The Big Picture
The New Jersey Division on Civil Rights (DCR) has adopted new rules that codify the state’s prohibition against disparate impact discrimination. The rules, codified under the New Jersey Law Against Discrimination (the Act or LAD), were announced on December 17, 2025, and are, according to the state’s press release, the “most comprehensive state-level disparate impact discrimination regulations in the country.” The new rules address disparate impact discrimination in numerous areas, including employment, housing and places of public accommodation.
Intent to Discriminate Not Required
Under the new rules,even if there is no intent to discriminate, disparate impact discrimination can occur when a policy or practice of a covered entity that appears neutral has a disproportionately negative effect based on a protected characteristic. The Act’s protected characteristics include, but are not limited to, race, color, national origin, nationality, civil union status, pregnancy, gender identity and disability.
Anyone that believes they have been discriminated against based on disparate impact liability due to an unlawful employment practice or unlawful discrimination under the Act can file a complaint of discrimination under disparate impact liability in Superior Court, or with various state agencies, including the Attorney General, Director of the Division of Civil Rights, Commissioner of the Department of Labor and Workforce Development or the Commissioner of the Department of Education. Covered entities under the Act include an employer; labor organization; employment agency; housing provider; real estate broker, agent, or salesperson; lending institution; place of public accommodation; or person who is required to comply with other state laws – specifically N.J.S.A. § 10:5-12. Of note, the new rules,while written to be construed with narrow exceptions, do make a distinction between timing for when a policy or practice by a covered entity can serve as the basis for a claim under the new rules. Under this rule, a policy or practice that is being debated or deliberated internally by a covered entity must be finalized before that policy or practice can be challenged under the new rules.
Two-Step Burden of Proof Shift for Claims and Evidence Provided To Establish Burden
A number of organizations, including the New Jersey Apartment Association (N.J.A.A.), the New Jersey Chamber of Commerce, and the U.S. Chamber of Commerce, provided comments to the DCR. N.J.A.A. argued that the burden shifting framework for analyzing disparate impact discrimination liability in the housing and housing financial assistance contexts runs contrary to the legislative intent of the L.A.D., which it claims was to mirror the federal anti-discrimination statute and case precedent. N.J.A.A. and other organizations also noted that under the two-step burden shifting framework, the burden has been lowered for complainants, which will lead to an increase in litigation. The D.C.R. responded that in promulgating the rule, it codifies the two-step burden-shifting framework only in housing, noting that under its analysis of state law, there is a “clear precedent for treating housing differently from other contexts.”
Under the Act, one who believes they have been discriminated against in violation of the Act (the complainant) has met their burden of proof by showing the challenged practice or policy has a disparate impact on members of a protected class. Under the Act, the burden then shifts to the party whose policy or practice is being challenged (the respondent) to show that the challenged policy or practice is necessary to achieve a “substantial, legitimate, nondiscriminatory interest.” In order to show the challenged policy or practice is necessary to achieve a “substantial, legitimate, nondiscriminatory interest,” the respondent would need to show that the challenged policy or practice is necessary to achieve a core interest of the entity that has a direct relationship to the entity’s function, that the justification for the challenged action is genuine, and the justification itself does not discriminate based on a protected characteristic. Additionally, the respondent would need to show that the challenged action effectively carries out the identified interest, meeting the burden codified under N.J.A.C. §13:16-2.4(b). A challenged action would likely be determined on a case-specific, fact-based inquiry utilizing the burden shifting test laid out in the law.
Parties seeking to meet their burden under the Act are required to provide empirical evidence that is not hypothetical or speculative in support of their claim(s). The Act specifically includes examples for housing and housing financial assistance. Under N.J.A.C. § 13:16-2.3(c), a complainant that argues unlawful discrimination based on gender could meet its burden by providing evidence including applicant files, data, or applicant rates by gender, in arguing a policy or practice harms women over men, but would not meet the burden of showing unlawful discrimination by speculating the policy or practice harms women more than men (gender references as provided appear in the Act). While the Act requires evidence that is not hypothetical or speculative, the Act will allow anecdotal evidence to be used with empirical evidence.
Liability Under Other Areas of Law Not Removed
Housing providers in New Jersey likely are already aware of other areas of law where claims against policies or procedures may appear, such as the Fair Chance in Housing Act (F.C.H.A.). In fact, in comments submitted regarding the proposed rules, the N.J.A.A. suggested that criminal background screening should not be included as a practice that could result in unlawful disparate impact discrimination under the Act because the F.C.H.A. is not a part of the L.A.D. This viewpoint was advanced by several other organizations in their testimony. In declining to remove disparate impact liability from protection under the Act, the D.C.R. noted that including criminal background screening is appropriate, as the practices may violate the L.A.D., separate and apart from the liability that applies under the F.C.H.A.
