HUD Proposes Rule Defining Housing Discrimination Proof

Published September 26, 2019

The U.S. Department of Housing and Urban Development (HUD) is proposing a regulation  amending the agency’s “Interpretation of the Fair Housing Act’s Disparate Impact Standard” adopted during the Barack Obama administration in 2013.

The title of the proposed rule refers to business practices alleged to have a discriminatory effect on persons in a class—such as race, sex, or disability—protected by federal civil rights laws.

The new rule, proposed on August 19, would provide more certainty for developers, mortgage lenders, and home insurers, says HUD Secretary Ben Carson.

“This proposed rule is intended to increase legal clarity and promote the production and availability of housing in all areas while making sure that every person is treated fairly under the law,” Carson stated in a press release on August 19.

Shifting Burden of Proof

The disparate impact standard was enshrined in fair housing law by the 1990 Civil Rights Act. HUD’s 2013 rule implementing the standard put the burden of proof on defendants—primarily businesses—in cases of alleged discrimination. The new rule would shift this burden back to the plaintiff by establishing a five-step threshold test in which defendants would have more leeway to rebut plaintiffs’ allegations.

Plaintiffs in cases involving charges of disparate impact in housing would have to establish the practice or policy is “arbitrary, artificial, and unnecessary” and show a “robust causal link” between the practice and the disparate impact, the proposed rule states.

In addition, plaintiffs would have to show the practice has an adverse effect on a protected class of people, not just an individual who happens to be a member of that class. The disparity would also have to be “significant,” and the complaining party’s alleged injury would have to be “directly caused” by the practice in question.

‘Common Sense’ Reform

The new rule will “insert common sense into each step of the litigation process,” says Roger Clegg, president and general counsel of the Center for Equal Opportunity.

“Plaintiffs will now have to identify with some precision what they are complaining about and how it results in racial disparities and by how much,” Clegg said. “What’s more, HUD rightly returns the burden of proof where it belongs, with the plaintiff.”

More Than Math

The evidence for claims that business practices have a discriminatory effect is often purely mathematical.

“Claims relying on statistical disparities must articulate how the statistical analysis used supports a claim of disparate impact by providing an appropriate comparison which shows that the policy is the actual cause of the disparity,” states the proposed rule.

The disparate impact standard violates principles of justice, says Horace Cooper, an attorney and cochairman of the black leadership group Project 21.

“Regulations relying on disparate impact standards are inherently un-American because they assess guilt based on a statistical algorithm,” Cooper said. “A perverse system is created when banks, landlords, and other players in the housing industry are held liable for discrimination even if they aren’t actually intending to discriminate.”

‘Supreme Court Demanded Reform’

The proposed revision to the disparate impact standard brings it in line with a 2015 U.S. Supreme Court ruling, states HUD’s summary of the rule. In that decision, Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., the court held disparate impact claims can be brought under the Fair Housing Act.

However, “disparate impact liability must be limited so employers and other regulated entities are able to make practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system,” Justice Anthony Kennedy stated in the majority opinion.

The proposed rule responds to the concerns expressed in that opinion, says Cooper.

“The Supreme Court demanded reform, and Ben Carson delivered it,” Cooper said. “HUD wants to restore the constitutional protections of defendants and require plaintiffs to provide proof beyond simple numbers to substantiate charges of discrimination.”

HUD could enact the rule after the 60-day public comment period ends on October 18.

Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.