Fair housing groups slam newly finalized disparate impact rule change

The Department of Housing and Urban Development’s final rule changing its implementation of the Fair Housing Act’s disparate impact standard took effect Thursday, and the agency immediately faced calls to scrap the rule change.

HUD first proposed the new rule, which would amend its interpretation of the standard, last August. The change replaces the prior three-step threshold for proving fair housing violations with a five-step process that would require regulators to prove intentional discrimination.

Critics of the rule change say that HUD has made the standard basically worthless by setting too high a bar to prove discrimination.

“Practically speaking, the new HUD rule would sideline disparate impact as a usable legal tool to tackle systemic housing discrimination,” the National Housing Law Project said in a statement. “That means landlords, lenders, and other housing providers would be free to engage in activities that deprive people of color, domestic violence survivors, families with children, people with disabilities and others of housing opportunities – so long as a discriminatory intent could not be shown.”

“It is difficult to believe that our nation’s federal housing agency is promoting housing discrimination in the middle of a pandemic and related housing crisis,” said Shamus Roller, the project’s executive director. “While the rest of the country is demanding racial justice, the administration attempts to eliminate one of the nation’s most important civil rights tools and writes the playbook on how to discriminate without getting caught.”

“HUD’s final rule on disparate impact is the latest abhorrent action by the Trump administration to gut civil rights and fair housing protections,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition. “…The Fair Housing Act prohibits housing policies and practices that have a discriminatory effect, even if there was no obvious intent to discriminate. Policies and practices that have the effect of creating disparate impact can be just as harmful to society as outright intentional discrimination.”

The rule change has even garnered criticism from one of the top housing industry associations.

“While there is debate … as to whether additional clarity is needed with respect to disparate impact claims, there is broad consensus across the country that now is not the time to issue a regulation that could hinder further progress toward addressing ongoing systemic racism,” Vince Malta, president of the National Association of Realtors, said in July. “…Ultimately, NAR supports disparate impact as a legal theory to address the unfair housing practices that inhibit fair housing and unfairly target members of protected classes, while still protecting the ability of realtors and other stakeholders to run their businesses in a free and functional real estate market.”

Rep. Maxine Waters (D-Calif.), chairwoman of the House Financial Services Committee, called for the rule change to be rescinded “immediately”.

“This move by the Trump Administration to weaken fair housing is turning back the clock on decades of progress and 45 years of jurisprudence,” Waters said Thursday. “The new rule shifts the burden of proof from the perpetrators of discrimination onto the victim, making it significantly more difficult for victims of discrimination to prevail in court and ultimately making it easier for discriminatory policies and practices to plague our housing markets.”

The condemnation wasn’t universal, however. Edward J. Pinto, director of the American Enterprise Institute Housing Center, called the new rule “an historic and positive change.”

“In the past, many plaintiffs have filed disparate impact suits based on inputs, for example a higher turn down rate for a protected class, and claimed that this demonstrated disparate impact,” Pinto wrote in an AEI report on the rule. “Defending against such a claim was both difficult and expensive, especially for smaller banks. Now, for the first time, HUD has recognized that defendants have a valid interest in outcomes of lending policies and can use these outcomes as a defense. This is a common sense solution to a problem that has befuddled lenders for decades.”