HUD Proposes Rescission of Disparate Impact Rule
Today, the U.S. Department of Housing and Urban Development (HUD) issued a proposed rule repealing its Discriminatory Effects Standard, which governs disparate impact liability in accordance with the Fair Housing Act. Disparate impact liability is the legal theory prohibiting seemingly facially neutral policies that cause a disproportionate negative impact on a protected class, as opposed to more explicitly discriminatory policies and practices. The proposed rule asserts that, “it is appropriate for courts, not a Federal agency, to make determinations related to the interpretation of disparate impact liability under the Fair Housing Act.” The proposed rule was issued as pre-published and will be published formally in the Federal Register tomorrow.
HUD initially established disparate impact regulations in 2013, formally interpreting the Fair Housing Act to prohibit policies that resulted in discriminatory effects, consistent with case law at the time, and codified a burden shifting framework for analyzing disparate impact claims. The Supreme Court, in 2015, confirmed the interpretation that disparate impact is cognizable under the Fair Housing Act in its decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.
During the first Trump Administration, HUD issued a final rule to adjust the 2013 disparate impact regulations, which it maintained provided clarification consistent with the Supreme Court decision, but its rule was challenged in court and never fully implemented. The Biden Administration later reinstated the 2013 rule.
In his second term, President Trump issued Executive Order 14281, Restoring Equality of Opportunity and Meritocracy, asserting that disparate impact liability creates a “near insurmountable presumption of discrimination… even if there is no facially discriminatory policy or practice or discriminatory intent involved…” and ordered the elimination of disparate impact liability to the maximum extent possible.
In making its case for repealing the disparate impact rule, the proposed rule cites the Supreme Court decision in Loper Bright Enterprises v. Raimondo, which found that federal agency interpretations of statutes and agency actions that rely on them do not receive judicial deference. The proposed rule states, “As a result, HUD’s prior disparate impact rulemakings, HUD’s interpretation of the Fair Housing Act, and the codification of that interpretation in regulations, do not carry deferential weight.”
HUD is providing only a 30-day comment period on the proposed rule. If you would like to inform NCSHA’s comments, email your feedback to Jennifer Schwartz by January 27.
