Will the Proposed Renter's Bill of Rights Impact the Background Check in Real Estate?

Across the country, the rules and regulations that govern the housing market can vary substantially. A tenant's experience trying to find housing in New York City can be dramatically different from the experience someone has in Kansas City. This is true in many ways, especially when considering the requirements tenants face during the application process. However, one thing remains constant in almost every market: using a background check in real estate.

In recent years, background checks have become a target for fairness advocates who say that they unfairly limit access to housing in a discriminatory manner. This problem, combined with the patchwork of rules nationwide, has led the Biden administration to publish its framework for a "Renter's Bill of Rights." 

Aimed at creating consistency and instilling fairness in the system, this blueprint is not law—but it could inform legislative and regulatory efforts in the future. Already, agencies such as the Consumer Financial Protection Bureau and the Federal Trade Commission have begun looking at elements such as tenant background checks to formulate tentative new rules. What do landlords need to know about this?

What the Renter's Bill of Rights Proposes

Overall, the blueprint's goal is to encourage more consistent and standardized policies nationwide. Ideally, this will expand access to housing, making the rental process more fair. The blueprint outlines several key points to achieve this:

• Aiming to control rent prices, so tenants do not need to spend more than about a third of their income on rent.
• Simplifying lease language and eliminating hidden fees.
• Educating renters about the rights they have.
• Letting renters form tenant organizations.
• Making the eviction process more fair.

As part of this blueprint, several agencies have identified problems with landlords' existing approach to check criminal records. Specifically, the government has concerns about mismatched names, potential FCRA violations, and a lack of transparency for renters denied based on a background check. Ultimately, the government may seek to regulate this process in a way that requires reporting agencies and other parties to do more to verify their reports.

Does the Bill of Rights Impact Landlord Liability?

Landlords must protect the neighborhoods around them from harmful criminal activity conducted by their tenants. Could the renter's bill of rights hamstring a landlord's ability to conduct due diligence and expose them to liability if a tenant later commits a crime? Not likely. If anything, the blueprint could lead to an even better and more reliable process for landlords. 

The goal isn't to ban the criminal background check in housing or to disempower landlords from choosing how to rent their property. Instead, the blueprint looks to ensure accuracy in the process. Landlords should assess the relevancy of any records they find because not all records automatically make someone a risk. However, the administration's concern is that many landlords issue denials based on any criminal record since they do not have to provide any reasoning.

A requirement to explain the denial and to allow tenants to provide additional information could expand housing access while still allowing landlords to exercise discretion during due diligence.

Whether more states begin to adopt the blueprint's bullet points remains to be seen — and since its announcement, Congress has not moved towards any major rental legislation. Landlords should review their policies and ensure they use best practices during tenant selection.