Hud Proposes Eliminating Disparate Impact Rule

The Department of Housing and Urban Development (HUD) on Wednesday proposed eliminating its discriminatory effects regulations under the Fair Housing Act, according to a rule published in the Federal Register.

Disparate impact refers to policies or practices that appear neutral but disproportionately and unintentionally affect protected groups, even without discriminatory intent. Under the proposal, HUD would leave to court questions related to interpretations of disparate impact liability under the Act. 

HUD first formalized recognition of disparate impact liability in a 2013 rule issued during the Obama administration. That interpretation was affirmed in 2015, when the U.S. Supreme Court ruled in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. that disparate impact claims are cognizable under the Fair Housing Act.

During President Donald Trump’s first term, HUD revised the rule to more closely reflect the Supreme Court’s Inclusive Communities decision and to clarify its application, including in areas such as state insurance regulation. In 2023, the Biden administration reinstated the 2013 rule.

In its latest proposal, HUD said the rollback aligns with a Trump executive order stating that equal treatment under the law is a “bedrock principle of the United States,” emphasizing equality of opportunity rather than equality of outcomes. 

The agency argued that disparate impact liability conflicts with that principle by creating what it described as an “insurmountable presumption of discrimination.”

HUD also said it is more appropriate for courts — rather than a federal agency — to determine how disparate impact liability should be interpreted under the Fair Housing Act.

Other federal regulators have taken similar steps. The Consumer Financial Protection Bureau (CFPB) dropped disparate impact enforcement in April, followed by the Office of the Comptroller of the Currency (OCC) in July.

Public comments on HUD’s proposed rule are due by Feb. 13.