Soon after taking office, President Donald Trump issued an executive order (EO), “Restoring Equality of Opportunity and Meritocracy,” mandating the cessation of federal enforcement of the “disparate impact” theory of liability. This EO initiated a series of administrative actions that, when taken together, set the stage for a dramatic limitation of disparate impact liability for multifamily housing operators and developers in 2026 and beyond.
Pertinent Background
Federal courts have long held that the Fair Housing Act prohibits both (1) discriminatory treatment (intentional discrimination) and (2) discriminatory effects – when a facially neutral policy or action results in an adverse effect on a protected group (such as a race) and cannot be justified as serving a legitimate business purpose (also known as “disparate impact”).
Disparate impact liability under the Fair Housing Act was specifically addressed in June 2015 when the U.S. Supreme Court held that the Fair Housing Act precludes policies that are neutral on their face but have discriminatory effects – even without proof of intent. See Texas Dept. of Housing & Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015).
The case involved a lawsuit brought by an advocacy group against the Texas Department of Housing and Community Affairs under the Fair Housing Act (which prohibits discrimination on the basis of race or color, national origin, religion, sex, disability, and familial status). The advocacy group alleged that the Department and its officers had caused continued segregated housing patterns by allocating too many tax credits to housing in predominantly minority inner-city areas and too few in predominantly white suburban neighborhoods.
The Court evaluated the language of the Fair Housing Act and noted that it mirrors language in employment statutes (including Title VII of the Civil Rights Act and the Age Discrimination in Employment Act), both of which had historically allowed for disparate impact liability. See Griggs v. Duke Power Co., 401 U.S. 424, 91 S. Ct. 849, 28 L. Ed. 2d 158 (1971). It further reasoned that “disparate-impact liability ... plays an important role in uncovering discriminatory intent: it permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.”
Under Inclusive Communities Project, policies and practices that cause a disparate impact are permissible only when they are “necessary to achieve a valid interest.” To date, the U.S. Supreme Court has not revisited this decision.
The EO and Its Impact
Despite the Inclusive Communities Project decision, in the EO, President Trump stated that it is the policy of the United States to eliminate the use of disparate impact liability in all contexts to the maximum extent possible to avoid violations of the U.S. Constitution, federal civil rights laws and fundamental American principles.
In support of this objective, through the EO, the President instructed federal agencies to rescind previous administrative actions that implemented the disparate impact doctrine and to cease all utilization of the disparate impact theory of liability. The President also called for a comprehensive review and replacement of all implementing regulations for Title VI of the Civil Rights Act of 1964, as well as all other regulations, guidance, rules or orders to the extent that they contemplate disparate impact liability.
The U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Justice (DOJ) have taken the following administrative actions to implement the President’s directive set forth in the EO:
- In mid-September, HUD released a guidance memorandum on Fair Housing Act Enforcement and Prioritization of Resources. The document states that the Department will prioritize claims of intentional discrimination, rather than claims based on disparate impact theories.
- HUD also revoked existing guidance documents on the basis that they were inconsistent with the statutory text of the Fair Housing Act.
- On November 25, 2025, HUD Secretary Scott Turner issued a letter to Public Housing Authorities and Owners on criminal screening requirements for such housing, substantially changing the protocol to be followed for that housing.
- On December 9, 2025, DOJ published a final rule that rescinds the disparate impact liability provisions in the existing implementing regulations for Title VI of the Civil Rights Act.
- And, most recently, on January 14, 2026, HUD issued a proposed rule that would eliminate all HUD regulations governing disparate impact liability under the Fair Housing Act.
Policy Changes
As discussed in greater detail below, each of these four actions reflects a significant change in federal enforcement priorities.
1. HUD Guidance Memorandum on Fair Housing Enforcement and Prioritization of Resources
On September 16, 2025, HUD’s Office of Fair Housing and Equal Opportunity (FHEO) issued guidance stating that it will be prioritizing cases with strong evidence of intentional discrimination under the Fair Housing Act while de-prioritizing investigations based on disparate impact theories.
In doing so, HUD characterized disparate impact theories as “novel or tenuous theories” of liability and specifically revoked guidance from the agency addressing appraisal bias, zoning, environmental justice, and criminal background screening policies.
