The Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB) cleared HUD’s proposed changes to the disparate impact regulations on July 19. According to HUD’s Spring Regulatory Agenda, the agency wants to amend the February 15, 2013 final rule’s interpretation of the Fair Housing Act’s disparate impact standard and to clarify how to apply the disparate impact standard to state laws governing the insurance industry.
When the proposed changes are published in the Federal Register, NLIHC will alert our members and provide a summary and preliminary analysis. Once a thorough assessment of the proposed amendments are made, NLIHC will urge advocates to submit comments and will provide a sample comment letter.
HUD sent the proposed changes to OIRA on February 1 (see Memo, 2/11). HUD previously published an advance notice of proposed rulemaking (ANPR) in the Federal Register on June 20, 2018 (see Memo, 6/25/18). In the ANPR, HUD 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 policies or practices have a discriminatory impact on protected classes of people. HUD went on to state that the Court “did not directly rule upon it [the disparate impact rule],” hence HUD sought public input on whether the regulation is consistent with the Court’s ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities. NLIHC submitted comments in response to the ANPR.
For many years HUD interpreted the Fair Housing Act to prohibit housing policies or practices that have a discriminatory effect even if there was no apparent intent to discriminate. All eleven courts of appeal that considered the issue agreed. There were minor variations, however, in how the courts and HUD applied the concept of discriminatory effects. The February 15, 2013 regulation was therefore issued to establish uniform standards for determining when a housing policy or practice with a discriminatory effect violates the Fair Housing Act.
The final rule standardized a three-step “burden-shifting” approach that HUD has used and that most appeals courts have applied.
- First, the party complaining that there is a discriminatory effect has the burden of proving that a policy or 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 policy or practice has a “legally sufficient justification,” meaning the policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest that cannot be served by another policy or practice that has a less discriminatory effect.
- 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 policy or practice that has a less discriminatory effect.
The OIRA posting indicating that the proposed rule change cleared OIRA is at: https://bit.ly/2SFpUZw. Select “Department of Housing and Urban Development” from “Regulatory Review Completed in Last 30 Days.”
The Spring Regulatory Agenda synopsis of the proposed changes to the disparate impact rule is at: https://bit.ly/2Y4uOXm
The June 20, 2018 Advance Notice of Proposed Rulemaking is at: https://bit.ly/2lqfXAT
NLIHC’s comment letter in response to the ANPR is at: https://bit.ly/2PvX9hd
More about disparate impact is on page 7-8 of NLIHC’s 2019 Advocates’ Guide.