On September 24, 2020, the Department of Housing and Urban Development (HUD) announced the amendment of the disparate impact standard regulation to better reflect the U.S. Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. and to provide clarification regarding the application of the standard to State laws governing the business of insurance.

The Fair Housing Act prohibits discriminatory housing practices on the basis of race, color, religion, sex, disability, familial status, or national origin. HUD has the authority and responsibility for administering and enforcing the Act, including the authority to conduct formal adjudications of Fair Housing Act complaints and the power to promulgate rules to interpret and carry out the Act. Consistent with this responsibility, on February 15, 2013, HUD published a Final Rule entitled, “Implementation of the Fair Housing Act’s Discriminatory Effects Standard” (“the 2013 Rule”). The 2013 Rule formalized HUD’s longstanding interpretation that disparate impact liability is available under the Act. The 2013 Rule also codified a burden-shifting framework for analyzing disparate impact claims under the Fair Housing Act, relying in part on existing case law under the Fair Housing Act, decisions by HUD’s administrative law judges, and Title VII of the Civil Rights Act of 1964 (prohibiting employment dis- crimination).

In 2015, the U.S. Supreme Court held that disparate impact claims are cognizable under the Fair Housing Act in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The Court recognized the availability of disparate impact claims under the Fair Housing Act independent of the 2013 Rule, but clarified that the burden of proof is with the plaintiffs.

Among other things, the amendment establishes the liability under the Act based on a specific policy’s or practice’s discriminatory effect on members of a protected class even if the specific practice was not motivated by discriminatory intent. The Rule also sets forth the requirements for a discriminatory effects claim at the pleading stage, the burdens of proof, potential defenses, and remedies. The Rule also states that it does not intend to invalidate or supersede any state law regulating insurance.

The Rule is available at: https:// www.govinfo.gov/content/pkg/ FR-2020-09-24/pdf/2020- 19887.pdf

NOTE: On October 25th, the U.S. District Court for the District of Massachusetts granted a preliminary injunction and stay of the effective date of HUD’s disparate impact regulation under the Fair Housing Act.


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