The internal guidance document states that HUD will now (a) require the preparation of priority memorandums before filing a case, which must detail the statutory basis for the enforcement action, protected classes, allegations, evidence, respondent rebuttal, damages methodology and litigation viability and (b) mandate senior-level review before proceeding with an enforcement action.
2. HUD Revocation of Fair Housing Guidance Documents
The following day, on September 17, 2025, the FHEO issued a memorandum withdrawing several pre-existing policy guidance documents. The withdrawal was effective immediately.
The withdrawn guidance documents include:
- A 2007 guidance document regarding Limited English Proficiency under Title VI, which required recipients of federal funds to provide translation and other services to individuals who do not speak English as their primary language and who have a limited ability to read, speak, or understand English;
- 2013 and 2020 guidance documents regarding Service and Assistance Animals, which addressed how housing providers could respond to specific requests for accommodation for both trained service animals and untrained assistance animals;
- A 2021 memorandum regarding gender identity and sexual orientation protections, which prohibited housing discrimination based on sexual orientation and gender identity (following the Supreme Court’s decision in Bostock v. Clayton County, 590 U.S. 644 (2020), which addressed the same in employment discrimination);
- A 2021 Statement on Special Purpose Credit Programs, which stated that lenders could offer targeted credit programs for underserved groups (like those in minority or low-income communities) without violating Fair Housing or ECOA (Equal Credit Opportunity Act) rules (so long as specific requirements were met);
- A 2022 guidance document on the use of criminal records in background screenings, which required housing providers to conduct individualized assessments considering the nature, severity, and recency of the offense, rather than using blanket bans on applicants with criminal histories;
- A 2024 notice allowing Fair Housing Assistance Program (FHAP) funds to be used for source of income testing; and
- 2024 notices addressing guidelines for how housing providers should manage the use of artificial intelligence (AI) and algorithms to avoid discrimination in digital advertising and background screenings.
To date, these pre-existing guidelines and statements have not been replaced with alternatives, leaving it to the courts to interpret the standards that must be followed.
3. HUD Letter to Public Housing Authorities and Owners
HUD has also withdrawn prior guidance that discouraged the use of criminal history in housing decisions and issued a letter to public housing authorities and owners, creating increased requirements for screening public housing residents.
Specifically, public housing authorities and owners are now required to deny admission for individuals who were evicted for drug-related activity within three years; are currently using illegal drugs or pose safety threats; were convicted of methamphetamine production in federally assisted housing; are lifetime registered sex offenders; and have a history of alcohol abuse threatening safety or peaceful enjoyment. Public housing authorities and owners may deny assistance for criminal activity affecting health, safety, or property enjoyment.
HUD also requires public housing authorities and owners of public housing to act on criminal activity, including drug use, violent crime, methamphetamine production and alcohol abuse, with new ‘One Strike and You’re Out’ eviction guidelines.
4. DOJ Rule on Disparate Impact Liability Under Title VI of the Civil Rights Act
Under Title VI, entities – both public and private – that receive federal assistance from any federal agency must take concrete steps to ensure nondiscrimination based on race, color or national origin in their programs and activities.
Title VI specifically prohibits recipients of federal funds from: denying program services, financial aid or other benefits; providing different services, financial aid or other benefits, or providing them in a manner different from that provided to others; segregating or treating individuals or groups differently in any matter related to the receipt of any service, financial aid or other benefits; denying an individual or group the opportunity to participate as a member of a planning, advisory or similar body; using other method or criteria of administering a program that treats or affects individuals or groups in a discriminatory manner; and intimidating, threatening, coercing or discriminating against any individual for the purpose of interfering with any right or privilege secured by Title VI, or because the individual has made a complaint, testified, assisted or participated in any manner in an investigation, proceeding, or hearing.
Prior to the promulgation of the new December 9, 2025 rule, DOJ had the ability to bring claims under Title VI based on both intentional discrimination and discriminatory effect (or disparate impact). This was made clear in a in 2001 decision, whereby the U.S. Supreme Court limited disparate impact claims by private parties but permitted civil rights enforcement agencies to bring enforcement actions based on disparate impact liability without evidence of explicit discriminatory intent. See Alexander v. Sandoval, 532 U.S. 275 (2001).
