HUD Final Rule Rescinding 2020 Rule on Discriminatory Impacts
On March 17, 2023, the Department of Housing and Urban Development published a final Rule for inclusion in the Federal Register concerning discriminatory impact policies of landlords and others (mortgage lenders, insurance brokers, and others whose businesses relate to housing). While seemingly significant, the new Rule (the 2023 Rule) in large part only confirms the state of the law as it existed with HUD prior to 2020.
In 2013, HUD passed a final Rule governing the availability and disposition of claims related to the discriminatory effects of policies in housing. Essentially, the 2013 Rule states that a housing provider may not implement a policy that has a “discriminatory effect” on a protected class, even if the policy is not intentionally discriminatory. Importantly, the 2013 Rule includes a provision that the landlord’s policy cannot cause a “disparate impact or perpetuate segregation.” If a person believes they have been discriminated against by the subject policy, whether intentionally or through “discriminatory effect,” then they can then bring a claim for discrimination under the Fair Housing Act.
In 2020, the administration then in office implemented a Rule that would make it more difficult for a person to claim discrimination by erecting certain defenses and procedures that would increase the burden of bringing a claim. The 2020 Rule was implemented in September 2020, but was immediately blocked by a United States District Court in Massachusetts. As such, the Rule never actually went into effect.
The action by HUD this year in passing the 2023 Rule essentially does away with the 2020 Rule and reverts the guidelines to the way they have existed since 2013.
Most importantly, the 2023 Rule provides guidelines for Courts to consider when evaluating a claim of discrimination under the Fair Housing Act. The Rule provides (as it did in 2013) that a claim is subject to a three-stage burden-shifting evaluation of the claim. That three-stage evaluation proceeds as follows:
“(1) The plaintiff or charging party is first required to prove as part of the prima facie showing that a challenged practice caused or predictably will cause a discriminatory effect;
(2) if the plaintiff or charging party makes this prima facie showing, the defendant or respondent must then prove that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the defendant or respondent; and
(3) if the defendant or respondent meets its burden at step two, the plaintiff or charging party may still prevail by proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.
As such, while this announcement seems significant, in light of the Court decision staying implementation of the 2020 Rule, the law remains as it has been since 2013. The new Rule, simply restating in large part the 2013 Rule, sets forth the framework a Court should follow in evaluating an FHA claim, and complete negates any possibility that the 2020 Rule could become controlling law. This means that any current policies, as long as they complied with the 2013 Rule, remain adequate under current law after the implementation of the 2023 Rule. The 2023 Rule will become final 30 days after publication in the Federal Register.
The 2023 Rule, along with HUD’s detailed review of comments offered for and against the 2023 Rule, can be found here.