Disparate Impact Discrimination Rule Adopted by HUD for Housing Discrimination

Unintentional discrimination is still discrimination and can result in serious penalties in a lawsuit so long as the effects of actions cause a discriminatory result. 

In the sale, rental, or financing of dwellings and in other housing-related activities, HUD has clarified, by 24 CFR 100, its Rule to evaluate a case, which is effective on May 1, 2023. 

The Rule sets forth how our government analyzes a Title VIII Fair Housing Act case and looks back to reinstate HUD's 2013 rule, titled "Implementation of the Fair Housing Act's Discriminatory Effects Standard." Under the rule, discrimination occurs through "facially neutral practices with an unjustified discriminatory effect." To understand whether there is an unjustified discriminatory effect, the Rule requires "a burden-shifting test," as follows:

The plaintiff or charging party is first required to prove as part of the prima facie showing that a challenged practice caused or predictably will cause a discriminatory effect;

if the plaintiff or charging party makes this prima facie showing, the defendant or respondent must then prove that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the defendant or respondent; and 

if the defendant or respondent meets its burden at step two, the plaintiff or charging party may still prevail by proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.

As a result, defendants now have much greater exposure to liability than they had under the 2020 Rule, which has been revoked by this new Final Rule even though it was never enforced or went into effect during the Trump era.