The Department of Housing and Urban Development (“HUD”) recently released a Final Rule, entitled Restoring HUD’s Discriminatory Effects Standards. The Final Rule rescinds the 2020 rule, “HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard” (“2020 Rule”), and recodifies the previous rule enacted in 2013,“Implementation of the Fair Housing Act’s Discriminatory Effects Standard” (“2013 Rule”), in its entirety.
The final rule is pending publication in the Federal Register and will be effective 30 days after publication.
The Fair Housing Act (the “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 announcing the Final Rule, HUD emphasizes that the 2013 Rule is more consistent with how the Act has been applied by the courts for decades 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 in Massachusetts Fair Housing Center v. HUD prior to the October 2020 effective date, which stopped HUD from implementing and enforcing the rule. Regulated entities that have been complying with the 2013 Rule, which has been in effect for almost a decade, will not have to make any changes to comply with the Final Rule.
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 Act. In June 2021, HUD issued a proposed rule advocating for a return to the 2013 Rule which provides “a more appropriately balanced standard for pleading, proving, and defending a fair housing case alleging that a policy or practice has a discriminatory effect” and is more consistent with the Act’s purpose.
In addition to recodifying the 2013 Rule, the Final Rule adopts one amendment made by the 2020 Rule which provides illustrations of prohibited activities under the Act. The Final Rule’s amendatory instructions state that HUD is republishing “§ 100.70(d)(5) without change from the 2020 Rule.”
HUD has also released a Discriminatory Effects Final Rule Fact Sheet along with the publication of the Final Rule. To view, click here.
