[Federal Register Volume 88, Number 209 (Tuesday, October 31, 2023)]
[Proposed Rules]
[Pages 74381-74386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23678]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 115 and 125
[Docket No. FR-6355-P-01]
RIN 2529-AB07
Removing Criminal Conviction Restrictions for Testers in FHIP-
and FHAP-Funded Testing Programs
AGENCY: Office of Fair Housing and Equal Opportunity, HUD.
ACTION: Proposed rule.
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SUMMARY: Through this proposed rule, the U.S. Department of Housing and
Urban Development (HUD) seeks to eliminate the tester restrictions for
Fair Housing Initiatives Program (FHIP) grantees and for Fair Housing
Assistance Program (FHAP) agencies that forbid FHIP and FHAP recipients
from using fair housing testers with prior felony convictions or
convictions of crimes involving fraud or perjury. This proposed rule
would make HUD's programs as inclusive as possible for people with
criminal records, consistent with Secretary Marcia Fudge's April 12,
2022 Memorandum, ``Eliminating Barriers That May Unnecessarily Prevent
Individuals with Criminal Histories from Participating in HUD
Program,'' and 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.
DATES: Comment due date: January 2, 2024.
ADDRESSES: Interested persons are invited to submit comments regarding
[[Page 74382]]
this proposed rule. There are two methods for submitting public
comments. All submissions must refer to the above docket number and
title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street SW, Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly encourages commenters to submit
comments electronically. Electronic submission of comments allows the
commenter maximum time to prepare and submit a comment, ensures timely
receipt by HUD, and enables HUD to make them immediately available to
the public. Comments submitted electronically through the
www.regulations.gov website can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must be
submitted through one of the two methods specified above. Again, all
submissions must refer to the docket number and title of the rule.
No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Comments. All properly submitted comments and
communications submitted to HUD will be available for public inspection
and copying between 8 a.m. and 5 p.m. weekdays at the above address.
Due to security measures at the HUD Headquarters building, an advance
appointment to review the public comments must be scheduled by calling
the Regulations Division at 202-402-3055 (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. Copies of all comments
submitted are available for inspection and downloading at
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Demetria McCain, Principal Deputy
Assistant Secretary for Fair Housing and Equal Opportunity, Department
of Housing and Urban Development, Office of Fair Housing and Equal
Opportunity, 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
On April 12, 2022, Secretary Marcia Fudge directed 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.'' \1\ Two HUD programs, the Fair Housing Initiative Program
(FHIP) and the Fair Housing Assistance Program (FHAP) fund local
private and governmental agencies who further enforcement of the Fair
Housing Act. Current regulations forbid these entities from using these
program funds for fair housing testing that involves testers with prior
felony convictions or convictions of crimes involving fraud or perjury.
The applicable regulations containing these restrictions can be found
at 24 CFR 125.107(a) (the FHIP regulation) and 24 CFR 115.311(b) (the
FHAP regulation).
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\1\ ``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.
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A. Fair Housing Initiatives Program (FHIP)
In 1987, Congress established the FHIP to strengthen the
Department's enforcement of the Fair Housing Act and to further fair
housing. This program funds, among other things, ``testing'' activities
undertaken by fair housing organizations and other private non-profits
designed to enhance enforcement of the Fair Housing Act.
Testing refers to the use of an individual or individuals
(``testers'') who, without a bona fide intent to rent or purchase a
house, apartment, or other dwelling, pose as prospective renters or
purchasers for the purpose of gathering information that may indicate
whether a housing provider is complying with fair housing laws.
B. History of the FHIP and its Testing Guidelines
Section 561 of the Housing and Community Development Act of 1987
(Section 561) established the FHIP as a temporary program, and
specifically required HUD to ``establish guidelines for testing
activities funded under the private enforcement initiative of the fair
housing initiatives program.'' Section 561 noted 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.'' In the FHIP's
first iteration, the enabling law imposed a sunset on the
``demonstration period'' for September 30, 1989.\2\
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\2\ Section 561(e).
