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Arroyo v. Corelogic

New federal lawsuit seeks to establish that tenant-screening companies must comply with the Fair Housing Act when advising landlords to accept or deny particular rental applicants.

A new lawsuit in the U.S. District Court for the District of Connecticut may become the first in the country to hold a tenant-screening company liable for discrimination under the Fair Housing Act.  The complaint, filed by the Connecticut Fair Housing Center and the National Housing Law Project, contends that a tenant-screening company unlawfully discriminated against a Connecticut family when it instructed a landlord to deny a Connecticut mother’s request to move her disabled son into her apartment due to a dismissed shoplifting arrest from 2014.  Although rental decisions have traditionally been made by housing providers, today many landlords contract with third-party tenant-screeners to make admission decisions for them.  If successful, this case—believed to be the first of its kind—would establish that tenant-screening companies who make admission decisions for residential landlords must do so in accordance with fair housing laws.

The chief plaintiff in the lawsuit is Carmen Arroyo, whose son Mikhail was injured in a July 2015 accident that left him unable to speak, walk, or care for himself.  After becoming his conservator, Carmen asked her landlord for permission to move Mikhail into her home.  But the landlord declined after receiving a “CrimSAFE” background report from a tenant-screening company, Corelogic Rental Property Solutions, LLC, which stated that Mikhail had a “disqualifying [criminal] record.”

Carmen might have been able to persuade her landlord to disregard the criminal background report and admit him to the property, given that Mikhail’s only criminal record was a dismissed shoplifting charge from 2014 and that his newfound disabilities substantially eliminated any possible threat he could conceivably pose to persons or property.  But neither Carmen nor the landlord knew what Mikhail’s criminal record actually was.  Corelogic refused to provide the Arroyos a copy of Mikhail’s criminal history information, which they were entitled under federal law to receive.[1]

Corelogic’s criminal background report did not even provide any details about Mikhail’s underlying criminal history to the landlord—only a bare, computer-generated notation that the application did not meet the landlord’s criteria.  Without knowing what the denial was based on, the landlord could hardly have undertaken a meaningful reconsideration of Mikhail’s application in response to any additional information Carmen might have supplied.  So Mikhail, unable to move in with Carmen, remained in a nursing home.

The Fair Housing Act is well understood to prohibit housing providers from choosing tenants through policies that discriminate on the basis of race, color, religion, sex, familial status, national origin, or handicap (i.e., disability).  This rule not only bars landlords from explicitly excluding or disfavoring applicants or a particular race or other protected status, but also disallows rental admission policies that disproportionately exclude members of a protected class except when necessary to achieve some substantial, legitimate interest of the housing provider.  This rule has important implications for housing providers who consider applicants’ criminal history in making rental admission decisions.

Between 70 million and 100 million Americans have criminal records, and the U.S. incarcerated population (over 2.1 million) is the largest in the world. largest in the world.[2]  Roughly 626,000 persons leave prison per year.[3]  Policies limiting the housing alternatives available to those with criminal records can therefore inhibit efforts to successfully reintegrate formerly incarcerated persons into society.  Overly restrictive criminal records screening policies can therefore have significant adverse public policy consequences irrespective of racial or ethnic considerations.  But these problems fall most heavily on African Americans and Hispanics.

Scholars have long recognized,[4] and as the U.S. Department of Housing & Urban Development acknowledged in a 2016 guidance document for landlords, that “[a]cross the United States, African Americans and Hispanics are arrested, convicted and incarcerated at rates disproportionate to their share of the general population.”[5]  This is true even though whites tend to engage in criminal behavior at similar rates— especially drug offenses, which account for more than half of federal incarcerations. [6]  This means policies which restrict admission for applicants with criminal records disproportionately deny housing opportunities to people of color.[7]

This does not mean that a landlord may not consider an applicant’s criminal history when deciding whether to accept him or her as a tenant.  But it does mean that only criminal records which suggest an applicant poses a genuine and ongoing threat to persons or property should result in denial.[8]  HUD’s guidance specifically advises housing providers not to deny admission based on dismissed arrests, or through “blanket prohibitions” that exclude applicants with any kind of criminal record without regard to the nature of the offense, how long ago it occurred, intervening changed circumstances, and other relevant factors.”[9]

Instead, housing providers who use criminal background checks in their admissions processes generally must be prepared to conduct “individualized assessments” of applicants with potentially disqualifying convictions.[10]   Yet automated criminal background checks with computer-generated scores and decisions—like Corelogic’s “CrimSAFE”—are ill-suited to perform individualized assessments of applicant criminal history.  Tenant-screening computers can be programmed to apply standard rental admission criteria to criminal records data appearing in an applicant’s background check; they cannot realistically be programmed to evaluate whether an offense bears a meaningful relationship to housing, whether evidence of rehabilitation, maturity, education, or other changed circumstances significantly reduces the likelihood of an offense being repeated, or the myriad other possible factors that may related to a criminal history admission decision.

