On March 17, 2023, the U.S. Department of Housing and Urban Development (HUD) announced it submitted its Final Rule entitled Restoring HUD’s Discriminatory Effects Standard for publication in the Federal Register; it will go into effect 30 days after publication.
As its name suggests, the Final Rule restores the Obama-era, 2013 version of HUD’s disparate impact rule, rescinding the agency’s 2020 policy, which governs federal Fair Housing Act (FHA) cases on the basis of disparate impact theory. Under disparate impact theory, a rental housing provider can be sued if the owner or operator implements a policy that is neutral on its face but nonetheless has an unintended, discriminatory effect on members of a protected class under the FHA.
While HUD argues that the five-part framework of the 2020 rule complicates the discriminatory effects analysis and that the three-part framework of the 2013 rule provides “clarity, consistency, and predictability,” we disagree. While the rental housing industry is committed to providing equal opportunity for renters, the National Apartment Association (NAA) remains concerned about housing providers’ broad liability for disparate impact claims under HUD’s 2013 rule and subsequent guidance.
The 2020 rule amended the agency’s 2013 rule and refined its interpretation of the Fair Housing Act’s (FHA) disparate impact standard to better reflect the U.S. Supreme Court’s (SCOTUS) 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (also known as “Inclusive Communities”). However, the 2020 rule was challenged in the courts and ultimately never took effect after being barred by a Massachusetts Federal District Court.
NAA will continue our federal advocacy efforts to help HUD understand operational impacts of the Final Rule as well as its overall impacts on rental housing, and we will update NAA members and affiliates about our plans to issue updated industry guidance.
Read NAA and NMHC’s statement on HUD’s restoration of the 2013 disparate impact rule.