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In 1988, HUD proposed regulations for the demonstration period
that, among many other requirements, forbid testers under the FHIP from
having ``prior felony convictions or convictions of crimes involving
fraud or perjury.'' This restriction followed a proposed requirement
for a ``formal recruitment process designed to obtain a pool of
credible and objective persons to serve as testers.'' \3\
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\3\ 53 FR 25581 (July 7, 1988).
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The Department's FHIP 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.\4\ The
1989 final rule for the demonstration period describes comments both in
support and in opposition of the proposed guidelines. None of the
comments pertained specifically to the conviction restrictions for
testers. Accordingly, HUD did not discuss that particular portion of
the guidelines in the final rule.
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\4\ 54 FR 6492, 6501 (Feb. 10, 1989).
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Section 953 of the Cranston-Gonzalez National Affordable Housing
Act (November 28, 1990) extended the FHIP sunset to September 30, 1992.
Then in 1992, Congress made the FHIP program permanent through the
Housing and Community Development Act of 1992 that codified the FHIP
provisions in the Fair Housing Act at 42 U.S.C. 3616a.\5\
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\5\ Public Law 102-550, October 28, 1992, 106 Stat. 3672.
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[[Page 74383]]
The guidelines section at 24 CFR 125.405 that had been established
in 1989 changed significantly when regulations for the permanent
program were issued in 1995, but the tester conviction restriction
remained.\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. The revised Sec. 125.405 [retitled ``Testers'']
proposed here would remove the testing guidelines, but would still
require that testers must not have prior felony convictions or
convictions of crimes involving fraud or perjury, and that they receive
training or be experienced in testing procedures and techniques.'' \7\
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\6\ 60 FR 58452, 58453 (Nov. 27, 1995).
\7\ 59 FR 44596-01 (Aug. 29, 1994) (``The Department considered
two factors to be significant and determinative in the decision to
eliminate testing guidelines from the regulation. First, in the
original authorizing statute for FHIP, Congress specifically limited
the requirement for testing guidelines to the demonstration period;
and second, Congress did not include this requirement in its
permanent authorization of FHIP by section 905.'')
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HUD did not provide an explanation for why it chose to retain the
tester restriction in the 1994 final rule. Like with the 1989 final
rule, HUD received comments in support of and in opposition to removing
most of the testing guidelines, but none of the comments discussed the
tester conviction portion that remained. The operative section was
moved to 24 CFR 125.07--Testers: \8\ ``The following requirements apply
to testing activities funded under the FHIP: a) Testers must not have
prior felony convictions or convictions of crimes involving fraud or
perjury.'' This language has not changed since 1995.
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\8\ In addition to the conviction restrictions, 24 CFR 125.107
also imposes these requirements on testers: (b) Testers must receive
training or be experienced in testing procedures and techniques, and
(c) Testers and the organizations conducting tests, and the
employees and agents of these organizations may not: (1) Have an
economic interest in the outcome of the test, without prejudice to
the right of any person or entity to recover damages for any
cognizable injury; (2) Be a relative of any party in a case; (3)
Have had any employment or other affiliation, within one year, with
the person or organization to be tested; or (4) Be a licensed
competitor of the person or organization to be tested in the
listing, rental, sale, or financing of real estate.
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C. The Fair Housing Assistance Program (FHAP)
While the FHIP funds private non-profits to assist in enforcement
of the Fair Housing Act and substantially equivalent local laws, the
FHAP funds State and local governmental agencies to do the same.
Section 817 of the Fair Housing Act, 42 U.S.C. 3616, provides that the
Secretary may reimburse State and local fair housing enforcement
agencies that assist the Secretary in enforcing the Act. HUD has
implemented section 817 at subpart C of 24 CFR part 115, which sets
forth the requirements for participation in the FHAP. Under the FHAP, a
State or local agency is certified for participation if the Department
determines that the agency adequately enforces a law or laws that
provide rights, procedures, remedies, and judicial review provisions
that are substantially equivalent to the federal Fair Housing Act.\9\
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\9\ See 42 U.S.C. 3610(f); 24 CFR part 115.
