HUD proposes rule that would make housing discrimination lawsuits ‘impossible’

Today, the Department of Housing and Urban Development (HUD) introduced a proposal that would overhaul the Disparate Impact rule, a 2013 regulation from the Obama administration that created uniform 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 new rule would dramatically shift the burden of proof to the plaintiff in housing discrimination cases, making such lawsuits “impossible,” according to numerous fair housing advocates.

Courts have interpreted the Fair Housing Act to ban policies with a discriminatory disparate impact since it was passed in 1968, but with variations in its application. The new rule proposed by HUD, which will now undergo a 60-day comment period before being implemented, would make it much harder to bring housing discrimination cases to court.

“These changes are designed to make it much more difficult, if not impossible, for communities of color to challenge discriminatory effects in housing,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition. “With this harmful proposal, the Trump administration continues its pattern of attempts to weaken and disrupt the federal government’s responsibility to uphold its fair housing obligations under the law.”

Under the current Disparate Impact rule, the plaintiff, or the party making the accusation of discrimination, has to prove that a policy is causing a discriminatory effect. Then the defendant has to prove that the policy is necessary for legitimate, nondiscriminatory results. The burden then shifts back to the plaintiff to prove that the defendant’s interests could be achieved with a policy or practice that is less discriminatory.

Under HUD’s proposed rule, this three-step 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;” has a “robust casual link” with disparate impact on a protected class; causes a “significant” adverse effect on members of a protected class; is directly linked to the disparate impact in the plaintiff’s “alleged injury.”

The proposal also carves out new defenses for landlords and lenders who use algorithmic models to determine factors like credit-worthiness or risk. Defendants can have a disparate impact case dismissed if they can show that the inputs of the model are not highly correlated to protected class, or if the algorithm was generated by a third party. If the third party tests the algorithm for fairness and rules it fair, the defendant is shielded from liability in disparate impact cases.

Affordable housing advocates say this is potentially a giant loophole because lenders and landlords usually rely on a third party for algorithms, and if the rule goes into effect, any lenders and landlords who currently don’t use a third party would have a huge incentive to switch to one to avoid liability in disparate impact cases. HUD didn’t provide guidance on how third parties should test their models and algorithms, which is another potential loophole.

The rule proposal is just the latest in a string of attempts by the Trump administration and HUD secretary Ben Carson to roll back Obama-era housing regulations that were designed to strengthen protections against discrimination, diminish segregation, and boost recipients of rental subsidies.

In 2017, Carson sought to delay the implementation of the Small Area Fair Market Rent (SAFMR) rule, which effectively raised the value of Section 8 housing vouchers and gave its recipients more options in where to live. The rule was intended to alleviate segregation. Carson was sued for trying to delay the rule and lost.

In 2018, Carson successfully delayed the Affirmatively Furthering Fair Housing (AFFH) rule, which was designed to give teeth to a provision of the Fair Housing Act that required municipalities to actively look for barriers to fair housing and desegregation. The rule provided tools and data to local government so they can present a nonbinding plan for addressing those barriers.

The Trump administration has also repeatedly sought to cut funding for HUD-administered housing programs. It has proposed dramatic cuts to rental subsidies, public housing, and Community Development Block Grants. For the first three years of Trump’s term, Congress has rebuffed the administration’s cuts and funding levels have maintained the status quo. But Trump’s 2020 budget request renewed calls for deep cuts. Congress has not yet passed a counter to Trump’s budget request.