On June 25, 2021, HUD published a notice of proposed rulemaking that would withdraw its 2020 disparate impact final rule and reinstate its 2013 final rule. The announcement stems from a January 26, 2021 Presidential Memorandum that directed HUD to reassess, among other items, the impact of the 2020 disparate impact final rule. The 2013 final rule had codified discriminatory effects (also termed disparate impact) liability under the Fair Housing Act based on existing case law. The 2020 final rule, among other revisions, added new pleading requirements and defenses.
As background, in 2013, HUD published a final rule to ‘‘formalize its long-held recognition of discriminatory effects liability under the [Fair Housing] Act and, for purposes of providing consistency nationwide, formalize a burden-shifting test.’’ However, in 2020, HUD published a final rule that made significant changes. In its lead-up to the 2020 final rule, HUD explained that the new rule more faithfully represented disparate impact jurisprudence based on the 2015 U.S. Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. HUD’s revisions eliminated the previous 2013 rule’s definition of “discriminatory effect,” added additional defenses to these claims, and restricted the available remedies.
Before the new final rule went into effect, the U.S. District Court in Massachusetts issued a preliminary injunction that ordered HUD to maintain the current regulations based on the 2013 final rule. The court concluded that the 2020 final rule’s alterations, including those that HUD claimed streamlined the standard, were arbitrary and capricious and were not supported by the Supreme Court’s 2015 case.
Because of the nationwide injunction blocking this new final rule, the discriminatory effects standard fell into administrative limbo. Consequently, when President Biden took office in January, 2021, he directed HUD to examine whether the 2013 final rule should be reinstated. In its announcement of proposed rulemaking, HUD emphasized the importance of the discriminatory effects test in enforcing the Fair Housing Act.
Public comment on the new proposed rulemaking will be accepted until August 24, 2021.