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D. History of the FHAP and its Testing Guidelines
In 1980, the Carter administration asked Congress to authorize
funding for HUD to assist State and local agencies in enforcing fair
housing laws, citing limitations that localities had in processing fair
housing complaints. This request was approved by Congress in Public Law
96-103 (FY1980 Appropriations Act for HUD), which marked the
establishment of the FHAP.\10\ That same year, HUD issued an interim
final rule that established ``the eligibility criteria for participants
in the Fair Housing Assistance Program (FHAP) and the minimum standards
which specific project proposals must meet.'' \11\ HUD issued
subsequent rules for the FHAP in 1982, 1988, and 1989. None of these
initial rules addressed fair housing testing in any way.\12\ The
interim and final rules in 1996 mention testing only to note that any
ordinances that include ``anti-testing provisions'' would prevent a
jurisdiction from achieving substantially equivalent status.\13\ In
2005, HUD first addressed the criminal backgrounds of FHAP testers in
FHAP regulations.
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\10\ See The Fair Housing Act: HUD Oversight, Programs, and
Activities, Congressional Research Service R44557 (April 7, 2021)
(citing 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.
\11\ 45 FR 31880 (May 14, 1980).
\12\ Id.; 47 FR 8991 (March 3, 1982); 53 FR 34668 (Sept. 7,
1988); 54 FR 20094 (May 9, 1989).
\13\ 61 FR 7674 (Feb. 28, 1996); 61 FR 41282 (Aug. 7, 1996).
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The proposed rule in 2005 and final rule in 2007 created a new
definition of testing \14\ and included a new section on testing, which
read in part: ``The following requirements apply to testing activities
funded under the FHAP: [. . .] Testers must not have prior felony
convictions or convictions of any crimes involving fraud or perjury.''
\15\ There was no commentary about this restriction from the public or
HUD in these rules.
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\14\ ``Testing refers to the use of an individual or individuals
(``testers'') who, without a bona fide intent to rent or purchase a
house, apartment, or other dwelling, pose as prospective renters or
purchasers for the purpose of gathering information that may
indicate whether a housing provider is complying with fair housing
laws.'' 70 FR 28748 (May 18, 2005); 72 FR 19070 (Apr. 16, 2007);
currently codified at 24 CFR 115.100(c).
\15\ 70 FR 28748 (May 18, 2005); 72 FR 19070 (Apr. 16, 2007);
currently codified at 24 CFR 115.311(b). Unlike the FHIP criminal
conviction restriction, the FHAP restriction was not proceeded by
any reference to credibility.
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E. Basis for Tester Restrictions
As is explained above, in 1987, Congress required HUD to establish
guidelines for the FHIP demonstration period that would help ensure
that FHIP grantees' investigations developed ``credible evidence'' of
discriminatory housing practices. While HUD has never been explicit, it
presumably first enacted the restrictions on testers' criminal
histories 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) 609, which provides
that certain criminal convictions may be admitted to attack witness's
``character for truthfulness.'' \16\
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\16\ 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).
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Specifically, in civil cases where the witness is not the
defendant, FRE 609 requires the admission of evidence of two categories
of criminal convictions: (1) a crime punishable by death or
imprisonment for more than one year, and (2) any conviction of a crime
involving dishonesty or false statement. However, both categories are
subject to a number of exceptions that limit admissibility.\17\
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\17\ Specifically, although FRE 609(a)(1)(A) requires the
admission of a crime that was punishable by death or by imprisonment
for more than one year (what is often categorized as a felony), this
requirement is explicitly subject to Rule 403. Rule 403 says that a
court may exclude relevant evidence if its probative value is
substantially outweighed by a danger of one or more of the
following: unfair prejudice, confusing the issues, misleading the
jury, undue delay, wasting time, or needlessly presenting cumulative
evidence. Although FRE 609(a)(2) requires admission of any crime if
the elements of the crime required proving--or the witness's
admitting--a dishonest act or false statement (i.e., crimes of
dishonesty), evidence of the conviction is admissible only if its
probative value, supported by specific facts and circumstances,
substantially outweighs its prejudicial effect, if the conviction is
older than 10 years. See FRE 609(b). Also under both categories,
juvenile convictions are explicitly not admissible. 609(d). Nor are
convictions that have been the subject of a pardon, annulment,
certificate of rehabilitation, or other equivalent procedure based
on a finding of innocence. 609(b).
