Federal Judge Rejects HUD's Disparate Impact Rule

On Nov. 3, the U.S. District Court Judge for the District of Columbia filed an opinion vacating HUD's final rule on Implementation of the Fair Housing Act’s Discriminatory Effects Standard, commonly referred to as the Disparate Impact Rule. HUD had recently finalized regulations that were intended to codify how a disparate impact claim is established, including the respective burdens that the plaintiffs and defendants must carry. Under “disparate impact,” a person may be held liable for discriminatory conduct under the Fair Housing Act (FHA) without any showing of actual intent to discriminate. To make out a basic case, all that is necessary is statistical evidence that a policy or practice had a harsher effect–a “disparate impact”–on a class protected by the FHA.

The judge ruled in favor of the plaintiffs, the American Insurance Association and the National Association of Mutual Insurance Companies, which claimed that HUD's rule violated the Administrative Procedure Act by expanding the scope of the Fair Housing Act to recognize not only intentional discrimination, but also disparate impact.

Although this ruling was a win for the American Insurance Association and other business groups that oppose disparate impact claims, which allow for a broad range of business decisions related to housing to be subject to civil rights litigation, the immediate impact of this decision is limited, as the U.S. Supreme Court said it would take up a related case and is likely to decide by the end of June once and for all whether the Fair Housing Act allows for disparate impact lawsuits. The related case, Texas Department of Housing and Community Affairs (TDHCA) v. Inclusive Communities Project, focuses on whether TDHCA violated the FHA by disproportionately awarding Housing Credits to developers building properties in areas with high minority concentrations.