Disparate Impact Rule Should be Upheld

By Federal Policy Director Ellen Lurie Hoffman

While we hope that NHT’s partners and stakeholders are enjoying the summer, we caution them not to miss an important moment to stand up in defense of fair housing and against discrimination.  On June 20, HUD published an advanced notice of proposed rulemaking on the Department’s 2013 implementation of the Fair Housing Act’s Discriminatory Effects standard rule.  Comments are due by August 20.

The disparate impact rule, as it is commonly known, effectively prohibits housing providers, lenders, and landlords from creating policies that negatively impact a particular minority group if there are other means of achieving the policies’ objectives in a less discriminatory way.  The 2013 rule codified HUD’s interpretation that the Fair Housing Act creates liability for practices with an unjustified discriminatory effect, even if those practices were not motivated by discriminatory intent, and establishes a burden-shifting framework for analyzing claims of disparate impact. The Obama Administration implemented the disparate impact rule after decades of discriminatory housing sales, rental, and financing policies and practices, which helped create and perpetuate segregation throughout the United States.

In publishing the advanced notice of proposed rulemaking, HUD indicated that its objective is to determine what changes to the disparate impact rule, if any, may be needed to reflect the outcome of the 2015 Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.  The 2015 Supreme Court decision held that disparate impact claims are cognizable under the Fair Housing Act and clarified the standards for and constitutional limitations of disparate impact claims.

The advanced notice of proposed rulemaking also responds to the Treasury Department’s October 2017 report recommending that HUD reconsider the disparate impact rule as it relates to the insurance industry.  Over the last few years, the insurance industry has been challenging HUD over the rule in federal court, arguing that it is unlawful and that companies should be allowed to offer policies that take into account higher risk populations that typically reside in neighborhoods with concentrations of minorities and lower-risk populations that tend to live in predominantly white or affluent communities.

We are concerned that reopening the disparate impact rule may create unnecessary barriers to bring claims against policies and practices that have a discriminatory effect.  After a long history of racial segregation and housing discrimination, our country should not weaken regulations designed to prevent discriminatory effects.  Special exceptions should not be provided for individual industries.  We plan to submit comments urging HUD to maintain the disparate impact rule as written, particularly because it was upheld and reinforced by the 2015 Supreme Court decision.   We encourage our partners to follow suit.