Expanding the Fair Housing Testing Pool for FHIP and FHAP Funded Entities
| Published date | 03 April 2024 |
| Record Number | 2024-06977 |
| Citation | 89 FR 22934 |
| Court | Housing And Urban Development Department |
| Section | Rules and Regulations |
Federal Register, Volume 89 Issue 65 (Wednesday, April 3, 2024)
[Federal Register Volume 89, Number 65 (Wednesday, April 3, 2024)]
[Rules and Regulations]
[Pages 22934-22942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06977]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 115 and 125
[Docket No. FR-6355-F-02]
RIN 2529-AB07
Expanding the Fair Housing Testing Pool for FHIP and FHAP Funded
Entities
AGENCY: Office of Fair Housing and Equal Opportunity, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Through this final rule, HUD eliminates the restrictions for
Fair Housing Initiatives Program (FHIP) grantees and for Fair Housing
Assistance Program (FHAP) agencies that currently bar FHIP and FHAP
funded entities from using HUD funds to deploy fair housing testers
with prior felony convictions or convictions of crimes involving fraud
or perjury. The final rule ensures that FHIP and FHAP funded entities
are able to fully investigate criminal background screening policies
that are potentially discriminatory under federal civil rights laws by
using a diverse group of testers with actual criminal convictions. This
final rule also improves inclusivity in HUD programs for people with
criminal convictions, consistent with President Joseph R. Biden's March
31, 2022 Proclamation on Second Chance Month and Secretary Marcia
Fudge's April 12, 2022 Memorandum, ``Eliminating Barriers That May
Unnecessarily Prevent Individuals with Criminal Histories from
Participating in HUD Programs,'' and is based on a HUD determination
that no valid interest is served by categorically barring FHIP and FHAP
funded entities from using testers with such convictions.
DATES: Effective date: This final rule is effective May 3, 2024.
FOR FURTHER INFORMATION CONTACT: Aztec Jacobs, Director, Office of
Programs, Office of Fair Housing and Equal Opportunity, Department of
Housing and Urban Development, 451 7th Street SW, Room 5250,
Washington, DC 20410-8000, telephone number 202-402-7861 (this is not a
toll-free number). HUD welcomes and is prepared to receive calls from
individuals who are deaf or hard of hearing, as well as individuals
with speech or communication disabilities. To learn more about how to
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
SUPPLEMENTARY INFORMATION:
I. Background
Title VIII of the Civil Rights Act of 1968, as amended (Fair
Housing Act or Act), prohibits discrimination in the sale, rental, or
financing of dwellings and in other housing-related activities because
of race, color, religion, sex (including sexual orientation and gender
identity), disability, familial status, or national origin.\1\ Section
817 of the Fair Housing Act provides that the Secretary may reimburse
State and local fair housing enforcement agencies that assist the
Secretary in enforcing the Act.\2\
---------------------------------------------------------------------------
\1\ 42 U.S.C. 3601-3619, 3631.
\2\ 42 U.S.C. 3616.
---------------------------------------------------------------------------
Although Section 817 was part of the original 1968 Act, it was not
until 1980, through an annual appropriations act (Pub. L. 96-103), that
Congress
[[Page 22935]]
authorized funding for it, establishing the Fair Housing Assistance
Program (FHAP). In requesting funding for the FHAP, the Carter
administration cited limitations that localities had in processing fair
housing complaints.\3\
---------------------------------------------------------------------------
\3\ See The Fair Housing Act: HUD Oversight, Programs, and
Activities, Congressional Research Service R44557 (April 7, 2021)
and U.S. Department of Housing and Urban Development, FY1980 Budget
Justifications, p. Q-2 and Pub. L. 96-103) available at sgp.fas.org/crs/misc/R44557.pdf.
---------------------------------------------------------------------------
While the FHAP funds State and local governmental agencies to
assist in enforcement of the Fair Housing Act, the Fair Housing
Initiative Program (FHIP) was established in 1987 to fund private non-
profits to do the same. Section 561 of the Housing and Community
Development Act of 1987 (Section 561) established the FHIP as a
temporary program, which Congress made permanent in 1992 through the
Housing and Community Development Act of 1992.\4\ In combination, the
FHAP and FHIP strengthen HUD's enforcement of the Fair Housing Act and
further fair housing.
---------------------------------------------------------------------------
\4\ Public Law 102-550, October 28, 1992, 106 Stat. 3672.
---------------------------------------------------------------------------
Among other things, the FHAP and FHIP fund testing activities
designed to enhance enforcement of the Fair Housing Act. Testing refers
to the use of an individual or individuals who, without a bona fide
intent to rent or purchase a house, apartment, or other dwelling, pose
as a prospective renter or purchaser for the purpose of gathering
information that may indicate whether a housing provider is complying
with fair housing laws. Both FHIP and FHAP funded entities can use
testing as a tool to investigate potential violations of the Fair
Housing Act.
Section 561 specifically required HUD, during the demonstration
period for the FHIP, to ``establish guidelines for testing activities
funded under the private enforcement initiative of the fair housing
initiatives program'' and noted that the purpose of the guidelines was
``to ensure that investigations in support of fair housing enforcement
efforts [. . .] shall develop credible and objective evidence of
discriminatory housing practices.'' \5\ The Housing and Community
Development Act of 1992 eliminated testing guidelines as a permanent
requirement for the FHIP.\6\
---------------------------------------------------------------------------
\5\ Public Law 100-242, February 5, 1988, 101 Stat. 1943.
\6\ As explained in the 1994 proposed rule, ``the passage of
section 905 establishes FHIP as a permanent program, and with the
expiration of the demonstration period, the requirement for testing
guidelines is removed.'' 59 FR 44596 (Aug. 29, 1994).
---------------------------------------------------------------------------
Current Regulatory Landscape
HUD regulations currently forbid FHIP and FHAP funded entities from
using federal funds for fair housing testing that involves testers with
prior felony convictions or convictions of crimes involving fraud or
perjury.\7\
---------------------------------------------------------------------------
\7\ 24 CFR 125.107(a); 24 CFR 115.311(b).
