HUD provided a preview version of a final rule, “Restoring HUD’s Discriminatory Effects Standard,” on March 17. This final rule, when formally published in the Federal Register, will restore the 2013 discriminatory effects rule and rescind the Trump administration’s 2020 rule, which would have made it effectively impossible for people in a class protected by the “Fair Housing Act” to plead a “disparate impact” claim.
In addition to recodifying the 2013 discriminatory effects rule, the final rule adopts one amendment made by the 2020 rule to HUD’s general fair housing regulations that is not specific to discriminatory effects. The provision, §100.70(d)(5), provides additional illustrations of prohibited activities under the Fair Housing Act generally: “Enacting or implementing land-use rules, ordinances, procedures, building codes, permitting rules, policies, or requirements that restrict or deny housing opportunities or otherwise make unavailable or deny dwellings to persons because of race, color, religion, sex, handicap, familial status, or national origin.”
Title VIII of the “Civil Rights Act of 1968,” also known as the “Fair Housing Act,” prohibits discrimination on the basis of race, color, national origin, sex (including sexual orientation and gender identity), disability, familial status, or religion (the “protected classes”) in the sale, rental, or financing of dwellings and in other housing-related activities. The Fair Housing Act not only prohibits intentional discrimination but also prohibits policies that have an unjustified “discriminatory effect” on the protected classes. The discriminatory effects doctrine (which includes “disparate impact and perpetuation of segregation”) is a tool for addressing policies that unnecessarily cause systemic inequality in housing, regardless of whether the policies intended to discriminate.
For many years HUD interpreted the Fair Housing Act to prohibit housing practices that have a discriminatory effect, even if there was no intent to discriminate. Eleven U.S. Courts of Appeals agreed. However, there were minor variations in how the Courts and HUD 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, national origin, sex (including sexual orientation and gender identity), handicap, familial status, or religion.
The final rule also amended the “Fair Housing Act” regulations (24 CFR part 100) by 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.
- 2015, the U.S. Supreme Court in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc. upheld the availability of disparate impact claims under the Fair Housing Act. It cited the 2013 Rule with approval multiple times and did not suggest in any way that the 2013 Rule required modification.
The Trump administration issued a rule in September 2020 that added multiple new procedural requirements and defenses that collectively made it virtually impossible for a protected class plaintiff to plead a disparate impact case to get it started, let alone ultimately win such a case (see Memo, 9/14/20). The effect was to allow businesses, governments, and housing providers to adopt and maintain unnecessary discriminatory policies and practices while escaping any threat of liability. The Trump rule was challenged in three separate lawsuits. On October 25, 2020, a U.S. District Court in the District of Massachusetts enjoined the 2020 rule, and it never went into effect (see Memo, 11/2/20).
HUD published a proposed rule in the Federal Register on June 25, 2021, to reinstate the 2013 disparate impact rule (see Memo, 6/28/2021). As proposed, the 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.
Read the preview version of “Restoring HUD’s Discriminatory Effects Standard” at: https://bit.ly/3Z1JAbL
Read a HUD three-page fact sheet at: https://bit.ly/3Ju9YW6
Read HUD’s March 17 media announcement at: https://bit.ly/3JPIQCy
Read more about “disparate impact” on page 8-8 of NLIHC’s 2023 Advocates’ Guide, and on the Disparate Impact webpage of NLIHC’s Racial Equity and Fair Housing website.