Kriston Capps is a staff writer for CityLab covering housing, architecture, and politics. He previously worked as a senior editor for Architect magazine.
The housing agency plans to revisit its rule regarding “disparate impact,” a legal doctrine that prohibits discrimination that happens because of a policy whose language is otherwise neutral.
The U.S. Department of Housing and Urban Development signaled on Wednesday that it may reverse an Obama-era rule that bans more subtle forms of discrimination in housing.
At a time when the department is already locked in a court battle over fair housing law and proposing to raise rents on low-income families, the move indicates Secretary Ben Carson’s efforts to rethink the department’s fundamental obligation to protect vulnerable residents against discrimination.
The department issued a notice that it plans to revisit its rule regarding “disparate impact,” a legal doctrine that prohibits discrimination that happens as an effect of a policy whose language is otherwise neutral. Under this standard, lenders and landlords may not enact any practice that disproportionately negatively affects minorities, even if the practice itself is not explicitly discriminatory.
HUD adopted a final rule on the disparate impact provision in 2013, formally recognizing a ban on any “facially neutral practice that has a discriminatory effect.” The rule confirmed the department’s long-held reading of the Fair Housing Act, making its use consistent across jurisdictions. The U.S. Supreme Court further weighed in on disparate impact in 2015, affirming in a 5-4 decision that civil rights law indeed prohibits policies that indirectly affect minorities adversely. Eleven earlier federal appellate courts all confirmed the doctrine.
While the disparate impact doctrine has guided employment law for decades, its application in housing was settled more recently by the courts. By reopening the issue, critics say that Carson may be trying to weaken the rule in favor of industry—and in conflict with established jurisprudence.
“This new advance notice of proposed rulemaking appears to ask the kinds of questions that you might ask if you were trying to water down a rule,” says Jesse Van Tol, CEO of the National Community Reinvestment Coalition, a nonprofit that promotes fair practices in lending and housing. “Are there loopholes that should be provided? Is the rule burdensome?”
HUD published its notice in the Federal Register, a first step in the rulemaking process required by law. The notice says that the department is reviewing the rule to see what, if any, changes are necessary in light of the Supreme Court’s decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project—the 2015 decision that affirmed the disparate impact reading of fair housing law. HUD did not respond to a request for comment.
“As HUD conducts its review, it is soliciting public comment on the disparate impact standard set forth in the final rule and supplement, the burden-shifting approach, the relevant definitions, the causation standard, and whether changes to these or other provisions of the rule would be appropriate,” the notice reads.
The settled discriminatory-effect rule established a three-part “burden-shifting test” to determine whether a practice violates the Fair Housing Act. First, a plaintiff, typically a fair housing group, has to prove a prima facie case that a policy discriminates on the basis of race, gender, or another protected class. Then, the defendant, often a bank or mortgage lender, must show that the policy serves a business interest—that it reduces risk, for example. That shifts the burden back to the plaintiff, who must then show that there’s a way to accomplish the same goal without discriminating.
The Trump administration has already moved to walk back another fair housing rule, a decision that has drawn sharp criticism from civil rights advocates. Under the Fair Housing Act, the government is required to actively work to achieve desegregation; during the Obama administration, HUD finally implemented an Affirmatively Furthering Fair Housing (AFFH) rule. Early this year, however, Carson postponed implementing the rule.
Housing advocates sued the Trump administration last month to try to push the department to enforce this fair housing rule. At the same time, HUD scrapped the tool that was key to facilitating the AFFH rule at the community level. The same housing organizations sued Carson and HUD over that decision, too. New York Governor Andrew Cuomo and the state attorney general moved to join that lawsuit earlier this month.
“As former HUD Secretary, it is appalling to me that the agency would abdicate its responsibility to fight housing segregation and discrimination and allow this deplorable practice to continue,” Governor Cuomo said in a statement.
With its Inclusive Communities decision, the Supreme Court argued that Texas discriminated against minorities by concentrating federal tax credits for affordable housing in mostly poor, mostly minority neighborhoods around Dallas. That strategy, while not on its surface discriminatory, had the effect of keeping low-income residents away from high-opportunity, mostly white neighborhoods—a disparate impact that violated the Fair Housing Act.
Van Tol says that it’s hardly the case that courts decide most fair housing cases in favor of plaintiffs. If that were so, it might be reasonable to conclude that HUD’s disparate impact rule proved burdensome for the industry. Courts throw out fair housing cases frequently, he says.
“Historically, discrimination in housing has taken two forms, implicit and explicit,” Van Tol says. “What we’ve successfully managed to drive out of the mortgage industry in particular is intentional and explicit discrimination. But implicit discrimination still exists.”