On June 25, 2021, the Department of Housing and Urban Development (“HUD”) published a notice of proposed rulemaking (“NPRM”) in the Federal Register entitled Reinstatement of HUD’s Discriminatory Effects Standard. The NPRM announced plans to rescind the 2020 rule entitled “HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard” (“2020 Rule”) and restore the previous rule enacted in 2013, entitled “Implementation of the Fair Housing Act’s Discriminatory Effects Standard” (“2013 Rule”).
The Fair Housing Act, enacted over 50 years ago, prohibits discrimination in the sale, rental, or financing of housing and housing-related services based on race, color, religion, national origin, sex, familial status, and disability. In the NPRM, HUD states that the 2013 Rule “is more consistent with decades of caselaw and better effectuates the Act’s broad remedial purpose of eradicating unnecessary discriminatory practices from the housing market.”
Under the 2013 Rule, liability could be established under the Fair Housing Act when a facially neutral policy or practice was applied uniformly but had an unjustified discriminatory effect on a protected class if it did not serve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest. A discriminatory effect could be established with statistical data that showed a protected class was disproportionately harmed by a policy or practice and the harm was substantial.
The 2020 Rule removed the definition of “discriminatory effect” and added a requirement to prove intention. In addition, a plaintiff would need to show that a policy or practice has a disproportionately adverse effect on a protected class, and that there was a direct causal link between the challenged policy or practice and the discriminatory effect. The 2020 Rule also created additional defenses such as a policy or practice being reasonably necessary to comply with third-party requirements such as a binding court opinion or regulatory requirement.
The 2020 Rule has never actually taken effect as the U.S. District Court for the District of Massachusetts issued a preliminary injunction prior to the October 2020 effective date, which stopped HUD from implementing and enforcing the rule. The NPRM states that since the 2020 Rule did not affect obligations of any regulated entities, HUD seeks to recodify the 2013 Rule so that it may continue to remain in effect as it has been for the past seven years.
One of President Biden’s first memorandums when he took office in January 2021 directed the Secretary of HUD to look at the effects the 2020 amendment to the 2013 Rule has had on HUD’s ability to ensure compliance with the Fair Housing Act . In an announcement regarding the NPRM, Secretary of HUD, Marcia L. Fudge, stated that “having a workable discriminatory effects standard is vital for the accomplishment of the Biden-Harris Administration’s policy goal of a housing market that is free from both intentional discrimination and policies and practices that have unjustified discriminatory effect.”
The NPRM states that comments on the proposed rule will be accepted until August 24, 2021.
