Settlement Reached in Fair Housing Case Challenging Discriminatory Criminal Background Screening

FOR IMMEDIATE RELEASE
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Contact:
Caroline Peattie, Fair Housing Advocates of Northern California
(415) 483-7552 | [email protected]
 
Settlement Reached in Fair Housing Case Challenging Discriminatory Criminal Background Screening
 
San Rafael, CA – Fair Housing Advocates of Northern California (FHANC) announces a successful resolution of a fair housing complaint against Two Coast Living Property Management (Two Coast) and the owner of the Grove Luxury Apartments (the Grove) – a 492 unit building in Petaluma – alleging racially discriminatory rental practices. The complaint filed with the California Civil Rights Department (CRD) challenged the use of overly restrictive criminal background screening policies that FHANC claims disproportionately excluded Black and Latinx applicants. The complaint also alleged racially discriminatory treatment by rental agents, claiming that FHANC’s Black fair housing testers – covert investigators posing as prospective renters – were treated less favorably by Two Coast employees than their counterpart white testers.
 
This settlement represents an important step in the right direction. In addition to paying FHANC $27,000, Two Coast Living – which manages thousands of units across the country – agreed to fundamentally change their criminal record screening policy at all their California properties to address the fair housing concerns raised in FHANC’s complaint. These reforms are critical because overly broad uses of a person’s criminal conviction history in tenant screening disproportionately excludes Black and Latinx applicants, who – due to the over-policing of communities of color – are arrested, convicted, and incarcerated at rates disproportionate to their share of the general population. As such, some jurisdictions in California have already outlawed the use of criminal history in tenant screening altogether, and HUD has recommended against its use because it is not a reliable predictor of whether someone will be a successful tenant. This agreement ensures that any consideration of criminal history is extremely narrowly tailored to achieve a legitimate non-discriminatory business interest, and helps open housing opportunities at over 3,800 units in California for renters of color who might otherwise be unfairly excluded.
 
“We are pleased that Two Coast was willing to work collaboratively with us to resolve this case and to take meaningful steps toward having equitable screening practices,” said FHANC’s Executive Director, Caroline Peattie. “We anticipate that California will eventually adopt a statewide fair chance housing law and Two Coast’s decision to apply these new policies across all of their California properties shows a genuine commitment to complying with fair housing laws and to leading the way on reform in this area.”
 
The new policies ensure that criminal background checks may only be used when they serve a legitimate business purpose related to safety, and denials must be based on serious and recent violent, sex, or property offenses, rather than a broad list of offenses. Importantly, the policies now require consideration of the nature, severity, and recency of an offense; prohibit reliance on convictions older than seven years; and mandate individualized assessments that take into account mitigating information such as rehabilitation, tenant history, and circumstances of the conviction. In addition, the landlord must provide transparency by giving applicants written notice of any adverse action, a copy of the background check, and an opportunity to dispute errors or provide mitigating evidence. Critically, a criminal background check will not even be considered unless and until an applicant has first passed the financial qualification screening and been conditionally approved.
 
FHANC views this agreement as a significant opportunity to drive broader reforms in the rental housing industry. “We urge other housing providers to re-examine their screening practices and align them with fair housing laws so that equitable access to housing becomes the rule, not the exception,” said Ms. Peattie. “While we believe that criminal conviction records should not be used in tenant screening at all, we know this is a step in the right direction. And we hope this settlement serves as a catalyst for change across the rental housing industry in California.”
 
FHANC brought the complaint after it investigated the Grove as part of a broader investigation of race discrimination in rental housing and the use of criminal record screening practices in Marin, Sonoma, and Solano counties. FHANC conducted 120 covert testing investigations at 30 large rental properties, including the Grove, and analyzed the experiences of fair housing testers who inquired about available rental listings. Black and white female testers were assigned aliases to further indicate their race (in addition to their racially identifiable voices) and given profiles that included a boyfriend of the same race who had either a misdemeanor or felony conviction on his record and who planned on living with the tester. The findings revealed alarming patterns of discrimination: out of the 25 landlords that screened for criminal records, none followed HUD’s or CRD’s guidelines to prevent racial disparities, and most failed to provide applicants with opportunities to address or appeal denials based on criminal records.
 
The testers who contacted the Grove were given conflicting information about the property’s criminal record screening policy; however, all testers were told that any applicant with a felony on their record would be automatically denied regardless of the nature, severity, or recency of the criminal conduct and that there was no way to appeal the decision or provide mitigating information. Some testers were also told that even misdemeanors could result in a denial. Additionally, FHANC found that the Black testers were treated less favorably than the white testers, with one Black tester being advised not to apply because she would be denied based on her boyfriend’s criminal record, despite her counterpart white tester with the same conviction on her boyfriend’s record being encouraged to apply and advised that the conviction would be overlooked if they applied with a co-signer. FHANC notified the manager and owner of the property that their criminal record screening practices violated fair housing laws and outlined HUD’s recommended best practices, including individualized assessments and transparency. FHANC then tested the property again and found additional evidence of discrimination, prompting FHANC to file its complaint with CRD.
 
Decades of "tough on crime" policies, including the War on Drugs, have resulted in a significant increase in the prison population and nearly one-third of the U.S. population has a criminal record.  With 95% of current inmates eventually returning to society, access to safe, secure, and affordable housing is crucial for their successful reentry. However, many formerly incarcerated individuals, as well as those with convictions who were not incarcerated, face significant barriers to securing housing. People with criminal records are routinely denied when applying to rent housing, particularly given the explosive increase in algorithmic tenant screening products now commonly used by housing providers, most of which screen for criminal conviction histories. “Our investigation revealed troubling evidence of systemic barriers that Black and Latinx renters with criminal histories continue to face,” said Julia Howard-Gibbon, FHANC’s Legal Director. “The agreement in this case helps dismantle some of those barriers.”
 
FHANC views this settlement as a strong reminder that, even as HUD has rolled back regulations and deprioritized civil rights and racial equity, California continues to maintain robust fair housing protections. The California Fair Employment and Housing Act, along with its implementing regulations, provides critical safeguards, and the California Civil Rights Department remains a vigorous enforcement agency that takes cases like this seriously. Private fair housing organizations like FHANC also continue working tirelessly to enforce these laws and to expand housing opportunities for people who have been unfairly excluded due to discrimination. FHANC welcomes the resolution of this case and the important changes it will bring. “This outcome is a win for renters across California who deserve fair and equitable access to housing,” said Ms. Peattie.

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