HUD guidelines on disparate impact and how it affects property managers


What is “disparate impact”?

HUD states concern that some of the rental criterion that is common in property management discriminates in effect, because certain protected classes tend to belong in categories that engender declines, e.g., criminal backgrounds. HUD specifically excludes crimes regarding manufacturing and distribution of controlled substances, however. Here is a link to the document that most recently created these issues: HUD Document

Legal review of rental criterion

The new HUD guidelines are, in my opinion, contradictory to Fair Housing guidelines. On the one hand, we are supposed to be fair to all, using the same criterion regardless of the protected class of the applicant. I like to remind people that EVERYONE is a member of a protected class. You’re female or male, white or other ethnicity, foreign or native, married or not, have a family or not, etc. Both sides of the “or” is a protected class.

The criminal record is a big deal. You need policies in place to review applicants and their criminal records. If a conviction will result in a decline, you need to have a business reason for it.

At substantial expense, I hired legal counsel to help draft our company criterion on criminality. They helped me distinguish between types of crimes, choose a length of time for convictions to fall off the radar, and a small selection of criminal convictions that would invoke a permanent decline.

Additionally, I took several classes in rental criterion. Several? Well, CE credits in my field can’t a bad thing. With confusing and contradictory guidelines, it was important to look at other expert’s opinions on how to deal with it. I did learn some tricks and tips to wend my way through the conflicts in HUD and Fair Housing “guidelines”.

How to apply criminal records to an application

So, what if you have an approvable application except for those pesky crimes? This is where you have to throw your Fair Housing training out the window (i.e., treating everyone the same, using rules based guidelines). Are there are mitigating factors? You need to ponder the whole situation (both mitigating and exacerbating factors), you should take the time to find details about the conviction, etc, etc. That can go so far as reading trial transcripts. I would not take the applicant’s word for it, of course.

In conclusion

If you’re not spending serious time with these HUD and Fair Housing regulations, you should have a professional review and approve applications. It’s getting too tricky!