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[[Page 74384]]
F. How HUD's Conviction Restrictions Are Overbroad, Outdated, and
Unnecessary
Notably, the disqualifying convictions covered by HUD's regulations
are much broader than those in FRE-609. For example, unlike 609, HUD's
current regulations always disqualify testers for prior convictions,
even those that are over 10 years old and have little or no probative
value. In addition, HUD's current regulations do not have explicit
carve outs for testers whose convictions have been the subject of a
pardon, annulment, certificate of rehabilitation or similar findings of
innocence. Moreover, HUD's current regulations may disqualify testers
with certain juvenile convictions.
More broadly, even with respect to convictions that could be
admissible under FRE 609, HUD now sees 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.\18\
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\18\ Several fair housing organizations from across the country
recently wrote HUD noting that ``[p]eople with conviction histories
commonly testify credibly in civil matters, and organizations can
make individual determinations, consistent with HUD and EEOC
guidance, as to the facts or circumstances surrounding the proposed
tester's criminal conduct and whether these facts would be likely to
present barriers to credibility. . . Critically, the vast majority
of fair housing testers never testify at trial at all, nor is
eliciting trial testimony a primary purpose of testing. Instead,
test results often serve as the basis to start a broader
investigation and enforcement strategy and provide helpful data to
guide education efforts. 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.''
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Based on HUD's experience investigating fair housing complaints,
testers today generally audio and/or video record their testing
experiences, meaning that the recordings--not the testers' testimony--
are of utmost importance in most fact-finding hearings.\19\ Recording
fair housing tests has become ubiquitous as cost of devices and
technology has gone down and the utility of such recordings has become
evident. Such recording is not only relatively inexpensive, it is also
explicitly legal: Federal law and state law in many states allow a
party to a communication like a telephone call to record without the
knowledge or consent of other parties.\20\ In many cases, sharing
recorded evidence of fair housing testing facilitates early resolution
and settlement, negating the need to interrogate tester credibility.
And in housing discrimination cases that go to trial, the main role of
testers as witnesses is to introduce the recorded evidence of the
interaction, not to recount their experience in detail. In short,
testing evidence often speaks for itself and a tester merely needs to
be credible enough for the judge or jury to believe their testimony
that the recording being presented is an authentic recording of the
events at issue in the case.
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\19\ See also, id., noting that ``39 of the 50 states allow for
single party consent to record, which means that tests are audio
recorded in most states, removing any doubt about the veracity of
accounts.''
\20\ See, e.g., Recording Phone Calls and Conversations: 50-
State Survey, available at https://www.justia.com/50-state-surveys/recording-phone-calls-and-conversations/.
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In addition, other requirements in these regulations that will
continue to apply to testers 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.\21\ Testers cannot have an economic interest in the outcome
of the test; \22\ be a relative or acquaintance of any party in the
case; \23\ have had a recent employment history or other affiliation
with the person or organization to be tested; \24\ or be a competitor
(or licensed competitor) of the person or organization to be
tested.\25\
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\21\ 24 CFR 115.311(c); 24 CFR 125.107(b).
\22\ 24 CFR 115.311(d)(1); 24 CFR 125.107(c)(1).
\23\ 24 CFR 115.311(d)(2); 24 CFR 125.107(c)(2).
\24\ 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).
\25\ 24 CFR 115.311(d)(4); 24 CFR 125.107(c)(4)(specifying such
``licensed'' competitors are barred from conducting testing).
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HUD also observes that FRE 609 itself is not always applied even
where a crime of conviction comes under its potential application.
