HUD to reinstate 2013 disparate impact rule

The Department of Housing and Urban Development announced today that it will re-codify the 2013 disparate impact rule, saying the rule “is more consistent with how the Fair Housing Act has been applied in the courts and in front of the agency for more than 50 years.” The final rule will go into effect 30 days after publication in the Federal Register.

HUD’s proposal would overturn a 2020 final rule that conformed the 2013 disparate impact rule with the U.S. Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, which recognized disparate impact analysis to demonstrate discrimination claims under the FHA but added key limitations to ensure the burden of proof in disparate impact cases is with the plaintiffs. The 2020 final rule never took effect because a Massachusetts federal district court judge stayed the rule pending consideration of consumer advocates’ challenge to the rule as arbitrary and capricious. In a statement, HUD said the 2013 rule provides a more straightforward framework for determining discriminatory effects than the 2020 rule.

The American Bankers Association and other trade associations warned against re-codifying the older rule in a 2021 letter, saying that HUD’s proposed recodification would reinstate a legal standard that is inconsistent with the Supreme Court’s ruling. The groups also emphasized that changes to the rule with each new administration create uncertainty for industry and fair housing advocates, and undermine the Fair Housing Act’s goal of expanding availability of housing including mortgage credit.