President Biden Administration

A final rule, “Restoring HUD’s Discriminatory Effects Standard,” was formally published in the Federal Register on March 31, 2023 and became effective on May 1, 2023. It restored the 2013 discriminatory effects rule and rescinded the Trump administration’s 2020 rule. The final 2023 rule recodified the 2013 rule’s discriminatory effects three-step burden shifting standard and returned the definition of “discriminatory effect” eliminated from the 2020 rule, which also erased “perpetuation of segregation” as a recognized type of discriminatory effect distinct from disparate impact.

HUD posts a three-page fact sheet

HUD published a proposed rule in the Federal Register on June 25, 2021 to reinstate the 2013 disparate impact rule. The proposed rule would recodify the 2013 rule’s discriminatory effects three-step burden shifting standard. The proposed rule would also return the definition of “discriminatory effect” eliminated from the 2020 rule, which also erased “perpetuation of segregation” as a recognized type of discriminatory effect distinct from disparate impact.

NLIHC signed on to four formal comment letters: National Housing Law Project, National Fair Housing Alliance, National Women’s Law Center, and National Alliance for Safe Housing, which are summarized in an NLIHC Memo to Members article.

President Biden issued “Memorandum on Redressing Our Nation’s and the Federal Government’s History of Discriminatory Housing Practices and Policies” on January 26, 2021 to the HUD Secretary instructing the department to examine the effect of the previous administration’s September 24, 2020 final Disparate Impact  ule replacing the 2013 Disparate Impact rule (see end of this page for summary of the 2013 rule). 

The memorandum further instructs the HUD secretary to take the necessary steps to prevent practices that have a disparate impact. The memorandum states, “Based on these examinations, the Secretary shall take any necessary steps, as appropriate and consistent with applicable law, to administer the Fair Housing Act including by preventing practices with an unjustified discriminatory effect.”

Under the Biden Administration, the U.S. Department of Justice withdrew a previous Trump-era HUD appeal of the case postponing implementation of the Disparate Impact rule. By withdrawing the appeal, the preliminary injunction described next will continue to delay implementation of the Trump Disparate Impact rule.

U.S. District Court Issues Preliminary Injunction on Trump Final Disparate Impact Rule, October 2020

The U.S. District Court for the District of Massachusetts issued a preliminary nationwide injunction on October 25 to halt implementation of HUD’s final Disparate Impact rule. Thanks to the efforts of the Lawyers for Civil Rights and Anderson & Kreiger, with the Massachusetts Fair Housing Center and Housing Works, Inc. serving as plaintiffs on the case.

The plaintiffs claimed the new final Disparate Impact rule violated the Administrative Procedure Act (APA). In order to obtain preliminary injunctive relief, the plaintiffs demonstrated: a substantial likelihood of success on the merits; a significant risk of irreparable harm if an injunction is withheld; a favorable balance of hardships; and a fit between the injunction and the public interest. 

The court wrote that there can be [no] doubt that the 2020 Rule weakens, for housing discrimination victims and fair housing organizations, disparate impact liability under the Fair Housing Act. It does so by introducing new, onerous pleading requirements on plaintiffs, and significantly altering the burden-shifting framework by easing the burden on defendants of justifying a policy with discriminatory effect while at the same time rendering it more difficult for plaintiffs to rebut that justification. In addition, the 2020 Rule arms defendants with broad new defenses which appear to make it easier for offending defendants to dodge liability and more difficult for plaintiffs to succeed. In short, these changes constitute a massive overhaul of HUD’s disparate impact standards, to the benefit of putative defendants, and to the detriment of putative plaintiffs (and, by extension, fair housing organizations, such as MFHC).

An NLIHC summary provides more detail.

Advocacy Organizations File Lawsuits Challenging Trump Final Disparate Impact Rule

The National Fair Housing Alliance (NFHA), the NAACP Legal Defense and Educational Fund, Inc. (LDF), Fair Housing Advocates of Northern California, and BLDS, LLC filed a lawsuit against HUD with the U.S. District Court for the Northern District of California. In addition, the Open Communities Alliance (OCA) and SouthCoast Fair Housing of Massachusetts and Rhode Island filed a lawsuit with the United States District Court for the District of Connecticut.