First, fair housing cases using testers are not only heard in federal
courts; they are also heard in state courts, which sometimes have
different rules of evidence. At least one state (Montana) has chosen to
adopt a Rule 609 variation that prohibits admission of evidence that a
witness has been convicted of a crime for the purpose of attacking the
credibility of a witness, explaining that ``[t]he Commission does not
accept as valid the theory that a person's willingness to break the law
can automatically be translated into willingness to give false
testimony'' and that conviction evidence has ``low probative value in
relation to credibility.'' \26\ And even in Federal courts, while no
survey appears to have been conducted to see the frequency with which
judges admit prior convictions to impeach witnesses in civil matters,
one survey done in the criminal context has shown that ``federal judges
do not routinely admit prior convictions to impeach criminal
defendants.'' \27\ Judges sometimes exclude or find unpersuasive prior
criminal convictions of witnesses in civil matters, preferring to focus
on more reliable indicators of credibility tied to the facts of the
case at hand.\28\ Ultimately, HUD believes it is better left to FHIP
and FHAP funded entities to decide whether to hire a tester with
criminal convictions, as they are in the best position to know and be
able to weigh the risk that a testers' former criminal convictions will
be admitted--and matter--in their local courts, and based on the kind
of testing that will be done.
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\26\ Mont. Code Ann. Rule 26-10-609.
\27\ Ric Simmons, An Empirical Study of Rule 609 and Suggestions
for Practical Reform, 59 B.C. L. Rev. 993 (2018).
\28\ See, e.g., Sanchez v. Jiles, No. CV 10-09384 MMM (OPx)
``Final Order on Motions In Limine'' 2012 U.S. Dist. LEXIS 200372
(C.D. Cal. June 14, 2012) (finding felony convictions involving
fraud and forgery to not highly relevant to the plaintiff's
witness's credibility and ordering that defendants not introduce it
into evidence); 3 Federal Rules of Evidence Manual Sec. 609.03
(2022).
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Indeed, HUD recognizes 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.\29\ When the
restrictions on testers' criminal histories were first promulgated as a
demonstration regulation in 1989, housing providers were unlikely to
conduct criminal background checks on prospective applicants.\30\ Since
then, landlords have increasingly implemented policies and practices to
screen applicants based on their criminal backgrounds--including those
with felony convictions and convictions involving fraud or perjury.\31\
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\29\ HUD has been contacted by fair housing organizations urging
reform of the 24 CFR 105.107 because its restrictions prevent fair
housing centers from testing for certain types of criminal
background discrimination by preventing them from employing testers
with felonies to test the entire application process.
\30\ 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).
\31\ See, e.g., id. at 12 (describing a 2005 survey of large
landlords which revealed that 80 percent screened prospective
tenants for criminal histories).
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[[Page 74385]]
In 2016, HUD issued a memo explaining how these kinds of admissions
policies and practices may be discriminatory under the Fair Housing
Act.\32\ 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.\33\
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.\34\
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\32\ 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).'')
\33\ The Fair Housing Act prohibits discrimination in the sale,
rental, or financing of dwellings and in other housing-related
activities on the basis of race, color, religion, sex, disability,
familial status or national origin. 42 U.S.C. 3601 et seq.
\34\ 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).
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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. For example, testers with no
criminal histories cannot submit actual applications to test a criminal
records screening policy where the landlord runs a typical computer-
based ``background check'' on its applicants; they are limited to
investigating discrimination that occurs pre-application. Testers
without criminal backgrounds can inquire about what a criminal records
policy is at a property, reveal a fabricated history, and ask whether
they would be accepted or rejected. However, 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 \35\
and whether the policy is being applied (after the application is
submitted) in a discriminatory manner. Absent a change in regulation,
FHIP and FHAP funded entities do not have the option of conducting
testing using HUD funds that investigates modern criminal records
policies through the application phase.\36\
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\35\ See, e.g., 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
housing provider may have a policy in writing that differs from a
policy in practice, and that fully ``[i]dentif[ing] all policies,
including written and unwritten policies or practices'' is an
important first step in investigating the potential discriminatory
effects of a policy. 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.
