HUD restores 'Discriminatory Effects' Rule

The U.S. Department of Housing and Urban Development (HUD) announced on Friday that it has submitted to the Federal Register for publication a final rule entitled Restoring HUD's Discriminatory Effects Standard. The rule rescinds the Department's 2020 rule governing Fair Housing Act disparate impact claims and restores the 2013 Discriminatory Effects rule. In the final rule, HUD emphasizes that the 2013 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, and that it more effectively implements the Act's broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market.

The Fair Housing Act prohibits discrimination in housing and housing-related services because of race, color, religion, national origin, sex (including sexual orientation and gender identity), familial status, and disability. The discriminatory effects doctrine (which includes disparate impact and perpetuation of segregation) is a tool for addressing policies that unnecessarily cause systemic inequality in housing, regardless of whether they were adopted with discriminatory intent. It has long been used to challenge policies that unnecessarily exclude people from housing opportunities, including zoning requirements, lending and property insurance policies, and criminal records policies. Accordingly, having a workable discriminatory effects standard is vital for the Biden-Harris Administration to accomplish its goal of creating a housing market that is free from both intentional discrimination and policies and practices that have unjustified discriminatory effects.

HUD's 2013 discriminatory effects rule codified long-standing case law for adjudication of Fair Housing Act cases under the discriminatory effects doctrine, for cases filed administratively with HUD and for federal court actions brought by private plaintiffs. Under the 2013 rule, the discriminatory effects framework was straightforward: a policy that had a discriminatory effect on a protected class was unlawful if it was not necessary to achieve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest.

The 2020 rule complicated that analysis by adding new pleading requirements, new proof requirements, and new defenses, all of which made it more difficult to establish that a policy violates the Fair Housing Act and harder for entities regulated by the Fair Housing Act to assess whether their policies were lawful. HUD now returns to the 2013 rule’s analysis.

This final rule will go into effect 30 days after it is published in the Federal Register.