As we all well know, the Fair Housing Act prohibits any type of discrimination from Real Estate Professionals when choosing who to rent their property or unit to in regards to race, gender, sexual orientation, disability, family status or national origin, and in some counties: section 8 voucher status (tenantsunion.org). But what about disparate impact?

Disparate impact is the legal theory that people of certain races and ethnicities are disproportionately represented in the criminal justice system. This theory was previously used in regards to employment, but in recent years has moved into the real estate industry as well. The theory states that the use of criminal records for tenant screening purposes has a disparate impact on certain minorities who have been disproportionately represented in the legal system, and who therefore have criminal records that could be used to determine that they should not be rented to. Fair Housing Advocates argue that in effect, while you may be following all Fair Housing Laws, and screening every applicant, you could be inadvertently discriminating against certain minorities (Wikipedia).

The Landlord Times gives a great example: “…a property management company has a policy of charging a set rental amount for the first three residents in a household, plus $100 per month for each additional resident. This policy, although applied equally to all applicants and residents, will have a disproportionately negative effect on families with children, and thus likely violates fair housing laws. Similarly, a policy of denying rental to everyone who has any criminal record may have a disparate impact on certain protected class groups (such as race, national origin, and disability).”

On the other side of that argument are landlords and owners who want to protect their tenants, as well as their staff from those who have committed crimes in the past (be it on a property, or not). Another question that is being debated by certain states is should applicants who have a criminal history be immediately rejected, even if it is not directly related to an on-property offence? This issue also arose in employment screening, and a few states have made amends to only deny an applicant if they can directly relate the crime to the specific job the applicant applied for. They also argue that being a convicted criminal does not put a person into any protected class.

Another law that you could begin to see take hold in other states is the Fair Tenant Screening Act, passed in Washington, which compels landlords to share the reasons behind obtaining certain information required from applicants that is used during the screening process. If a landlord or owner does not disclose this information, then they themselves must pay for the screening fee, even if a third party tenant screening company is used. The owner must also easily identify what criteria for that particular property will fail an applicant. If an adverse action follows a screening report, then the manager or landlord must notify the applicant in writing if it is a direct result of any of the following conclusions:

• Information contained in a consumer report
• The consumer credit report did not contain sufficient information
• Information received from previous rental history or reference
• Information received in a criminal record
• Information received from an employment verification (www.walandlord.com)

A few screening companies out there already offer adverse action letters, and lists of criteria needed from applicants that will be used in their screening process. If criminals cause problems on a property, then future landlords and property managers have a right to know. This does not mean however, that they will not be rented to, but sharing this type of information can be beneficial to all parties involved. Any sort of “black list” of who not to rent to posted online, written, or read aloud in any capacity is illegal, because there is no addendum to inform the tenants, evidence, and no appeals on behalf of the tenant.

Do your research, and make sure to find a database that utilizes all of these tools and is Fair Credit Reporting Act compliant for a completely legal way to share information about tenants. To stay up to date on new amendments and additions to the Fair Housing Law, please visit the U.S. Department of Housing and Urban Development website, or see a list of landlord/tenant laws broken down by state.