HUD Issues Notice of Proposed Rulemaking to Eliminate Disparate Impact Regulations

HUD recently issued a notice of proposed rulemaking in which it proposes eliminating the regulations that interpret the Fair Housing Act (the Act) to provide for disparate impact liability.

In 2013, HUD issued a final rule stating that a person engaging in conduct subject to the Act can be held liable thereunder if such conduct has a disparate impact (i.e., discriminatory effect) on members of a protected class.  This rule also introduced a burden-shifting framework to assess whether conduct has a disparate impact.  In the 2015 case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the U.S. Supreme Court agreed that the Act provides for disparate impact liability.  Two subsequent rulemakings in 2020 and 2023 subsequently modified the relevant regulations.

Now, in support of the proposed rule, the notice cites Executive Order 14281, which directed that — given limited resources for enforcement, the order’s newly stated policy to eliminate disparate impact liability, and the asserted illegality of disparate impact liability — executive agencies must “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.”  Accordingly, HUD asserts that eliminating the disparate regulations furthers the executive order’s goal and reduces unnecessary regulatory burdens.

The proposed rule, however, is not final and is not yet effective.  Interested persons have until February 13, 2026, to submit comments to HUD on the proposed rule.