HUD Sends Proposed Changes to Disparate Impact Regulations to OMB

HUD recently sent proposed changes to the disparate impact regulations to the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget. HUD’s disparate impact rule was enacted by HUD during the Obama administration and is used as a way to enforce the Fair Housing Act. Under HUD’s rule, lenders, landlords, and other housing providers can be held liable for discrimination against protected classes even if it wasn’t their intent to discriminate.

The use of disparate impact was challenged all the way up to the Supreme Court, which ruled in 2015 in favor of disparate impact. The 2015 Supreme Court ruling upheld and established that the Fair Housing Act allows lawsuits based on disparate impact, meaning a law or practice can be determined to have a discriminatory effect even if it wasn’t based on a discriminatory purpose. And while the Supreme Court upheld the use of disparate impact as a legal means to establish liability for discriminatory actions, the court’s decision didn’t specifically rule on HUD’s policy.

Last year, HUD, under Ben Carson’s leadership, asked the public to comment on whether its 2013 final rule implementing the Fair Housing Act’s disparate impact standard required amendments. This was done by publishing an advance notice of proposed rulemaking (ANPR) in the Federal Register on June 20, 2018, seeking public comment on possible amendments. In the ANPR, HUD acknowledged that the Supreme Court upheld the use of disparate impact theory to establish liability under the Fair Housing Act in cases where seemingly neutral practices have a discriminatory impact on protected classes of persons. HUD went on to state that the Court “did not directly rule upon it [the disparate impact rule],” hence HUD sought public input on whether the regulation is consistent with the Court’s ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities.

The Feb. 1 OIRA posting doesn’t provide any more detail than the ANPR. Under Executive Order 12866, proposed changes to regulations must be reviewed by OIRA, which technically then has 90 days before sending them back to HUD for publishing in the Federal Register. Once published, the public will have 60 days to submit comments to HUD.