---------------------------------------------------------------------------
For FHIP funded entities, this restriction dates back to the 1988
proposed regulations for the demonstration period that, among many
other requirements, prohibited testers under the FHIP from having
``prior felony convictions or convictions of crimes involving fraud or
perjury.'' \8\ HUD did not explicitly explain why it proposed this
specific restriction, nor did HUD receive comments related to this
specific restriction. The regulations for the demonstration period were
finalized in 1989 at 24 CFR part 125, and contained a section titled
``Guidelines for private enforcement testing'' (previously codified at
Sec. 125.405). The guidelines contained numerous prescriptive
requirements about how eligible testing was to be designed and
conducted (e.g., allowing testing only in response to a ``bona fide
allegation''), including the requirement for a ``formal recruitment
process designed to obtain a pool of credible and objective persons to
serve as testers,'' followed by a restriction on testers having felony
convictions or convictions of crimes involving fraud or perjury.\9\
---------------------------------------------------------------------------
\8\ 53 FR 25581.
\9\ 54 FR 6492, 6501.
---------------------------------------------------------------------------
In 1994, HUD proposed eliminating the testing guidelines, noting
that Congress specifically limited the testing guidelines requirement
to the demonstration period and did not include this requirement in its
permanent authorization of the FHIP. However, HUD proposed keeping the
restriction on hiring testers with ``prior felony convictions or
convictions of crimes involving fraud or perjury'' and keeping a
requirement that testers receive training or be experienced in testing
procedures and techniques.\10\ HUD did not provide an explanation for
why it chose to retain the restriction regarding convictions in the
proposed rule, nor in the 1995 final rule.\11\ The language--``The
following requirements apply to testing activities funded under the
FHIP: Testers must not have prior felony convictions or convictions of
crimes involving fraud or perjury''--has not changed since 1995.\12\
---------------------------------------------------------------------------
\10\ 59 FR 44596, 44604.
\11\ 60 FR 58452, 58453.
\12\ 60 FR 58452, 58453.
---------------------------------------------------------------------------
HUD did not address the criminal backgrounds of FHAP testers in its
regulations until 2005.\13\ While HUD established the eligibility
criteria for participants in the FHAP in a 1980 interim rule and issued
subsequent rules for the FHAP in 1982, 1988, and 1989, none of these
addressed fair housing testing in any way.\14\ The proposed rule in
2005 proposed a tester conviction restriction identical to that
contained in the FHIP regulations. As with the FHIP rulemaking, there
were no public comments on this restriction, and it was codified in
2007 in a final rule.\15\
---------------------------------------------------------------------------
\13\ See 45 FR 31880 (May 14, 1980); 47 FR 8991 (March 3, 1982);
53 FR 34668 (Sept. 7, 1988); 54 FR 20094 (May 9, 1989); 61 FR 7674
(Feb. 28, 1996); 61 FR 41282 (Aug. 7, 1996) (containing no
conviction restrictions on testers) compare to 70 FR 28748 (May 18,
2005) (containing the conviction restrictions on testers at issue in
this final rule).
\14\ 45 FR 31880; 47 FR 8991; 53 FR 34668; 54 FR 20094.
\15\ 72 FR 19070 (Apr. 16, 2007), currently codified at 24 CFR
115.311(b).
---------------------------------------------------------------------------
The Proposed Rule
On October 31, 2023, HUD issued a Notice of Proposed Rulemaking,
which proposed to amend its regulations by eliminating the tester
restrictions that restrict FHIP and FHAP funded entities from using
fair housing testers with prior felony convictions or convictions of
crimes involving fraud or perjury (the proposed rule).\16\ The proposed
rule was a response to an April 12, 2022 directive from Secretary
Marcia Fudge to HUD to ``review our programs and put forth changes that
ensure that our funding recipients are as inclusive as possible of
individuals with criminal histories.'' \17\
---------------------------------------------------------------------------
\16\ 88 FR 74381.
\17\ ``Eliminating Barriers That May Unnecessarily Prevent
Individuals with Criminal Histories from Participating in HUD
Programs'' available at https://www.hud.gov/sites/dfiles/Main/documents/Memo_on_Criminal_Records.pdf.
---------------------------------------------------------------------------
In the proposed rule, HUD explained that it presumably first
enacted the restrictions on testers' criminal convictions and then
continued them in subsequent rulemakings because of the idea that
certain criminal convictions would undermine a tester's credibility in
testifying in court to what the tester witnessed under Rule 609 of the
Federal Rules of Evidence (FRE), which provides that certain criminal
convictions may be admitted to attack witness's ``character for
truthfulness.'' \18\
---------------------------------------------------------------------------
\18\ FRE 609(a). Also, twenty-four states have local rules of
evidence with substantially similar provisions to FRE 609. 6
Weinstein's Federal Evidence Article VI (2021).
---------------------------------------------------------------------------
However, HUD explained that it viewed a categorical bar on anyone
with a felony conviction, or conviction involving fraud or perjury to
be
[[Page 22936]]
overbroad, outdated, and unnecessary. First, such a broad and
categorical bar includes a broader range of convictions than does FRE
609. Second, even for those convictions covered by FRE 609, HUD saw no
reason to categorically bar those who conduct testing using FHIP or
FHAP funds from employing testers with such convictions. Those entities
may reasonably conclude that the prospect of admissibility under FRE
609 in litigation is of little consequence, especially because audio
and video recording is often used in testing, which means that the
recordings--more than the testers' testimony--are often the most
important evidence. HUD pointed out that FRE 609 itself is not always
applied even where a conviction comes under its potential application.
Further, other requirements in these regulations will continue to apply
to testers to help ensure that testers are objective, credible, and
well qualified, regardless of their criminal backgrounds. For example,
testers still must be trained in testing procedures and techniques.\19\
Testers cannot have an economic interest in the outcome of the test;
\20\ be a relative or acquaintance of any party in the case; \21\ have
had a recent employment history or other affiliation with the person or
organization to be tested; \22\ or be a competitor (or licensed
competitor) of the person or organization to be tested.\23\
---------------------------------------------------------------------------
\19\ 24 CFR 115.311(c); 24 CFR 125.107(b).
\20\ 24 CFR 115.311(d)(1); 24 CFR 125.107(c)(1).
\21\ 24 CFR 115.311(d)(2); 24 CFR 125.107(c)(2).