Under the new rule, however, consistent with the President’s directive, DOJ has removed all references to the effect or impact of policies and practices on any protected class. It also makes clear that under Title VI, policies with discriminatory effects alone are not actionable.
Unlike the other changes discussed in this memorandum, this December 9, 2025 rule aligns with Supreme Court precedent in place for private litigants. Therefore, this regulatory shift will most likely be interpreted as closing off any disparate impact liability under Title VI.
5. HUD Proposed Rule Withdrawing Disparate Impact Regulations
On January 14, 2026, HUD issued a proposed rule that would eliminate all HUD regulations governing disparate impact liability under the Fair Housing Act. The rule, published in the Federal Register as HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard (91 Fed. Reg. 1475; FR Doc. 2026 00590), is open for public comment through February 13, 2026.
Since 2013, HUD has implemented disparate impact through a regulatory burden shifting test codified in 24 C.F.R. § 100.500 and Subpart G.
In the proposed rule, HUD now proposes to remove Subpart G entirely and eliminate its disparate impact regulatory framework. Under the proposal:
- HUD intends to withdraw the 2013, 2019, and 2023 disparate impact rules.
- HUD would no longer provide a regulatory test for establishing unjustified discriminatory effects.
- HUD would defer to courts to determine the applicable standards for disparate impact liability.
In announcing the proposed rule, HUD states that these prior regulations “formalized legal tests that were not explicit in statute” and, in its view, sometimes presumed unlawful discrimination based solely on statistical disparities, even without evidence of discriminatory intent or a facially discriminatory policy.
The proposed rule does not eliminate disparate impact liability itself. The Fair Housing Act remains unchanged, and courts may continue to recognize disparate impact claims under Inclusive Communities. However, there will be no regulatory burden-shifting standard, and case law will become the primary authority on how disparate impact claims are evaluated.
Practical Implications
Taken together, these administrative actions represent a significant shift in Fair Housing Act enforcement priorities of the federal government, especially concerning disparate impact claims. As a practical matter, they indicate that HUD and DOJ are extremely unlikely to initiate new litigation based on a disparate impact theory or that they will investigate or issue “cause” findings based on that theory.
Disparate impact liability, however, has been upheld by the Supreme Court, and, absent congressional action or a new Supreme Court ruling on disparate impact, those claims will remain viable in litigation filed by private plaintiffs and outside advocacy organizations. Additionally, state and local fair housing laws typically recognize disparate impact liability, and it is likely that courts may find that those laws are unaffected by any federal administrative changes.
As to which specific standards will be applied, courts will likely look to the general statutory requirements and case law interpreting those requirements (including pre-existing disparate impact framework) when assessing a housing provider’s actions.
This area continues to develop, and HUD and DOJ will likely provide additional guidance in the coming months. The National Apartment Association (NAA) will continue to work with HUD, DOJ and the White House to ensure the rental housing industry’s needs are considered in future policymaking and guidance. As more information becomes available, NAA will provide updates to its membership. Housing providers should continue complying with all applicable federal and state laws and proceed with caution as this area develops.
For more information on:
- NAA’s advocacy efforts, please contact Nicole Upano.
- NAA’s legal advocacy efforts, please contact Ayiesha Beverly.
- Your legal and operational compliance obligations, please contact Lynn Estes Calkins and Christine Walz at Holland & Knight, LLP.
About the Authors:
Lynn E. Calkins is a trial lawyer and appellate advocate, concentrating in civil enforcement actions and federal regulatory litigation. Ms. Calkins is experienced in representing clients in civil disputes involving the federal government and plaintiff advocacy groups, including defending clients against civil enforcement actions and bringing affirmative challenges to final agency actions.
Christine Walz is a litigation and media attorney in Holland & Knight's New York office. She is a member of both the firm's Litigation Section and Media Practice Team. Ms. Walz defends multifamily housing developers, hotel operators and shopping center developers in actions involving compliance with the Fair Housing Act (FHA) and Americans with Disabilities Act (ADA).