Trump Final Disparate Impact Rule Published, September 24, 2020

The final Trump-version of the Disparate Impact rule was published in the Federal Register on September 24, 2020. NLIHC provided a detailed analysis of this final rule. A summary of key problems with the final rule are described here:

Omission of Perpetuation of Segregation Theory

HUD’s revision of §100.500(a) eliminates the definition of “discriminatory effect” as presented in the 2013 rule, which included a clause explicitly defining “discriminatory effect” to include a practice that “creates, increases, reinforces, or perpetuates segregated housing patterns.” (emphasis added) By attempting to erase liability under the perpetuation of segregation theory, HUD eviscerates an essential clause designed to address the very core problem that the Fair Housing Act intended to eliminate – segregation. Removing perpetuation of segregation theory from the rule is one more attack on the Fair Housing Act and its intent to foster and realize integration. 

Virtually Insurmountable Barriers to Presenting a Prima Facie Case

The first step in the 2013 rule’s three-step burden shifting standard, establishing a prima facie case, [at §100.500(c)(1)] called for the plaintiff (the party alleging disparate impact) to prove that a challenged practice caused or predictably will cause a discriminatory effect. This first step under the 2013 rule had already proven to be a formidable obstacle for many plaintiffs.

HUD’s new §100.500(b) requires a plaintiff to allege a prima facie case based on facts supporting five new required elements. This provision dramatically increases the standard for a prime facie case at the pleading stage, before the benefit of discovery which could provide the plaintiff with information necessary to present a sufficiently robust challenge. 
 
Element (b)(1) requires people experiencing a discriminatory policy or practice to demonstrate that a specific policy or practice “is arbitrary, artificial, and unnecessary to a achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law.” (emphasis added)

At this early stage of the process of challenging a policy or practice, this element of the final rule compares very unfavorably with the “legally sufficient justification” of the 2013 rule at §100.500(b) [deleted from the final rule] by removing the defendant’s burden to provide a legally sufficient justification, instead placing the heavy burden on the plaintiff. The 2013 rule [§100.500(b)(1)] required the defendant to demonstrate that the challenged policy or practice is “necessary to achieve one or more [of its] substantial, legitimate, nondiscriminatory, interests” and that “those interests could not be served by another policy or practice that has a less discriminatory effect.” (emphases added)  

Final (b)(1) weakens the language to a mere “valid” interest – not a “substantial” interest. It also eliminates the need for a defendant to address the discriminatory character of a business interest. Furthermore, the addition of the word “profit” without a modifier implies that a defendant could claim later in the process [at (c)] that an exorbitant profit is their valid, legitimate objective, and that a “reasonable” profit would not be in the defendant’s interest. A businesses’ desire for excessive profit would thus supersede consideration of a less discriminatory policy or practice that still resulted in reasonable profits.

The four other elements are:

Paragraph (b)(2) The policy or practice has a disproportionately adverse effect on members of a protected class.

Paragraph (b)(3) There is a robust causal link between the policy or practice and the adverse effect on members of a protected class, meaning that the specific policy or practice is the direct cause of the discriminatory effect.

Paragraph (b)(4) The disparity is significant.

Paragraph (b)(5) There is a direct relation between the injury asserted and the injurious conduct alleged.

Overwhelming Burdens on Plaintiffs to Prove Discriminatory Effect

If a plaintiff overcomes the staggering obstacles presented during the pleading stage at §100.500(b), even without the benefit of information that could be provided through discovery, the final rule at §100.500(c) erects yet more overwhelming obstacles. 

Paragraph (c)(1) requires a plaintiff to prove by the preponderance of the evidence, each of the elements in paragraphs (b)(2) through (5) listed above – for which the plaintiff has already “sufficiently” provided facts at the pleading stage. Notably, the word “preponderance” is only used in reference to the plaintiff, further placing a thumb on the scale in favor of the defendant. 

Paragraph (c)(2) allows a defendant to rebut a plaintiff’s allegation under the first element of (b) that the policy or practice is “arbitrary, artificial, and unnecessary,” by producing evidence showing that the policy or practice advances the defendant’s valid interest (or interests). Note again that the defendant merely has to produce evidence (not a “preponderance” of evidence) showing the challenged policy or practice advances a valid interest. In comparison, the second step of the 2013 rule’s burden shifting process [§100.500(c)(2)] placed a more rigorous burden of proof on the defendant to prove “the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.” – not merely a valid interest. The final rule places the burden on those experiencing the harmful impact of a defendant’s policy or practice. 