\22\ 24 CFR 115.311(d)(3) (prohibiting any such affiliation
within five years of the testing); 24 CFR 125.107(c)(3) (prohibiting
any such affiliation within one year of the testing).
\23\ 24 CFR 115.311(d)(4); 24 CFR 125.107(c)(4) (specifying such
``licensed'' competitors are barred from conducting testing).
---------------------------------------------------------------------------
HUD also noted that it had been contacted by fair housing
organizations urging reform of conviction restrictions because they
prevent fair housing centers from testing for certain types of criminal
background-based discrimination by preventing them from employing
testers with felonies to test the entire application process. HUD
recognized that many FHIP and FHAP funded entities now have an
affirmative need to hire testers with criminal histories, who in cases
that are of great priority to HUD may actually be better positioned to
help those entities uncover discrimination. HUD explained that when the
restrictions on testers' criminal convictions were first promulgated as
a demonstration regulation in 1989, landlords were unlikely to conduct
criminal background checks on prospective applicants.\24\ Since then,
landlords have increasingly implemented policies and practices to
screen applicants based on their criminal convictions.\25\
---------------------------------------------------------------------------
\24\ See David Thatcher, Law & Social Inquiry Volume 33, Issue
1, 12, Winter 2008 (explaining the upward trend since the 1990s in
criminal background checks, including that no ``how to'' landlord
books reviewed in a literature review prior to 1990 suggested
conducting criminal background checks on tenants whereas all ``how
to'' books suggested such checks as of the article's publication in
2008).
\25\ See, e.g., id. at 12 (describing a 2005 survey of large
landlords which revealed that 80 percent screened prospective
tenants for criminal histories).
---------------------------------------------------------------------------
In 2016, HUD issued a memo explaining how these admissions policies
and practices may be discriminatory under the Fair Housing Act.\26\ One
way landlords may discriminate is by using a criminal records policy as
a cover (or pretext) for intentional discrimination because of a
protected class. For example, a landlord may tell Black applicants that
they are being rejected because of their criminal record but accept
white applicants with the same or similar record. The real reason for
the rejection is the person's race, even though the landlord is saying
the reason is the person's criminal record. Another example of how a
landlord may violate the Fair Housing Act is if a landlord has a
criminal records policy that disproportionately excludes people of a
certain protected class, and that policy is not necessary to achieve a
substantial, legitimate, nondiscriminatory interest, or if there is a
less discriminatory policy that can achieve that interest.\27\ Testers
with actual criminal records ranging from misdemeanor to felony
convictions are in certain circumstances the best suited to obtain
evidence of what modern-day criminal record screening practices are and
whether these policies are being applied in a discriminatory way
because of a protected characteristic. HUD explained how testers
without bona fide criminal records are limited to investigating
discrimination that occurs pre-application. Only testers with real
criminal records will be able to submit an application to obtain
evidence of what the policy is in practice at the admission stage and
whether the policy is being applied (after the application is
submitted) in a discriminatory manner.\28\
---------------------------------------------------------------------------
\26\ See 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 (April 4,
2016) (``While having a criminal record is not a protected
characteristic under the Fair Housing Act, criminal history-based
restrictions on housing opportunities violate the Act if, without
justification, their burden falls more often on renters or other
housing market participants of one race or national origin over
another (i.e., discriminatory effects liability). Additionally,
intentional discrimination in violation of the Act occurs if a
housing provider treats individuals with comparable criminal history
differently because of their race, national origin or other
protected characteristic (i.e., disparate treatment liability).'')
\27\ See id. (explaining that achieving resident safety and/or
protecting property may be substantial and legitimate interests,
assuming they are the actual reasons for the policy, but that a
housing provider must be able to prove through reliable evidence
that its policy or practice of making housing decisions based on
criminal history actually assists in protecting resident safety and/
or property).
\28\ See, e.g., Implementation of the Office of General
Counsel's Guidance on Application of Fair Housing Act Standards to
the Use of Criminal Records by Providers of Housing and Real Estate-
Related Transactions (June 10, 2022) Memorandum directed to FHIP and
FHAP funded entities, highlighting the different ways in which
criminal records policies may violate the Act, and explaining that a
landlord may have a policy in writing that differs from a policy in
practice, and that fully ``[i]dentify[ing] all policies, including
written and unwritten policies or practices'' is an important first
step in investigating the potential discriminatory effects of a
policy) available at https://www.hud.gov/sites/dfiles/FHEO/documents/Implementation%20of%20OGC%20Guidance%20on%20Application%20of%20FHA%20Standards%20to%20the%20Use%20of%20Criminal%20Records%20-%20June%2010%202022.pdf. Without having testers that go through the
entire application process, it is difficult to find out whether
there is a difference between what a tester is told the policy is
and what the policy is in practice.
---------------------------------------------------------------------------
Finally, HUD pointed out that HUD's current regulation
disproportionately excludes people of color from opportunities to work
for FHIP and FHAP funded entities, even as it serves questionable value
in ensuring credible evidence in view of the other safeguards that
apply to fair housing testing.
This Final Rule
After reviewing and considering public comments on this Rule, HUD
finalizes its proposal to remove the conviction restrictions for
testers in the FHIP and FHAP regulations.
HUD notes that in addition to the reasons expressed in the proposed
rule, summarized above, and echoed by many public comments summarized
below, HUD received several public comments from local fair housing
organizations regarding the difficulties they have had due to the
conviction restrictions recruiting testers of color to conduct race and
national origin-based testing. Further, commenters highlighted the
catch-22 organizations are put in regarding compliance with these HUD
restrictions and compliance with anti-discrimination employment
restrictions and/or civil-rights based values. Finally, several
commenters noted that removing this restriction is necessary for HUD to
be consistent in terms of its own commitment to equity and civil
rights. HUD believes these are important
[[Page 22937]]
additional reasons to finalize the proposed rule and to remove the
restrictions on testers with felony convictions and convictions
involving fraud and perjury.
II. Public Comments and HUD's Response to Public Comments
HUD received 192 comments from FHIP and FHAP funded entities,
advocacy and re-entry organizations, appraisers, testers, persons with
criminal convictions, and other individuals. This public comments
section includes a summary of the public comments that HUD received in
response to the proposed rule.
