HUD’s Proposed Rule to make Housing Discrimination Lawsuits Challenging

The U.S Department of Housing and Urban Development (HUD) announced a proposed rule for revising the Disparate Impact rule under the Fair Housing Act on August 20, 2019. A 2013 regulation from the Obama administration made equal standards for the application of disparate impact —the idea that a policy can be discriminatory even if discrimination is not the policy’s intent—in housing discrimination lawsuits.

The Fair Housing Act prohibits discrimination in housing based on race, color, religion, sex, disability, familial status, or national origin. (42 USC 3608(a) and 3614a). In 2013, HUD mentioned a rule setting forth the prerequisites for a disparate impact claim under the Fair Housing Act (the “2013 Rule”). 78 FR 11460

The 2013 Rule provides that disparate impact is cognizable under the Fair Housing Act and classifies the burdens of proof as follows: it is the duty of the plaintiff to prove that the challenged practice results in a disparate impact on a protected class of persons; the defendant must then prove that the practice meets a substantial, legitimate, nondiscriminatory interest. However, the plaintiff may still prevail by proving that the defendant’s goals can be achieved by another less discriminatory practice. (24 CFR 100.500)

Under HUD’s proposed rule, this process is scrapped for a five-step burden of proof that falls almost entirely on the plaintiff, who would have to show that the policy: is “arbitrary, artificial, and unnecessary” (Proposed section 100.500(b)(1)); has a “robust casual link” with disparate impact on a protected class (Proposed section 100.500(b)(2)); causes a “significant” adverse effect on members of a protected class; is directly linked to the disparate impact in the plaintiff’s “alleged injury.” These rules are tougher for plaintiff to reach the court in housing discrimination cases. According to the new proposal, the burden of proof would lie on the plaintiff in housing discrimination cases. But according to various fair housing advocates, such type of law would make lawsuits “impossible.”

The proposed rule also makes it difficult for plaintiff to take a plea for a motion to dismiss. It would remove the defendant’s burden of proving to challenge the policy or practice, and would instead bound plaintiff to prove that the policy or practice is superfluous to achieve a lawful business goal. The rule also explains how defendants could defend their use of model or other algorithm in disparate impact cases.