Even so, automated tenant-screening methods—including for criminal history—are rapidly becoming the norm in rental admission screening.  Though typically characterized as mere “recommendations,” landlords commonly follow the screening company’s recommendation in virtually every case, often—as with Carmen Arroyo’s landlord—not even receiving the underlying background information that might be used evaluate applicants individually.  Allowing computers to effectively make rental decisions will inevitably produce unjust denials for applicants like the Arroyos, whose circumstances do not fit neatly into pre-programmed screening algorithms.

A housing provider who blindly follows a screening company’s denial recommendations and has no viable process for individualized review or reconsideration thus follows a discriminatory policy for which there is likely no legally sufficient justification under the Fair Housing Act.[11]  But the Fair Housing Act does not only apply to housing providers—the Act also reaches persons and companies who provide services in connection with housing, such as tenant-screening reports.[12]  When a tenant-screening company markets a criminal background report that contains only a bare “accept” or “decline” recommendation, and does not make the underlying criminal history information available to allow a landlord to make an individualized assessment of a rejected applicant, the screening company’s “recommendation” is tantamount to the actual admission decision.  And if a tenant-screening company is going to make the actual decisions about who is admitted to housing and who is denied, then it’s important for that company to make those decisions within fair housing constraints, just as we expect landlords to do.

With the assistance of the Connecticut Fair Housing Center, Carmen was eventually able to persuade her landlord to admit Mikhail to her home—though not until another full year had passed.   But now, she and the Connecticut Fair Housing Center, together with the National Housing Law Project, have brought an action seeking to hold Corelogic accountable for its role in unlawfully denying housing to Mikhail Arroyo based on a discriminatory criminal records policy, and for failing to provide the Arroyos a copy of the criminal background report as required by federal law. If they prevail, the case could set an important precedent establishing that tenant-screening companies who functionally make rental decisions on behalf of landlords must make those decisions in accordance with fair housing requirements.

[1] See 15 U.S.C. § 1681g(a) (“Every consumer reporting agency shall, upon request … clearly and accurately disclose to the consumer:  (1) All information in the consumer’s file at the time of the request…”).

[2] See http://www.prisonstudies.org/highest-to-lowest/prison-population-total?field_region_taxonomy_tid=All , last visited May 4, 2018, on which date the United States had the highest total incarcerated population in the world at 2,121,600, which China second at 1,649,804.

[3] See Wagner, Peter and Wendy Sawyer, “Mass Incarceration: The Whole Pie 2018,” Prison Policy Initiative (Mar. 14, 2018).

[4] See, e.g., Alexander, Michelle, The New Jim Crow: Mass Incarceration in the Age of Colorblindness (2010).

[5] See HUD, Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, p. 2 (Apr. 4, 2016).

[6] Taxy, Sam, et al., “Drug Offenders in Federal Prison: Estimates of Characteristics Based on Linked Data,” p. 2 (Table 1), Bureau of Justice Statistics (2015).

[7] See HUD, Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, p. 2 (Apr. 4, 2016).

[8] See HUD, Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, p. 2 (Apr. 4, 2016).

[9] HUD, Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, p. 6 (Apr. 4, 2016).

[10] Id. at 7 (“Relevant individualized evidence might include: the facts or circumstances surrounding the criminal conduct; the age of the individual at the time of the conduct; evidence that the individual has maintained a good tenant history before and/or after the conviction or conduct; and evidence of rehabilitation efforts.”).

[11] See 24 C.F.R. § 100.500(b) (defining “legally sufficient justification”); see also HUD, Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate Related Transactions, pp. 6-7 (Apr. 4, 2016).

[12] See 42 U.S.C. § 3604(a)(b) (unlawful “to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin”) (italics added).