A. General Support for the Proposed Rule
Several commenters expressed their general support for HUD's
proposal to eliminate the agency's restrictions on the use of fair
housing testers with prior felony convictions or certain other
convictions by FHIP and FHAP funded entities. Commenters writing in
support of the rule emphasized the value of or necessity for testing,
generally. One commenter said that ``testers play a vital role and
necessity in assisting to eradicate housing discrimination in
America.''
Comments Criticizing the Current Regulation
Some commenters noted that HUD's current restrictions are
``antiquated'' and ``outdated.'' One of these commenters also described
the current restrictions as ``overbroad'' and ``unnecessary.'' Another
questioned their policy justification. Two commenters said the current
restrictions never should have been on the books in the first place.
Some commenters said the current restrictions amount to a
discriminatory ``blanket ban'' on persons with criminal histories.
Other commenters said the current restrictions constitute
employment discrimination. Some commenters noted that the restrictions
are inconsistent with Equal Employment Opportunity Commission guidance
on the use of criminal records in employment decisions. One commenter
said complying with the current regulation causes them to face
potential liability for employment discrimination. One commenter noted
that the proposed changes would also allow FHIP and FHAP funded
entities to abide by state and local laws which prohibit employment
discrimination based on criminal legal system interaction.
One commenter said the current regulation is inconsistently applied
and frequently misunderstood with some grant technical monitors
enforcing the regulation while others do not, and several FHIP staff
across the country have misunderstood the regulation to only bar
testers with felonies related to fraud or perjury.
Consistent Anti-Discrimination Message From HUD
Commenters said the proposed rule would make it easier for housing
organizations to uncover housing discrimination, and therefore further
the current Administration's goal of advancing core values of equity,
civil rights, racial justice, and equal opportunity.
Several commenters said that there is a contradiction between HUD
forbidding housing providers from discriminating against tenants on the
one hand, but on the other hand engaging in discrimination by forcing
FHIP and FHAP funded entities to discriminate in employment. One
commenter said HUD's ``blanket ban'' on testers with criminal
convictions negates HUD's stated commitment to breaking down barriers
for criminal justice system involved persons. One commenter said the
existing regulation tells justice-impacted communities that fair
housing organizations are ``hypocrites'' for indulging in the very
discrimination those organizations work to combat. One commenter said
it is hypocritical to test for discrimination on the basis of criminal
record while barring those who have served their sentences from
testing. Another commenter said revoking the current restrictions would
meaningfully aid in HUD's commitment to make reentry into the workforce
more accessible for persons with a prior felony conviction. This
commenter cited prior HUD statements that align with the proposed rule,
which note that criminal history is not a good predictor of housing
success, and that denying housing to prospective tenants could violate
the Fair Housing Act. Some commenters said eliminating the current
restrictions would reinforce rather than contradict HUD's own guidance.
These commenters said the proposed rule was essential to ensure a
consistent anti-discrimination message from HUD and its grantees.
Advancing Equity
Several commenters supported the proposed rule, noting that it
aligns with their organizational missions. Commenters supported the
proposed rule because it would help to make HUD programs more fair and
inclusive.
Commenters indicated specific populations that this rule would
help, including those who are being discriminated against by housing
authorities and employers, domestic violence survivors, people with
disabilities who have felony convictions, and those needing a place to
live. One commenter said the proposed rule takes a step to deter the
criminal justice system's oppression and discrimination against people
of color.
Several commenters said employment-based criminal history
restrictions discriminate against Black people and minorities. Other
commenters also pointed out that the current regulation
disproportionately affects certain groups which have been unfairly
impacted by mass incarceration and biases in the criminal justice
system, including Black and Latino individuals and other racial
minorities, and these people are the exact demographic of people who
are needed to be fair housing testers. Some of these commenters said
that excluding individuals with convictions from serving as fair
housing testers undermines efforts to address the inequalities in
housing by perpetuating inequalities in employment- a double negative
impact. One commenter noted that the proposed changes are a step
towards rectifying centuries of policies and practices that have
created worse housing and employment outcomes for underserved groups.
HUD Response: HUD thanks these commenters for their comments and
notes that this final rule mirrors the proposed rule.
B. General Opposition to the Proposed Rule
Commenters opposing the proposed rule cited various potential
disadvantages as outweighing values such as inclusion, equity, or anti-
racism. One commenter said those values are not worth making testing
worse, and potentially dangerous.
Some commenters opposed the proposed rule, expressing disapproval
of fair housing testing in appraisal transactions. One commenter said
that national rules outlined in USPAP (the Uniform Standards of
Professional Appraisal Practice) already forbid appraisers from
utilizing any kind of bias when preparing a report or opinion of value.
Another commenter said that ``[i]f a property is accurately evaluated,
it is a non-biased issue. The property speaks for itself'' and noted
that those controlling testing are not knowledgeable about the
appraisal process.
One commenter expressed disapproval of the proposed rule , stating
that HUD Secretary Marcia
[[Page 22938]]
Fudge has ``commented publicly and on the record with her own racial
bias without substantiating evidence or proof.'' Another commenter said
the proposed rule was an ``egregious idea,'' and that HUD should
instead be promoting safe and affordable housing.
One commenter noted that ``there are plenty of people who do not
have criminal records that are from diverse populations and socio-
economic backgrounds that can assist with this job.''
Another commenter said the proposed rule hides information from the
screening decision process, and that if an applicant has prior felony
convictions or convictions of crimes involving fraud or perjury, then
it should be known.
HUD Response: HUD thanks the commenters for their comments.
HUD respectfully disagrees that there are enough candidates of
diverse backgrounds to fill the job of testers. HUD notes that it
received several comments from organizations that conduct fair housing
testing that say that they find it either difficult or impossible to
recruit a diverse set of fair housing testers under the current
regulation. Based on those comments, this problem seems to be
particularly heightened in rural communities. Commenters also note that
persons with criminal convictions are needed to effectively test for
certain kinds of discrimination (i.e., using criminal convictions as a
pretext for discrimination based on race), because only these people
can complete the application process to effectively uncover this kind
of discrimination.
