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HUD Restores 'Discriminatory Effects' Rule

A rule changed in 2020 was reinstated. As a result, HUD still considers “disparate impact” and “perpetuation of segregation” illegal forms of discrimination.

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) submitted a Final Rule entitled “Restoring HUD’s Discriminatory Effects Standard.” It will appear in the Federal Register.

The rule rescinds a 2020 rule governing “disparate impact” claims and restores the 2013 discriminatory effects rule, a part of the Fair Housing Act.

“Discrimination in housing continues today and individuals, including people of color and people with disabilities, continue to be denied equal access to rental housing and homeownership,” says HUD Secretary Marcia L. Fudge. “Today’s rule brings us one step closer to ensuring fair housing is a reality for all in this country.”

Nothing, however, changes. A 2013 Rule made clear that “discriminatory effects” includes both “disparate impact” and “perpetuation of segregation,” and it made both illegal. Under the Trump Administration, a 2020 Rule “added multiple new procedural requirements and defenses that collectively made it virtually impossible for a plaintiff to plead a disparate impact case,” HUD says.

But the changes from the 2020 Rule never went into effect, causing confusion over the nation’s standards for fair housing. It was challenged in three separate lawsuits.

“The 2020 Rule, while technically not in effect, was published in the Federal Register and shows up as the current regulation,” according to HUD’s Fact Sheet on the latest change. “It has been causing confusion about HUD’s position as to the standards HUD and private litigants must meet to pursue discriminatory effects claims.”

“Disparate impact” and “perpetuation of segregation”

The discriminatory effects doctrine – which includes disparate impact and perpetuation of segregation – is a tool for addressing policies that unnecessarily cause systemic inequality in housing, even if they weren’t adopted with discriminatory intent.

It has been used to challenge policies that unnecessarily exclude people from housing opportunities, and has focused on issues such as zoning requirements, lending and property insurance policies, and criminal records policies.

  • Disparate impact: In this case, a policy appears neutral but affects people in protected classes differently. Rather than look directly at a policy, analysts often look at the results of that policy. If the results appear to discriminate, the policy may be questioned.
  • Perpetuation of segregation: Here, a policy “creates, reinforces or perpetuates segregated housing patterns but does not necessarily have a disparate impact.”

HUD’s new rule goes into effect 30 days after published in the Federal Register. But since the 2020 Rule never went into effect, regulated entities complying with the 2013 Rule don’t need to change any practices they have in place to comply with this rule.

HUD posted a Fact Sheet on its website that answers many of the frequently asked questions about the Fair Housing Act policies.

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