The Department of Housing and Urban Development is proposing to rescind three rules allowing the use of disparate impact in determining Fair Housing Act violations.
HUD in 2013 published a disparate impact rule under the Fair Housing Act, formalizing a burden-shifting test for determining whether a given practice has an unjustified discriminatory effect. Two years later, the U.S. Supreme Court, relying on its own interpretation of the Fair Housing Act, ruled that the act authorizes disparate impact liability, and announced important procedural safeguards for disparate impact litigation to ensure that the law is not used to bring frivolous cases. In 2019, HUD revised its 2013 rule to align with the court’s 2015 ruling. The 2019 rule was challenged, and in 2021, the Biden administration withdrew it and reinstated the 2013 rule.
In rescinding the 2013 rule, “these rules formalized legal tests that were not explicit in statute and imposed a presumption of unlawful discrimination when any variance in outcomes exists among protected classes, even without a showing of a facially discriminatory policy or discriminatory intent,” HUD said.
President Trump last year issued an executive order directing federal agencies to “deprioritize enforcement” of statutes and regulations that include disparate-impact liability. Since then, the FDIC, the Office of the Comptroller of the Currency and the CFPB have removed disparate impact from their documents and examinations.
The American Bankers Association last year urged HUD to rescind the 2023 rule and replace it with one that more closely aligns with the findings of the Supreme Court.
“The 2023 rule does not accurately state the law, puts necessary and nondiscriminatory lending practices at risk, and creates incentives to discriminate rather than reducing discrimination,” ABA said. “Moreover, it continues to create confusion in the courts as to the proper standards under the FHA as interpreted by the Supreme Court … The harmful effects of the rule should be addressed by its immediate recission.”