HUD notes that this rulemaking does not hide any information from
the tester screening process. Instead, the final rule permits FHIP and
FHAP funded entities who hire testers to screen for felony convictions
or crimes involving fraud or perjury and allows them to have discretion
to reject such applicants based on such convictions.
HUD disagrees with the commenter that this rule could make testing
potentially dangerous. HUD also believes this rule supports access to
safe and affordable housing free from discrimination.
HUD notes that this rule is not related to the necessity of testing
generally or in any particular industry such as the appraisal industry.
It also does not change who controls testing or their knowledge of the
appraisal process. Under this rule, testing remains an available option
for FHIP and FHAP funded entities to utilize to enforce the Fair
Housing Act in all covered housing transactions. This rule only changes
who can qualify as a tester funded through FHIP and FHAP funds. HUD
further notes that the fact that appraisers are legally prohibited from
discriminating does not mean that they actually refrain from
discriminating under the Fair Housing Act. Therefore, testing is still
a potentially relevant tool.
C. Potential Impacts on Fair Housing Testing
Negative Impacts
Two commenters said the proposed rule may make the testing process
unsafe. One commenter cited general recidivism statistics, while others
suggested that those who have broken the law or committed a felony in
the past are untrustworthy or more likely to break the law again. One
of these commenters cited a 75% recidivism rate over five years from
the Bureau of Justice Statistics to oppose the rule's inclusion
specifically of crimes of fraud and perjury.
One commenter noted that a person who has knowingly broken a major
law in the past may then be put in the position as a tester where they
can lie for financial gain. Another commenter suggested that testers
with criminal backgrounds may take a bribe from a housing provider so
that the provider would ``pass'' the fair housing test. Another
suggested that those who have committed felonies are more likely to
commit criminal acts like blackmail against landlords.
One commenter noted that although past felony convictions in
general may not have any bearing on the integrity of the FHIP and FHAP
programs, proven past behavior of fraud and perjury should. The same
commenter noted that allowing testers with fraud or perjury convictions
would impact the integrity of the program, and that such a rule would
be akin to, or lead to a slippery slope of, allowing contractors and
others on the debarment list to participate in future endeavors.
Positive Impacts
Some commenters stated that people with criminal histories are just
as capable as those without criminal histories. One of these commenters
said that justice involved individuals can be trustworthy, effective
communicators, reliable, and brilliant. Several commenters dismissed
concerns about the lack of credibility that may be attributed to a
person with certain criminal convictions, noting that because most fair
housing tests are now recorded, there is less concern that someone--
including someone with a criminal conviction--is fabricating a
narrative. One commenter said there are more reliable indicators of an
individual tester's credibility than a prior criminal conviction.
Another commenter said that a criminal conviction has no bearing on a
person's credibility or potential as a tester. Commenters said the
other restrictions on testers, including barring them from having an
economic interest in tests and other anti-bias restrictions, are
sufficient to demonstrate tester credibility. One commenter pointed out
that while some citizens may be guilty of fraud, it is not always a
direct result of their character; instead, barriers related to poverty
cause survival behaviors that can lead to conviction. Another commenter
similarly stated that there are countless reasons why someone may be
incarcerated, many of which have no bearing on an individual's
character. One person commented that not all those convicted of
felonies are ``true criminals,'' noting they know someone convicted of
a felony. Other commenters argued that tester applicants deserve an
individualized assessment, even if they have a criminal background. One
commenter said the vast majority of fair housing testers never testify
at trial at all, nor is eliciting trial testimony a primary purpose of
testing. The commenter stated that even when cases do go to litigation,
only a very small percentage go to trial and a smaller percentage still
involve the testimony of a tester.
Commenters pointed out that in some ways, people with criminal
convictions bring unique advantages to the role of fair housing tester
or otherwise would make more effective housing equity enforcement.
Commenters said it is important that people with conviction histories
have the chance to work as federally funded fair housing testers
because they are closest to the issue and have lived experiences that
can benefit investigations. One commenter noted that a job as a tester
is perfect for an individual with a felony, explaining that they would
have true interest and passion in this role.
One commenter said the proposed rule would ensure that testing
efforts are rooted in the community which promotes transparency and
trust and encourage the participation of individuals who may have a
personal stake in addressing housing discrimination, thereby
strengthening the overall impact of FHIP and FHAP funded initiatives.
Another commenter said allowing local FHIP and FHAP funded entities the
discretion to determine tester qualifications can also lead to
increased community engagement by involving community
[[Page 22939]]
members, advocates, and local experts in the testing process that will
foster a sense of ownership and collaboration.
Many commenters said the proposed rule would ensure that FHIP and
FHAP funded entities are able to fully investigate criminal background
screening policies that are potentially discriminatory under federal
civil rights laws by using testers with actual criminal backgrounds.
Commenters explained that testers with backgrounds are necessary to
complete effective testing throughout a housing transaction, including
during the application phase. Commenters said this is especially
important because as more sophisticated landlords have learned about
the ways that blanket bans against people with convictions may violate
the Fair Housing Act, they have become less likely to openly admit
discriminatory policies pre-application. One commenter said it needs to
use testers with criminal histories to successfully litigate these
types of fair housing cases ``given [their] hostile court system.''
Several commenters said removing these restrictions would make it
possible to fully investigate and enforce local and state laws that
limit tenant screening based on criminal histories of applicants.
Several commenters said the current regulation needlessly limits
the pool of potential fair housing testers who are members of racial
minorities, when the very thing that is needed to adequately test for
fair housing is a wide variety of people who are members of racial
minorities. Other commenters said broadening the scope of persons who
can serve as testers--as the proposed rule would do-- creates a more
diverse and more effective testing pool. One commenter explained that
their organization gets many complaints about housing discrimination,
and one of the most difficult parts of trying to get justice for their
clients is finding testers to do the work. This commenter wrote that
allowing formerly incarcerated people to work as fair housing testers
might go a long way to increasing the number of available testers in
their area. Another commenter stated that due to racial disparities in
the local criminal justice system, they have had challenges in
recruiting racially diverse testers, especially Native American
testers. The commenter stated that this impedes their ability to assist
their Native American clients who face housing discrimination. The
commenter explained the current restrictions also restrict their
ability to use Black testers, and explained how the current regulation
is especially harmful to anti-discrimination efforts in rural states by
needlessly limiting the pool of testers. Another organization commented
that the current restrictions on working with testers with criminal
backgrounds has presented obstacles in recruiting effective testers
that have prevented their agency from hiring individuals with criminal
convictions who would be excellent testers. One commenter said removing
barriers to entering the tester workforce can help meet the urgency of
the ongoing and evolving need to enforce fair housing.
