HUD Proposes Restoring Discriminatory Effects Rule

On June 25, 2021, HUD announced that it will issue a proposed rule titled Restoring HUD’s Discriminatory Effects Standard. The publication proposes to rescind HUD’s 2020 disparate impact rule and restore the 2013 discriminatory effects rule. HUD believes that the 2013 rule is more consistent with case law and better implements the Fair Housing Act’s broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market.

The discriminatory effects (also known as disparate impact) doctrine is a tool for addressing policies that cause systemic inequality in housing. It has long been used to challenge policies that unnecessarily exclude people from housing opportunities, including zoning requirements, lending, and property insurance policies, and criminal records policies. HUD believes that having a discriminatory effects standard is necessary to meet the goal of a housing market that is free from both intentional discrimination and policies and practices that have unjustified discriminatory effects.

HUD’s 2013 disparate impact rule codified long-standing caselaw for adjudication of Fair Housing Act cases under the discriminatory effects doctrine, for cases filed administratively with HUD, and for federal court actions brought by private plaintiffs. Under the 2013 rule, the disparate impact framework was fairly straightforward: a policy that had a discriminatory effect on a protected class was unlawful if it did not serve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest. The 2020 rule complicated that analysis by placing more burdensome requirements on complaining parties, new proof requirements, and new defenses, all of which made it harder to establish that a policy violates the Fair Housing Act. HUD now proposes to return to the 2013 rule’s more direct analysis.

The public will have 60 days to comment on the proposed rule. HUD will review the comments, develop responses, and publish a final rule. HUD has provided no timeframe regarding when a final rule can be expected.