Paragraph (c)(3) sets up yet another obstacle to people who are experiencing a discriminatory effect. If a defendant rebuts a plaintiff’s assertion under paragraph (c)(1) [that the plaintiff has proved the other four elements of paragraph (b)], the plaintiff must prove by the preponderance of the evidence either:

  • The interest (or interests) advanced by the defendant are not valid, or 
  • That a less discriminatory policy or practice exists that would serve the defendant’s identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant.

The third step in the 2013 rule’s burden shifting standard at (c)(3) called for the plaintiff to identify alternative policies or practices that the defendant could use that would still meet the defendant’s interests, but in a less discriminatory manner. The final rule requires the plaintiff to prove “by the preponderance of evidence” either that the defendant’s discriminatory policy or practice is “valid” yet again, or that a less discriminatory policy or practice works just as well as the discriminatory practice and does not cost much or entail much effort on the part of the defendant. In other words, preventing or eliminating discrimination against people protected by the Fair Housing Act should be cost free. In addition, the heavy weight placed on the plaintiff by the final rule’s (c)(3) forces the plaintiff (not the defendant who has far more knowledge of their own operations and options available to it) to guess the justifications a defendant might pose and then refute them.

One of the listed defenses the proposed rule offered to defendants elaborated on models or algorithms that businesses use in the course of implementing policies and practices; that defense offered three options. The final rule [Section (d)(2)(i)] does not mention models or algorithms. Instead it camouflages the same harmful policies and practices, stating that a defendant can rely on a policy or practice not having a discriminatory effect if the “policy or practice is intended to predict the occurrence of an outcome, the prediction represents a valid interest, and the outcome predicted by the policy or practice does not or would not have a disparate impact on protected classes compared to similarly situated individuals not part of the protected class, with respect to the allegations under paragraph (b).”

Finally, the new rule provides the insurance industry major cover, stating at Section (e) that “Nothing in this section is intended to invalidate, impair, or supersede any law enacted by any state for the purpose of regulating the business of insurance.”

NLIHC’s detailed analysis of this final rule is here

The final Trump Disparate Impact rule is here

NLIHC Submitted Comments to Proposed Disparate Impact Rule, October 2019

NLIHC submitted comments expressing strong opposition to HUD’s proposed radical changes to the 2013 Disparate Impact rule. NLIHC urged HUD to withdraw its proposed rule. NLIHC’s comment letter discussed specific problems with the text of the proposed rule: 

  • It removed text addressing perpetuation of segregation theory. 
  • The text of the proposed rule erected virtually insurmountable barriers that would prevent those experiencing discrimination from effectively challenging discriminatory policies or practices. NLHC sited court decisions refuting HUD assertions in the preamble to the proposed rule that explained HUD’s proposed text. NLIHC also highlighted how the proposed text compared very unfavorably with the current rule’s “legally sufficient justification” text by removing the offender’s burden to provide a legally sufficient justification, instead placing the heavy burden on those experiencing discrimination.
  • The proposed rule placed overwhelming burdens on those experiencing discrimination to prove an offender’s policies or practices have a discriminatory effect. The 2013 rule placed the burden of proof on the offender to prove “the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.” HUD instead proposed to place the burden on those experiencing the harmful impact of an offender’s policy or practice. Among a number of problems with the text, the proposed rule required those experiencing discrimination to demonstrate that working toward less discrimination would not entail significantly greater cost, begging the question – what is the price of fair housing and what are the short-term and long-term costs of discriminatory effects? In other words, the proposed rule suggested that preventing or eliminating discrimination against people protected by the Fair Housing Act should be cost free.

NLIHC’s comment letter also provided examples of disparate impact court decisions demonstrating the importance of disparate impact as a tool to protect people in the Fair Housing Act’s protected classes. Examples included:

  • Nuisance ordinances that endanger women experiencing domestic violence
  • Occupancy limit policies that adversely affect families with children
  • Restrictive zoning laws and building codes that harm people with disabilities
  • Restrictive zoning laws and building codes that disproportionately impact people of color
  • Policies and practices that harm those relying on vouchers who are disproportionately people of color
  • Redevelopment policies and practices that result in greatly increased rents that disproportionately harm people of color
  • Disaster recovery policies and programs that disproportionately harm or underserve people of color.