Commenters said FHIP and FHAP funded entities should decide whether
to hire a tester with a conviction record, as they are most equipped to
know and be able to weigh the risk that a tester's past involvement in
the criminal legal system poses in relation to the methods used in
testing. One commenter noted that the proposed rule would not require
FHIP and FHAP funded entities to hire testers with criminal
convictions, it would just give them that discretion. Another commenter
stated that FHIP and FHAP funded entities should have sufficient
latitude to identify and select testers that meet minimum training
standards and support their work without undue interference,
restrictions, and burdensome requirements.
HUD Response: HUD appreciates the comments related to the impacts
of the rule on the quality of fair housing tests and the integrity of
the FHIP and FHAP. HUD has considered how this rule may impact fair
housing testing negatively and how this rule may impact fair housing
testing positively and believes that the positive impacts will outweigh
any potential negative impacts.
HUD believes that FHIP and FHAP funded entities, who are
responsible for the conduct of their testers, are well positioned to
decide whether there is a risk in employing an applicant with a
particular criminal conviction as a tester. This rule leaves them free
to make the same kind of discretionary determination, based on the
totality of the circumstances (including how long ago the conviction
was, the circumstances surrounding the conviction, and life someone has
lived since) that employers, landlords, and others are free to--and
often--make. Far from posing a risk to public safety, providing
opportunities to those with criminal convictions to be employed as fair
housing testers opens up meaningful employment opportunities, and may
actually reduce the risk of recidivism among ex-offenders, increasing
public safety overall.\29\
---------------------------------------------------------------------------
\29\ See, e.g, Matthew Makarios, Benjamin Steiner, Lawrence F.
Travis III. (2010). ``Examining the Predictors of Recidivism among
Men and Women Released from Prison in Ohio'', Criminal Justice and
Behavior. 37(12): 1377-1391 (finding that ``offenders who maintained
stable employment throughout their first year of parole [were]
significantly less likely to recidivate than those that did not hold
a job at all''); Michele Staton, Megan F. Dickson, Martha Tillson,
J. Matthew Webster, Carl Leukefeld. (2019). ``Staying Out: Reentry
Protective Factors Among Rural Women Offenders'', Women & Criminal
Justice. 29(6) (following a group of women who exited county jails
to rural Appalachian communities for 12 months, concluding that
having at least part-time employment was one of many ``protective
factors'' associated with staying out of jail); Stephen J. Tripodi,
Johnny S. Kim, Kimberly Bender. (2010). ``Is employment associated
with reduced recidivism? The complex relationship between employment
and crime'' International Journal of Offender Therapy and
Comparative Criminology, 54(5): 706-720 (overviewing research that
``most criminological research indicates a strong inverse
relationship between employment and crime, suggesting that ex-
prisoners who obtain employment are at significantly reduced risk
for reoffending'' and finding, based on following a group of male
parolees released from Texas prisons, a significant association
between employment and increased time until reincarceration); Robert
Apel, Julie Horney. (2017). ``How and why does work matter?
Employment conditions, routine activities, and crime among adult
male offenders'', Criminology, 55 (2): 307-343 (finding that having
a job that a person is ``very committed to'' verses a job that was
``just a job'' significantly lowers crime risk).
---------------------------------------------------------------------------
HUD disagrees with commenters that individuals with felony and
convictions involving fraud or perjury should be barred to serve as
testers because they are more likely to accept bribes, blackmail
landlords, or lie for financial gain. HUD believes that the local FHIP
or FHAP funded entity--rather than HUD--is in the best position to know
the extent to which applicants with certain convictions may jeopardize
testing and the extent to which local judges and juries may find
particular convictions relevant to witness credibility. Those entities
can use this local expertise, along with weighing the particulars of
the conviction, such as the time that has passed since the conviction,
the nature of the conviction, and evidence of post-conviction reform,
in making their own local hiring decisions.
Secondly, as HUD explained in the preamble to the proposed rule,
under modern day testing methodologies allowed in many states, a
tester's main role on the witness stand is testifying that the
recording being presented is an authentic recording of the event at
issue in the case. Thus, in many cases, the tester merely needs to be
credible enough for the judge or jury believe that testimony.
In addition, HUD believes other requirements that are not impacted
by this final rule help ensure that testers are objective, credible,
and well qualified, regardless of their criminal convictions. For
example, testers must
[[Page 22940]]
be trained in testing procedures and techniques and they are prohibited
from having an economic interest in the outcome of the test, being a
relative or acquaintance of any party in the case, having had a recent
employment history or other affiliation with the person or organization
to be tested, or being a competitor (or licensed competitor) of the
person or organization to be tested. 24 CFR 125.107(c) and 115.311(d).
HUD declines to retain restrictions on individuals with convictions
involving fraud or perjury in this final rule. While this final rule
allows FHIP and FHAP funded entities to use HUD funds to hire testers
with convictions involving fraud or perjury (in addition to those with
felony convictions generally), HUD expects many FHIP and FHAP funded
entities will still screen for these convictions and consider whether
to hire an applicant on a case-by-case basis, in line with their own
needs, investigations, and litigation efforts. A FHIP or FHAP funded
entity may, for example, view an applicant with a 40-year-old
conviction for writing a bad check much differently than someone more
recently convicted of embezzling funds from a non-profit or
governmental organization. Whether for fraud or perjury crimes, or for
felony convictions more generally, HUD finds that an automatic, blanket
ban is unable to account for the numerous different circumstances which
may make a particular conviction an inappropriate disqualifier to a
testing applicant's candidacy for employment with a FHIP or FHAP funded
agency. While HUD notes that recidivism statistics can have value in
some contexts, the inferences that can be drawn from these statistics
are limited, and HUD believes that these statistics are inappropriate
to use here to justify categorical bans against people applying to be
testers.\30\ HUD reiterates the messages in ``Tenant Screening With
Criminal Background Checks: Predictions And Perceptions Are Not
Causality'', published on May 17, 2022 by HUD's Office of Policy,
Development, and Research, which notes that ``predicting future
criminal involvement is a complicated business. Even using the best
assessment and screening tools that undergo regular validations and
enhancements, predictions are often wrong. . . . prediction is not
causality, [and] we have to accept that predictions look backward to
estimate an outcome that has not yet occurred and may never occur.''
