Fair Housing: Disparate Impact

NLIHC tracks regulations around “disparate impact” and develops resources for advocates to weigh in on the process.

Title VIII of the Civil Rights Act of 1968, also known as the Fair Housing Act, prohibits discrimination on the basis of race, color, religion, sex, disability, national origin, or familial status (the “protected classes”) in the sale, rental, or financing of dwellings and in other housing-related activities.

For many years HUD has interpreted the Fair Housing Act to prohibit housing practices that have a discriminatory effect, even if there has been no intent to discriminate. Eleven U.S. Courts of Appeal have agreed. However, there have been minor variations in how the Courts and HUD have applied the discriminatory effects concept.

After obtaining stakeholder input to a proposed rule in November 2011, HUD issued a final regulation on February 15, 2013 establishing uniform standards for determining when a housing practice with a discriminatory effect violates the Fair Housing Act

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 amended the “Fair Housing Act” regulations (24 CFR part 100) adding a new subpart G, to standardize a three-step “burden-shifting” approach that HUD had long used and that a majority of Appeals Courts had 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.

However, the Trump/Carson administration proposed a drastic revision of the 2013 rule in August 2019 and issued a final rule on September 24, 2020 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. The 2013 rule’s three-part “burden shifting” standard to show disparate impact was 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 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. The rule makes 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.

The U.S. District Court for the District of Massachusetts issued a preliminary nationwide injunction on October 25 to halt implementation of the September 2020 final Disparate Impact rule.

President Biden issued a memorandum on January 26, 2021 to the HUD Secretary instructing the department to examine the effect of the previous administration’s final Disparate Impact rule. The Biden memorandum also directed HUD to take the steps necessary to prevent practices that have a disparate impact.

Under the Biden Administration, the U.S. Department of Justice withdrew the previous Trump-era HUD appeal of the case postponing implementation of the disparate impact rule. By withdrawing the appeal, the preliminary injunction described above continued to delay implementation of the Trump disparate impact rule.

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.

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.

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