HUD restores Discriminatory Effects rule, revokes 2020 rule

The U.S. Department of Housing and Urban Development (HUD) announced on Friday that it rescinded a 2020 Trump-era rule governing Fair Housing Act disparate impact claims and has restored a 2013 Obama-era “Discriminatory Effects” rule that takes aim at discriminatory practices from the housing market.

In a rule that will be published to the Federal Register, HUD said that the 2013 rule is “more consistent with how the Fair Housing Act has been applied in the courts and in front of the agency for more than 50 years.” According to HUD, it more effectively implements the broad remediations for eliminating discriminatory practices from housing.

“Discrimination in housing continues today and individuals, including people of color and people with disabilities, continue to be denied equal access to rental housing and homeownership,” said HUD Secretary Marcia Fudge in a statement. “[This] rule brings us one step closer to ensuring fair housing is a reality for all in this country.”

Roughly five months into President Biden’s term, HUD indicated that it was looking to restore the 2013 rule and rescind the 2020 rule with a proposal published in the Federal Register. The new rule cites a memorandum from Biden in which he directed the agency to take action to redress discriminatory housing policies and practices.

When handed down during the Trump administration, the 2020 rule led to a strong round of criticism by members of the housing industry including Bank of America, Citigroup, Quicken Loans and the National Association of Realtors. That pressure led then-HUD Secretary Ben Carson to update guidelines that imposed a requirement for regulators to prove intentional discrimination on the lender’s behalf.

The U.S. District Court for the District of Massachusetts issued a preliminary injunction in a legal case against HUD prior to the 2020 rule effective date that stayed HUD’s implementation and enforcement, leading the 2020 rule to hang in limbo without going into full effect.

Still, HUD explained that the 2020 rule muddled its ability to establish standards for what constitutes discriminatory action under the Fair Housing Act, including new pleading requirements and defenses.

“Under the 2013 rule, the discriminatory effects framework was straightforward: a policy that had a discriminatory effect on a protected class was unlawful if it was not necessary to achieve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest,” HUD said.

The rule is available to view ahead of its publication in the Federal Register and the agency published a fact sheet about the new rule.