HUD’s proposed rule reinstating the 2013 Disparate Impact Rule was published in the Federal Register on June 25. The rule will recodify the 2013 rule’s discriminatory effects standard, removing most changes made from the 2020 Disparate Impact Rule which would have discarded the well-crafted and time-tested three-part shifting standard, replacing it with a set of tests intended to hurt the Fair Housing Act’s protected classes (see Memo, 07/14/2020).
HUD proposed to recodify the 2013 rule’s discriminatory effect standard as it is more consistent with Fair Housing Act’s Disparate Impact standard purpose, prior case law under the Act, including Inclusive Communities (see Memo, 05/29/2015), and other civil rights authorities. The proposed rule also returns the definition of “discriminatory effect” that was eliminated from the 2020 rule which had also erased “perpetuation of segregation” as a recognized type of discriminatory effect distinct from disparate impact. HUD proposal changes will reaffirm that perpetuation of segregation remains a basis for contending that a policy has an unlawful discriminatory effect. The proposed rule also recodifies that actions that could predictably result in a disparate impact on a group of persons are prohibited by the Fair Housing Act.
HUD’s proposed rule also removes the confusing defenses introduced in the 2020 rule that had created virtually insurmountable barriers to presenting a case in the pleading stage. This includes removing the defense that a challenged policy or practice is “reasonably necessary to comply with a third-party requirement”, and the “outcome prediction” defense that had camouflage harmful practices used by lenders such as models and algorithms intended to predict the occurrence of an outcome.
The proposed rule does keep a portion of the 2020 proposed rule that added more examples to a list of prohibited activities under the Fair Housing Act’s Disparate Impact Standard such as enacting or implementing building codes, permitting rules, or requirements that restrict or deny housing opportunities or otherwise make unavailable or deny a dwelling to persons of a protected class.
This latest action by HUD was completed in accordance with a memorandum from President Biden to the secretary of HUD instructing the agency to redress the nation’s long history of discriminatory housing practices and reaffirming the administration’s commitment to end housing discrimination. The memo also ordered the HUD secretary to take the necessary steps to prevent practices that have a disparate impact (see Memo, 02/01).
As of June 25, a 60-day public comment period is open, and HUD must consider all comments may make changes upon them. Once the changes are complete, and after another review by OIRA, HUD will publish a final rule in the Federal Register. The introduction, or preamble, to the final rule must present all meaningful comments received and HUD must explain why each was accepted or rejected. If you would like to make comments, visit: regulations.gov.
“We must acknowledge that discrimination in housing continues today and that individuals, including people of color and those with disabilities, continue to be denied equal access to rental housing and homeownership,” said Secretary Marcia L. Fudge. “It is a new day at HUD, and our department is working to lift barriers to housing and promote diverse, inclusive communities across the country. Today’s publication of the proposed discriminatory effects rule is the latest step HUD is taking to fulfill its duty to ensure more fair and equitable housing.”
Read HUD’s proposed rule “Reinstatement of Discriminatory Effects Standard” at: https://bit.ly/2UrATvQ
An easy-to-read version can be found at: https://bit.ly/3gTgSY7
Read HUD’s Press Release on the Proposed rule at: https://bit.ly/3jfvLW6