HUD has published a proposed rule that would reinstate its final 2013 Implementation of the Fair Housing Act’s Discriminatory Effects Standard rule, which establishes uniform standards for pleading, proving and defending a fair housing case alleging that a policy or practice, which is seemingly neutral, has a discriminatory effect. In 2020, the Trump Administration released a rule titled “HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard,” revising the 2013 rule by removing the definition of discriminatory effect, adding pleading elements that made it far more difficult to initiate a disparate impact case, altering the rule’s burden shifting framework, and limiting available remedies in disparate impact claims, among other changes.
The new proposed rule also restores the original statute’s “perpetuation of segregation” concept as a recognized type of discriminatory outcome that is separate from disparate impact and can be used as a basis to assert that a policy has an unlawful discriminatory effect. In addition, this rule removes the defenses introduced in the 2020 rule that significantly increased the difficulty of presenting a case in the pleading stage. The defense that an identified policy or practice is “reasonably necessary to comply with a third-party requirement”, and the “outcome prediction” defense that had exempted harmful lender practices such as models and algorithms intended to predict the occurrence of an outcome, would no longer be valid under the new rule. The proposed rule retains the examples added under the 2020 proposed rule to a list of prohibited activities under the Fair Housing Act’s Disparate Impact Standard. These include 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.
The 2013 disparate impact rule remains in effect to date, due to an October 2020 preliminary injunction that halted the implementation of the 2020 rule. The current HUD administration believes that the 2013 rule is more consistent with the Fair Housing Act’s remedial purposes. HUD invites comments on this proposal through August 24, 2021.