1 Sep

On June 20, 2018, HUD requested public comment on possible amendments to HUD’s 2013 implementation of the Fair Housing Act’s disparate impact rule.[1]  Title VIII of the Civil Rights Act of 1968 (The Fair Housing Act) prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin.[2] On February 15, 2013, HUD published a final rule, entitled “Implementation of the Fair Housing Act’s Discriminatory Effects Standard.”[3] The rule creates liability for policies that have a disproportionate effect on protected classes, even when the policy itself has a facially “neutral” reason for being enacted, separate from discrimination.[4] For example, a rule that requires all tenants in a housing facility to have full time jobs could disproportionately affect disabled people. The purpose of the rule might be to make sure that everyone in the housing facility has the ability to afford rent, but since the rule disproportionately affects disabled people, even if they can afford rent, the rule would violate the disparate impact rule.

HUD is reviewing their disparate impact rule due to a 2015 United States Supreme Court decision in the case Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc., as well as complaints from the insurance sector.[5]  The insurance sector has had to change their underwriting procedures in the past to accommodate the disparate impact rule. Courts have consistently held that housing insurers must abide by The Fair Housing Act.[6] This has required insurance companies to change their underwriting to remove any burdensome policies that could make obtaining coverage difficult for protected classes.

The Inclusive Communities Supreme Court decision upheld that disparate impact claims are recognizable under the HFA and liability can be levied against defendants that run afoul of the rule.[7] Writing for the majority, Justice Anthony Kennedy stated that Congress intended for disparate impact claims to be recognized under the FHA, and that “[r]ecognition of disparate-impact liability under the FHA also plays a role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.”[8]

Critics of HUD’s disparate impact rule state that the legality of HUD’s rule was not specifically addressed in Inclusive Communities, even though it was mentioned.[9] Part of the reason that HUD is now allowing for public comment on an amendment to HUD’s disparate impact rule is that HUD wants to know how the Inclusive Communities decision should affect HUD’s policy. HUD states that it has, “received numerous comments asserting that the disparate impact rule created uncertainty for commercial decision making, as well as public policymaking, and that the rule is inconsistent with Inclusive Communities.[10] Whether the rule is inconsistent or not with the Inclusive Communities decision remains to be seen. The Supreme Court was clear that disparate impact claims were meant to be incorporated into the Fair Housing Act. Multiple other Courts have upheld this decision post Inclusive Communities.[11]

It should be noted that the deciding vote in the Inclusive Communities decision was Judge Anthony Kennedy, who retired at the end of July.[12] Kennedy has voted conservatively on a majority of issues, but voted with the liberals on the Court on a number of social issues and equal protection laws. The Court will almost certainly become more conservative in the future assuming a Trump appointee fills Kennedy’s seat on the bench. It’s likely that HUD, under the Trump administration, will have a more advantageous bench if the disparate impact rule is changed and then challenged in the Court in the future.

 

 



[1] 83 FR 28560

[2] 42 U.S.C. 3604

[3] 24 CFR Part 100

[4] Id.

[5] Inclusive Communities Project, Inc. v. Texas Dep’t of Hous. & Cmty. Affairs, 135 S.Ct. 2507 (2015).

[6] See, e.g., Ojo v. Farmers Group Inc., 600 F3d 1205, 1208 (9th Cir. 2010); Nationwide Mut. Ins. Co. v. Cisneros, 52 F.3d 1351, 1360 (6th Cir. 1995); United Farm Bureau Mut. Ins. Co. v. Metropolitan Human Relations Comm’n, 24 F.3d 1008, 1016 (7th Cir. 1994); NAACP v. American Family Mut. Ins. Co., 978 F.2d 287, 301 (7th Cir. 1992); Nevels v. Western World Ins. Co., Inc., 359 F. Supp. 2d 1110. 1117-1122 (W.D. Wash. 2004); National Fair Hous. Alliance v. Prudential Ins. Co. of America, 208 F. Supp. 2d 46, 55-9 (D.D.C. 2002); Lindsey v. Allstate Ins. Co., 34 F. Supp. 2d 636, 641-43 (W.D. Tenn. 1999); Strange v. Nationwide Mut. Ins. Co., 867 F. Supp. 1209, 1212, 1214-15 (E.D. Pa. 1994).

[7] Inclusive Communities Project, Inc. v. Texas Dep’t of Hous. & Cmty. Affairs, 135 S.Ct. 2507 (2015).

[8] Id.

[9] 83 FR 28560

[10] Id.

[11] Inclusive Communities Project, Inc. v. Texas Dep’t of Hous. & Cmty. Affairs, 135 S.Ct. 2507 (2015).

[12] Id.

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