The U.S. Department of Housing and Urban Development’s (HUD) guidance promotes fair practices in the tenant screening process for rental housing. This guidance emphasizes the importance of following the Fair Housing Act to ensure that all applicants, regardless of race, color, national origin, religion, sex, familial status, or disability, are treated fairly when being considered for rental properties.

Key Takeaways from HUD’s Fair Housing Guidance

HUD’s guidance focuses on several crucial areas where housing providers and tenant screening companies must be especially mindful. The document highlights best practices, addresses potential discriminatory practices, and offers recommendations for compliance.

1. Tenant Screening and Discrimination Risks

Tenant screening practices, especially those involving background checks, credit reports, and eviction histories, have become increasingly common among housing providers. However, certain screening methods can unintentionally result in discriminatory outcomes. Automated systems, artificial intelligence (AI), and machine learning have also complicated this process, as these technologies can obscure the reasoning behind certain applicant denials, potentially leading to unlawful discrimination​.

Housing providers have the responsibility to ensure that any screening tools they use are effective and in compliance with fair housing laws. Relying heavily on AI-driven screening processes without transparency can increase the risk of discriminatory outcomes, especially when these systems analyze factors that may not directly relate to a tenant’s ability to comply with their lease obligations​(FHEO_Guidance_on_Screen…).

2. The Role of Tenant Screening Companies

Tenant screening companies play a pivotal role in housing decisions, but their involvement does not absolve housing providers of their obligations under the Fair Housing Act. Even though tenant screening companies often provide housing providers with reports and recommendations, housing providers must independently evaluate whether the data supports a fair decision​.

These companies often use advanced technologies to screen for credit, eviction, and criminal records. However, HUD’s guidance cautions against overreliance on such technology, particularly when it lacks transparency. In some cases, the algorithms used by tenant screening companies may disproportionately disqualify certain groups, such as people of color or those with disabilities​.

3. Fair Housing Act Compliance

The Fair Housing Act prohibits discriminatory practices in housing, including intentional discrimination and discriminatory policies. Even when discrimination is not intentional, certain screening policies may unjustifiably exclude protected groups if they are overly broad or not tailored to the specific requirements of tenancy.

For example, consider a screening policy that automatically denies any applicant with a criminal record. Without considering the details or context, it may disproportionately impact minority groups and could be seen as a violation.

Housing providers must also be mindful that even if they use a tenant screening company, they are responsible for ensuring the company’s practices comply with fair housing laws. This includes avoiding default criteria set by the screening company that may result in discriminatory outcomes​.

4. Best Practices for Avoiding Discriminatory Outcomes

HUD’s guidance suggests several best practices to ensure compliance with the Fair Housing Act when screening rental applicants:

• Customize Screening Policies: Housing providers should adopt transparent, clear, and tailored screening policies for their properties. Default settings from tenant screening companies should not be used without careful review to ensure they comply with fair housing laws​.
• Independent Evaluation: Housing providers must independently judge applicants, even when using screening reports. They should review the information and decide whether it justifies denying an applicant.
• Allow Applicants to Dispute Findings: Applicants should be allowed to dispute negative findings in their background reports. Housing providers must give applicants clear information about how to correct any inaccuracies.
• Use Accurate, Relevant Records: Screening criteria should focus on the most relevant and recent records rather than using broad or outdated information that may unfairly disadvantage certain groups​.

5. AI and Machine Learning in Screening

A significant concern raised in HUD’s guidance is tenant screening companies’ growing use of AI and machine learning. These technologies can analyze vast amounts of data and make recommendations. Still, they often operate without transparency, making it difficult for housing providers to assess whether their decisions are non-discriminatory​.

HUD urges housing providers and tenant screening companies to ensure that AI models are thoroughly tested and monitored for compliance with fair housing laws. AI systems should not rely on variables that serve as proxies for race, national origin, or other protected characteristics, even indirectly​.

Ensuring Fairness in Tenant Screening

HUD’s updated guidance on tenant screening reminds housing providers and screening companies of their responsibilities under the Fair Housing Act. Fair, transparent, and accurate screening practices are essential to preventing discrimination and ensuring all applicants are treated equitably.

Housing providers should review their screening practices regularly to ensure compliance with HUD’s guidance and the Fair Housing Act. This includes carefully choosing tenant screening companies, customizing screening criteria, and giving applicants a fair chance to dispute any findings. By adopting these best practices, housing providers can help foster more inclusive and equitable housing opportunities for all applicants.