the side of inclusion and seek legal guidance for complex situations.

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