NLIHC’s comments are here 

HUD Proposed Major Changes to Disparate Impact Rule, August 2019 

HUD proposed drastic changes to the fair housing Disparate Impact rule in a Federal Register notice on August 19, 2019 that would make it far more difficult for people experiencing various forms of discrimination to challenge the practices of businesses, governments, and other large entities. As proposed, the current three-part “burden shifting” standard to show disparate impact would be radically changed to a five-component set of tests placing virtually all of the burden on people who are in “protected classes” as defined by the Fair Housing Act – people of color, women, immigrants, families with children, people with disabilities, LGBTQ persons, and people of faith. The changes were designed to make it much more difficult, if not impossible, for people in protected classes to challenge and overcome discriminatory effects in housing policies or practices. 

The proposed rule would tip the scale in favor of defendants (housing providers, governments, and businesses) that are accused of discrimination. It would shift the burden of proof entirely to the plaintiffs; victims of discrimination would be asked to try to guess what justifications a defendant might invoke, and plaintiffs would have to preemptively counter those justifications. HUD further proposed making a profitable policy or practice immune from challenge of disparate impact unless the victims of discrimination could prove that a company could make at least as much money without discriminating. In other words, according to HUD, the profit justifies the discrimination.

NLIHC prepared a summary of key features of the proposed rule. 

NLIHC also prepared a side-by-side comparison of a key section (§100.500) of the 2013 rule and proposed changes to it.

HUD Announces Intent to Change Disparate Impact Rule, 2018

In a media release on May 10, 2018 HUD indicated that it will formally seek public comment on whether the 2013 final regulation is consistent with the U.S. Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities. HUD’s media release acknowledged that the Supreme Court upheld the use of disparate impact theory to establish liability under the Fair Housing Act in cases where seemingly neutral practices have a discriminatory effect on protected classes of persons.  HUD stated that the Court “did not directly rule upon it,” hence HUD sought public input whether the regulation is consistent with the Court’s ruling in Texas v. Inclusive Communities.

A formal notice was published in the Federal Register on June 20, 2018. 

NLIHC formally responded with an August 20, 2018 comment letter.

U.S. Supreme Court Upholds Fair Housing Disparate Impact Principle, June 15, 2015

On June 25, 2015, Justice Anthony Kennedy announced the 5-4 decision of the Supreme Court    of the United States upholding the disparate impact standard in housing discrimination cases that was challenge by the State of Texas in Texas Department of Housing and Community Affairs v The Inclusive Communities Project.

NLIHC prepared a summary of the Supreme Court decision.

Final Rule, February 15, 2013

The final 2013 Disparate Impact rule defined the term “discriminatory effect” as a practice that actually or predictably results in a “disparate impact” on a group of people or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin.

The final rule also standardized a three-step “burden-shifting” approach that HUD has always used and that a majority of Appeals Courts have used. 

  • First, the party complaining that there is a discriminatory effect has the burden of proving that a practice caused or predictably will cause a discriminatory effect.
  • Second, if the complaining party makes a convincing argument, then the burden of proof shifts to the defending party, which must show that the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest that cannot be served by another practice that has a less discriminatory effect – that it has a “legally sufficient justification.”
  • Third, if the defending party is successful, the complaining party can still succeed by demonstrating that the defending party’s substantial, legitimate, nondiscriminatory interest could be served by another practice that has a less discriminatory effect.

The final 2013 Disparate Impact rule is here

Proposed Rule, November 16, 2011

HUD published proposed rules to implement “disparate impact” in the Federal Register on November 16, 2011. The term “discriminatory effect” would be defined as a housing practice that actually or predictably results in a “disparate impact” on a group of people in one of the protected classes, or that has an effect on the community as a whole by creating, perpetuating, or increasing housing segregation.

The preamble to the proposed rule provided a number of examples of “disparate impact” and “perpetuating segregation,” each based on court decisions. Examples included: zoning ordinances that restrict construction of multifamily housing to predominantly minority areas; public housing agency use of a local residency preference for distributing Housing Choice Vouchers where most residents are white; and, demolition of public housing principally occupied by African-Americans.

Comments were due, January 17, 2012. NLIHC submitted comments supporting HUD’s proposed rule. While NLIHC endorsed the proposed rule, the comment letter agreed with the suggested improvements in the comments submitted by the Housing Justice Network, the National Fair Housing Alliance, and the Consortium for Citizens with Disabilities. In particular, advocates urged that the final rule assign to defendants, the obligation to demonstrate that there are no less discriminatory alternatives to the practice plaintiffs claim have a discriminatory effect, because defendants have greater access to information than plaintiffs regarding available alternatives and the advantages and disadvantages of those alternatives. 

The proposed Disparate Impact rule is here

NLIHC’s comment letter is here