Further, basing risk assessments on criminal convictions means using
``measures that are inherently biased because of discriminatory
criminal justice practices.'' Id. Thus, HUD believes that examining
each applicant on a case on a case-by-case basis, with full contextual
information, is a fairer and more effective means to determine
someone's qualification for a job, compared to automatically assuming
someone will not be a good candidate based on a conviction for a
specific category of crime (here, either a felony or a crime involving
fraud or perjury).
---------------------------------------------------------------------------
\30\ First, it should be noted that recidivism rates in the BJS
study that the commenter appears to be citing from are measured by
arrest for any offense, including parole and probation violations,
and include arrests that do not result in convictions. See U.S.
Department of Justice Office of Justice Programs Bureau of Justice
Statistics, Special Report ``Recidivism of Prisoners Released in 30
States in 2005: Patterns from 2005 to 2010'' (April 2014), available
at https://bjs.ojp.gov/content/pub/pdf/rprts05p0510.pdf. Of note,
this report (and data tables accompanying it) shows that 11.9% of
re-arrests within five years were for fraud offenses, and that the
overall recidivism rate after 5 years was 55.4 percent if measured
by any arrest resulting in a new conviction. Second, even where
recidivism is measured in the same way, rates can vary widely
depending on the study. See id. (detailing that of a cohort of state
prisoners released in 2005, those convicted of fraud or forgery
offenses had one of the highest recidivism rates (77 percent were
re-arrested for any offense after five years)) compare to Kim Steven
Hunt and Robert Dumville, U.S. Sentencing Commission, Recidivism
Among Federal Offenders: A Comprehensive Overview 11 (2016),
available at https://www.ussc.gov/sites/default/files/pdf/research-and-publications/research-publications/2016/recidivism_overview.pdf
(detailing that of a cohort of federal prisoners released in 2015,
those convicted of fraud had the lowest recidivism rates (34.2
percent were re-arrested for any offense after eight years)).
---------------------------------------------------------------------------
HUD believes that integrity of the FHIP and FHAP is jeopardized by:
(1) imposing rigid and automatic bans based on convictions that may
have no bearing on a person's ability to be a quality tester, (2)
forbidding FHIP and FHAP funded entities from taking into account all
the relevant information about candidates for testers (including the
age of any conviction, evidence of rehabilitation, circumstances
surrounding any conviction), and (3) forcing FHIP and FHAP funded
entities to make decisions based on convictions that may have been the
result of the same kind of discrimination that these entities are meant
to combat. HUD believes that these issues pose more of a threat to the
integrity of the FHIP and FHAP than allowing FHIP and FHAP funded
entities the discretion to allow people with convictions for fraud and
perjury become testers. HUD further notes that providing discretion to
FHIP and FHAP funded entities to hire testers who have past convictions
involving fraud or perjury is consistent with current debarment
regulations, which allow federal agencies to debar individuals based on
certain criminal convictions (see 2 CFR 180.800), and also allow the
government to take into account a long list of mitigating circumstances
to decide not to debar an individual based on such convictions. See 2
CFR 180.860.
HUD agrees with commenters who said testers with actual criminal
convictions ranging from misdemeanor to felony convictions are, in
certain circumstances, the best suited to obtain evidence of what
modern-day criminal record screening practices are and whether these
policies are being applied in a discriminatory way. HUD also agrees
that engaging individuals with experiences that are relevant to a fair
housing investigation is beneficial to both fair housing enforcement
and HUD's mission to advance equity more generally. HUD agrees with
commenters that broadening the scope of persons who can serve as
testers allows FHIP and FHAP funded entities to build and maintain a
more diverse testing pool that is best poised to respond to all types
of fair housing allegations. The final rule is in line with these
goals.
HUD agrees that FHIP and FHAP funded entities are in the best
position to make decisions about how to screen their own testers
because those entities know the specific characteristics and challenges
of their local housing markets and can select the most appropriate
testers for their investigations. As stated in the proposed rule, HUD
sees no reason to categorically bar those who conduct testing using
FHIP or FHAP funds from employing testers with certain criminal
convictions. By rescinding the Federal prohibitions on tester criminal
convictions, this final rule provides necessary discretion to FHIP and
FHAP funded entities.
D. Increased Opportunities and Benefits for People With Criminal
Convictions and Society
Commenters noted the struggles of individuals who have made
mistakes, and noted that despite being rehabilitated, not a threat, and
active members of their community, people with criminal convictions are
continually unfairly excluded from desperately needed opportunities,
including career opportunities some of which are blocked by the current
regulation's stipulations. Commenters said the collateral consequences
of felony convictions can lead to mental health issues and recidivism.
Many commenters said that the current regulations unfairly punish
those who have already been punished through the criminal justice
system and should not be punished further.
[[Page 22941]]
Commenters said if someone has ``served their time'' and ``paid their
debt to society,'' they should be able to put the past behind them and
have a second chance, including the chance to assist in positive change
and serve in the role of a fair housing tester.
Commenters said the proposed rule will improve the lives of people
with criminal convictions by expanding opportunities to develop
marketable skills and jobs in order gain self-sufficiency, stability,
and contribute positively to society. Commenters specifically talked
about the value of those reentering society becoming more involved in
their communities through serving in the role of a fair housing tester.
Commenters stated that the proposed rule would reduce stigma against
people with felony convictions, which commenters noted as an important
goal.
One commenter stated that this rule is especially needed to support
single fathers and men, especially Black men who are struggling to
regain their identity without stability or sources of income because of
criminal records.
HUD Response: HUD agrees with commenters that the final rule will
expand important opportunities for individuals with criminal
convictions because of the compensation these opportunities will
provide for individuals who are hired through the FHIP and FHAP
programs, the valuable experience these individuals will gain to help
further career prospects, and because of the empowerment that comes
from employment generally, and particularly employment focused on
rooting out discrimination in one's community. HUD notes that opening
access to fair housing enforcement should increase housing
opportunities more generally by increasing detecting discriminatory
policies and practices that impact those with criminal convictions.