Under N.J.A.C. §13:16-4.3,the focus of whether a policy or practice is the basis for a disparate impact discrimination claim under the Act is not the same as a challenge to that same practice or policy under the FCHA. A housing provider that has a practice or policy of excluding applicants based on criminal history information that has a disparate impact on a protected characteristic would likely need to show the policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest, and that there is no less discriminatory alternative that would achieve the same result as provided in N.J.A.C. §13:16-4.3.
Numerous Aspects of Housing Provider Business Decisions and Processes Affected
The new rules also require housing providers, real estate brokers, agents and salespersons to conduct all sale and rental searches, listings and advertisements including referral programs in a manner to give all persons “fair, adequate, and equivalent” notice of vacancies and opportunities. The law does appear to provide protection from disparate impact discrimination for housing providers who provide specialty housing, such as age-restricted, or affordable housing, but only to a certain extent. Such providers can target advertising practices to the specific populations they serve, but such providers may still be subject to disparate impact liability to the extent that the policy or practice used has a disparate impact on members of a protected class other than those that the housing is intended to serve under the Act.
Advertisements and referrals are not the only areas of housing providers’ business processes subject to liability under the Act. The Act also aims at screening policies that affect minimum income requirements, and blanket policies or practices that exclude all people with any prior criminal history or credit history. Under the Act, individualized assessments regarding facts and circumstances of an applicant’s criminal record, and other mitigating information is specifically noted as likely viewed as a “less discriminatory alternative” compared to a policy that provides a blanket ban. The Act also takes a similar approach to consumer credit history or credit scores, denoting that policies or procedures that contain an individualized assessment of the facts and circumstances of an applicant's consumer credit history/credit score that reflect on the applicant’s ability to pay rent is likely to be a “less discriminatory alternative” to a policy that provides an automatic blanket ban on applicants based on lack of credit history or credit scores below a minimum threshold.
What’s Next
Housing providers in New Jersey should work with their compliance, business personnel and legal counsel to ensure that their policies and procedures are in compliance with all applicable laws and regulations. Housing providers generally should keep in regular contact with their legal counsel to ensure that they are kept updated on any regulatory or legislative changes within the jurisdictions in which they operate, particularly as more jurisdictions begin to pass regulations affecting the relationship between residents and housing providers. For example, in New York, the governor signed Senate Bill S4067A on December 19, 2025, which codifies disparate impact liability under the New York State Human Rights Law.
Federal Activity Will Drive Greater Focus by States
Activity in New Jersey and New York likely foreshadow a larger trend towards action by states to address perceived gaps in federal fair housing protections. The U.S. Department of Housing and Urban Development (HUD) recently released aproposed rule that would eliminate all HUD regulations governing federal disparate impact cases under the Fair Housing Act. This follows the release of HUD’s September 16, 2025 memorandum which detailed immediate changes to the agency’s enforcement priorities. The memo instructs the agency’s staff to focus all its resources on cases with the strongest evidence of intentional discrimination and rescinds all guidance that is not in alignment with this directive. HUD’s actions are part of efforts across the federal government to implement President Trump’s Executive Order 14281 titled, “Restoring Equality of Opportunity and Meritocracy.” This presidential action ordered federal agencies to eliminate disparate impact liability in all contexts to the greatest extent possible.
NAA’s Perspective
As part of our federal advocacy, the National Apartment Association (NAA), along with the National Multifamily Housing Council (NMHC), asked the Trump administration to revise HUD’s disparate impact rulemaking to realign with the Supreme Court’s decision in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc. (2015) and other legal action and include important safeguards for housing providers against litigation stemming from legitimate, nondiscriminatory policies. The apartment industry remains strongly committed to fair housing laws, but we have long-raised concerns that overly expansive views of disparate impact theory could create liability for basic housing development and operational practices. To learn more about NAA’s disparate impact-related advocacy, contact publicpolicy@naahq.org.
NAA continues to track and share updates on the legal issues impacting its members and will continue to serve as a voice for the industry in courtrooms across the nation. Legal advocacy efforts for this rule were in part, supported by a grant from NAA’s Legal Advocacy Program. For a deep dive of HUD’s policy changes and enforcement of disparate impact discrimination, see NAA’s deep dive member resource.