\36\ See, e.g., Locked Out: Criminal Background Checks as a Tool
for Discrimination, available at https://lafairhousing.org/wp-content/uploads/2021/12/Criminal_Background_Audit_FINAL.pdf. This
report demonstrates how a FHIP grantee was able to uncover evidence
that criminal records policies were being used as pretext for
intentional discrimination by showing that landlords used the
criminal backgrounds of black testers to treat those testers less
favorably at the pre-application stage compared to white testers,
even though the black and white testers had similar (but made-up)
criminal backgrounds. The investigation found that paired white
testers were quoted more lenient criminal records policies than
black testers, were encouraged to apply where black testers were
discouraged, and were uniquely told that exceptions would be made to
the landlord's criminal records policies. These investigations were
not able to see if landlords were discriminating after applications
were submitted, however, because the criminal histories of the
testers were not real. If this FHIP grantee was able to use paired
testers with actual similar criminal backgrounds, it would have the
ability to investigate the discriminatory use of a criminal records
policy beyond just the pre-application stage.
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Finally, 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. These issues are particularly problematic in the context of a
fair housing investigation, where sometimes people with criminal
records are best able to investigate discriminatory activity, and where
a factfinder is particularly unlikely to find a tester's criminal
records to undermine their credibility (as in the common case where
testing evidence is audio and/or video recorded and speaks for itself).
G. Removing the Tester Conviction Restrictions Is Legally Permissible
Outside of the considerations discussed above, removing these
restrictions is legally permissible. As HUD has previously noted, the
original authorizing statute for the FHIP specifically limited the
requirement for testing guidelines to the demonstration period.
Congress did not include this requirement in its permanent
authorization of the FHIP. HUD maintains the position that it took in
1994 that HUD is not required by any statute to have regulations
containing testing restrictions for the permanent FHIP.\37\ Nor are
these restrictions statutorily required for the FHAP.
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\37\ See footnote 7 (citing 59 FR 44596-01 (Aug. 29, 1994)). Of
note, even if HUD had taken the position that 561(c)(2) of the 1987
Act was still in effect, that section of the Act only required,
generally, for HUD to ``establish guidelines for testing activities
funded under the private enforcement initiative of the fair housing
initiatives program . . . to ensure that investigations in support
of fair housing enforcement efforts . . . develop credible and
objective evidence of discriminatory housing practices.'' Sec.
561(c)(2) of the Housing and Community Development Act of 1987. It
did not require restricting testers based on their criminal history
in order to ensure credible and objective evidence.
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II. This Proposed Rule
This rule proposes to amend the regulations in 24 CFR part 115 and
125 for the reasons discussed above.
At 24 CFR 115.311, the proposed regulatory text would delete
paragraph (b), which wholly contains the tester background restriction
but no other content.
At 24 CFR 125.107, the proposed regulatory text would delete
paragraph (a) which wholly contains the tester background restriction
but no other content.
HUD seeks comments on these proposals.
III. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Under Executive Order 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.
Executive Order 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.'' Executive Order 13563 also directs that, where
[[Page 74386]]
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. Executive Order 14094 entitled
``Modernizing Regulatory Review'' (hereinafter referred to as the
``Modernizing E.O.'') amends section 3(f) of Executive Order 12866
(Regulatory Planning and Review), among other things.
The proposed rule would revise 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.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on state,
local, and tribal governments, and on the private sector. This proposed
rule would not impose any Federal mandates on any state, local, or
Tribal Government, or on the private sector, within the meaning of the
UMRA.
Environmental Review
This proposed 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).
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 rule would 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. Accordingly, it
is HUD's determination that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
Executive Order 13132, 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 or 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 rule would not have
Federalism implications and would not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the Executive order.
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.
Accordingly, for the reasons described in the preamble, HUD
proposes to amend 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 and 42 U.S.C. 3535(d).
Sec. 115.311 [Amended]
0
2. In Sec. 115.311, remove paragraph (b), redesignate paragraph (c) as
paragraph (b), and redesignate paragraphs (d) through (d)(4) as
paragraphs (c) through (c)(4).
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), redesignate paragraph (b) as
paragraph (a), and redesignate paragraphs (c) through (c)(4) as
paragraphs (b) through (b)(4).
Demetria McCain,
Principal Deputy, Assistant Secretary for Fair Housing and Equal
Opportunity.
[FR Doc. 2023-23678 Filed 10-30-23; 8:45 am]
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