HUD agrees with the commenters that by opening up employment
opportunities for people with criminal convictions in our FHIP and FHAP
programs, this final rule contributes to a stronger, healthier, safer
society at large.\31\
---------------------------------------------------------------------------
\31\ While research has demonstrated that employment lowers
recidivism risks generally, there is also evidence that meaningful
jobs may be the most impactful. See, e.g., Robert Apel, Julie
Horney. (2017). ``How and why does work matter? Employment
conditions, routine activities, and crime among adult male
offenders'', Criminology, 55 (2): 307-343 (finding that having a job
that a person is ``very committed to'' verses a job that was ``just
a job'' significantly lowers the risk that person will commit a
crime).
---------------------------------------------------------------------------
E. Other
One commenter requested that guidance be issued to clarify to grant
managers and FHIP staff that a blanket ban on testers with past
convictions will no longer be enforced. Another commenter said HUD
should ensure that FHIP and FHAP funded testing programs are actively
advertising to people with prior criminal convictions, encouraging
people from all backgrounds to apply, and evaluating their applications
fairly. One commenter recommended that once the prohibition is removed,
HUD should partner with organizations that serve those with felony
convictions and convictions involving fraud or perjury to create and
fund a training program and pipeline for those with records to become
testers.
Several commenters wrote regarding their support for or their
opposition to expanding housing opportunities for individuals with
criminal convictions.
Other commenters wrote with specific concerns and requests relating
to their individual housing situations.
HUD Response: HUD thanks commenters for their recommendations and
will take them under advisement.
HUD also appreciates all comments relating to expanding housing
opportunities for individuals with criminal histories. However, this
final rule does not change any regulation regarding whom landlords --
including HUD-assisted housing providers and public housing agencies--
may accept as tenants. Instead, this final rule removes prohibitions on
the use of HUD funds to hire testers with certain criminal convictions.
Finally, regarding comments outlining specific concerns and
requests relating to individual housing situations, HUD thanks these
commenters for their thoughts, however, HUD is unable to take any of
the requested actions under this rulemaking.
III. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Under E.O. 12866 (Regulatory Planning and Review), a determination
must be made whether a regulatory action is significant and, therefore,
subject to review by the Office of Management and Budget (OMB) in
accordance with the requirements of the order. E.O. 13563 (Improving
Regulations and Regulatory Review) directs Executive agencies to
analyze regulations that are ``outmoded, ineffective, insufficient, or
excessively burdensome, and to modify, streamline, expand, or repeal
them in accordance with what has been learned.'' E.O. 13563 also
directs that, where relevant, feasible, and consistent with regulatory
objectives, and to the extent permitted by law, agencies are to
identify and consider regulatory approaches that reduce burdens and
maintain flexibility and freedom of choice for the public. E.O. 14094
(Modernizing Regulatory Review) amends section 3(f) of E.O. 12866,
among other things.
The final rule revises 24 CFR parts 115 and 125 to remove fair
housing tester restrictions. The revised regulations would allow FHIP
and FHAP funded entities the ability to use HUD funds to compensate
testers with felony convictions and convictions for crimes involving
fraud or perjury. This rule was not subject to OMB review. This rule is
not a ``significant regulatory action'' as defined in section 3(f) of
Executive Order 12866 and is not an economically significant regulatory
action.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.),
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
This final rule will remove tester restrictions from the FHIP and FHAP
regulations which prohibit fair housing testers with prior convictions
of a felony, fraud, or perjury. This will not create an undue burden on
small entities, instead it will allow FHIP and FHAP funded entities the
ability to use testers with felony convictions and convictions for
crimes involving fraud or perjury. Identifying potential discriminatory
screening policies will positively impact small entities and assist
with maintaining compliance with the Fair Housing Act. Therefore, this
final rule will not have a significant economic impact on a substantial
number of small entities.
Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive order. This final rule does not have
federalism implications and would not impose substantial direct
compliance costs on state and local governments or preempt
[[Page 22942]]
state law within the meaning of the Executive order.
Environmental Impact
This final rule is a policy document that sets out fair housing and
nondiscrimination standards and provides for assistance in enforcing
fair housing and nondiscrimination. Accordingly, under 24 CFR
50.19(c)(3), this rule is categorically excluded from environmental
review under the National Environmental Policy Act of 1969 (42 U.S.C.
4321).
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 establishes
requirements for Federal agencies to assess the effects of their
regulatory actions on state, local, and tribal governments and the
private sector. This rule will not impose any federal mandates on any
state, local, or tribal governments or the private sector within the
meaning of the Unfunded Mandates Reform Act of 1995.
List of Subjects
24 CFR Part 115
Administrative practice and procedure, Aged, Fair housing, Grant
programs--housing and community development, Individuals with
disabilities, Intergovernmental relations, Mortgages, Reporting and
recordkeeping requirements.
24 CFR Part 125
Fair housing, Grant programs--housing and community development,
Reporting and recordkeeping requirements.
For the reasons described in the preamble, HUD amends 24 CFR 115
and 125 as follows:
PART 115--CERTIFICATION AND FUNDING OF STATE AND LOCAL FAIR HOUSING
ENFORCEMENT AGENCIES
0
1. The authority citation for part 115 continues to read as follows:
Authority: 42 U.S.C. 3601-19; 42 U.S.C. 3535(d).
Sec. 115.311 [Amended]
0
2. In Sec. 115.311, remove paragraph (b) and redesignate paragraphs
(c) and (d) as paragraphs (b) and (c), respectively.
PART 125--FAIR HOUSING INITIATIVES PROGRAM
0
3. The authority citation for part 125 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 3616 note.
Sec. 125.107 [Amended]
0
4. In Sec. 125.107, remove paragraph (a) and redesignate paragraphs
(b) and (c) as paragraphs (a) and (b), respectively.
Damon Y. Smith,
General Counsel.
[FR Doc. 2024-06977 Filed 4-2-24; 8:45 am]
BILLING CODE 4210-67-P
