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HUD plans to restore 2013 version of discrimination rule

Trump administration changed "disparate impact" rule to require proof of intention

The U.S. Department of Housing and Urban Development published a proposal to the Federal Register on Friday that would rescind the department’s 2020 disparate impact rule and restore the 2013 discriminatory effects rule.

In its notice of proposed rulemaking, HUD stated it believes the “2013 rule is more consistent with decades of caselaw and better effectuates the Act’s broad remedial purpose of eradicating unnecessary discriminatory practices from the housing market.”

In other words, the agency said the 2020 update to the Fair Housing Act would have made it harder for those seeking justice to meet the legal threshold for proving unintentional discrimination.

HUD said that the 2020 disparate impact rule complicated discriminatory analysis by adding “new pleading requirements, new proof requirements, and new defenses, all of which made it harder to establish that a policy violates the Fair Housing Act.”

Prior to the effective date of the 2020 rule, the U.S. District Court for the District of Massachusetts issued a preliminary injunction in Massachusetts Fair Housing Center v. HUD, staying HUD’s implementation and enforcement of the rule. Consequently, the 2020 rule never actually took effect.

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Now, HUD wants to restore the previous rule due to its more “straightforward analysis.”

“We must acknowledge that discrimination in housing continues today and that individuals, including people of color and those with disabilities, continue to be denied equal access to rental housing and homeownership,” said HUD Secretary Marcia Fudge. “It is a new day at HUD-and our Department is working to lift barriers to housing and promote diverse, inclusive communities across the country.”

The housing industry strongly criticized a change in guidance made by the Trump administration in 2020 to the disparate impact rule. Then-HUD Secretary Ben Carson issued updated guidelines that imposed a specific, five-step approach that required regulators to prove intentional discrimination on the lender’s behalf.

Under HUD’s previous disparate impact rule enacted by President Barack Obama, lenders, landlords and other housing providers could be held liable for discrimination against protected classes, even if it was not their intent to discriminate. The use of disparate impact was challenged all the way up to the U.S. Supreme Court, which upheld the rule in 2015.

However, under Trump, HUD began signaling that changes could be coming. By 2017, the Trump administration, via the Department of the Treasurycalled on HUD to reconsider how it used the disparate impact rule.

In addition to civil rights groups and elected officials, mortgage industry leaders – including Bank of America, Citigroup, Quicken Loans, and the National Association of Realtors – urged the Administration to not issue the final rule. They cited concern it would facilitate housing discrimination and called for reexamination of the rule in light of the ongoing national examination of structural racism. 

After the controversial changes were issued in 2020, a federal judge delivered a preliminary injunction in October to stop HUD from implementing the rule until the legal challenge was resolved.

On January 26, 2021, President Biden issued a memorandum ordering HUD to “take all steps necessary” to examine the effects of the 2020 Rule, including the effect that amending the 2013 Rule has had on HUD’s statutory duty to ensure compliance with the Fair Housing Act.

Following Fudge’s confirmation to Secretary in March, discussions began over whether she would begin negotiating changes on both the disparate impact standard, as well as the “Preserving Community and Neighborhood Choice” rule.

During her nomination hearing in January, Fudge vowed to end discrimination in housing upon approval of her confirmation. She said part of her priorities for HUD, “will require us to end discriminatory practices in the housing market, and ensure that our fair housing rules are doing what they are supposed to do.”

The Center for Responsible Lending applauded the notice of proposed rulemaking on Friday, stating that the proposed rule would restore the power of a “crucial legal tool” when identifying and eliminating discrimination.

“Decades of government-backed redlining and other exclusionary practices have prevented Black, Latino, and other families of color from building intergenerational wealth on parity with white families,” the CRL said.

According to the notice, those who wish to comment on the proposed rulemaking may do so through Aug. 24, 2021.

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