Posts tagged ‘disparate impact regulations’

HUD Proposes Reinstating Disparate Impact Rule

On Friday the Department of Housing and Urban Development (HUD) announced that it was proposing regulations to reinstate an Obama era regulation scuttled by the Trump Administration which was designed to outline what had to be proven by individuals claiming a violation of the Fair Housing Act which prohibits discrimination on the basis of race, color, sex, and other protected classifications. Given the level of political discourse in this country, I suspect there will be a great deal of emotional debate. Here is a primer on the actual issues involved:

The core issue is how expansive HUD’s authority is to interpret the FHA and the regulation being debated is 24 CFR 100.500 which outlines how disparate impact in the provision of housing can be proven. Behind this ostensibly esoteric announcement lurks one of the most emotional and important debates that the nation will be having in the coming years; one that I suspect will only grow more intense: how much proof should be required to prove housing discrimination and should intent matter where policies have the effect of discriminating against someone on the basis of race?

In 2013, HUD issued regulations designed to “implement the Fair Housing Act’s discriminatory effect standards” (78 FED. REG. 11460. 2013). Even the title was loaded. At the time some lawyers argued that disparate impact analysis was not even authorized under the FHA.  In 2015, this issue was addressed by the Supreme Court in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project. The Supreme Court ruled that it was within HUD’s authority to promulgate a disparate impact standard but the issue was still not settled. Ultimately, the Trump administration repealed these regulations and replaced them with a new standard that made it more difficult for plaintiffs to win (see 85 FR60288-01, 2020).

It was back to the courts again. A district court ruled that these regulations clearly made it more difficult for plaintiffs to prove discriminatory impact.  For example, these regulations required plaintiffs to “sufficiently plead facts” to support.  “[T]hat the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law.” Massachusetts Fair Housing Center v. United States Department of Housing and Urban Development. In this decision, the federal district court in Massachusetts issued an injunction against the Trump era regulations.  Today you can still read these regulations, but they exist in a regulatory twilight zone with no one quite sure of what the legal standard is. 

There is undoubtedly more to come as the issues being debated ping pong between regulators and the courts. This is yet another issue that our system needs congress to resolve and its inability or unwillingness to do so creates a vacuum which leaves financial institutions unsure of what they can and cannot do.  

July 7, 2021 at 10:40 am Leave a comment


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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