HUD Proposes to End its Implementation of the Disparate Impact Standard
By: Tushar Gurjal, Senior Policy Manager
January 15, 2025 – Yesterday, HUD published a proposed rule titled “HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard.” The proposed rule would remove the regulation that codified a disparate impact standard. Disparate impact claims under the Fair Housing Act typically arise when facially neutral policies or procedures cause discriminatory effects among protected classes even in the absence of evidence that the policies or procedures were motivated by discriminatory intent. While the standard would still exist, it would be up to courts to determine “. . . questions related to interpretations of disparate impact liability under the Fair Housing Act.” Comments on the proposed rule are due February 13, 2026.
The Department’s rationale for this proposed rule is threefold. First, the Department is complying with Executive Order 14281 which instructs federal agencies to “ . . . review existing regulations and rules that impose disparate impact liability and consider amendment or repeal of [those] regulations as appropriate under applicable law.” Second, due to the Supreme Court decision Loper Bright Enterprises v. Raimondo, agency interpretations of laws by regulation no longer receive judicial deference when reviewed, so “[i]t is appropriate for courts, not a Federal agency to make determinations related to the interpretation of disparate impact liability under the Fair Housing Act.” Third, consistent with certain other executive orders, the Department believes that this action would reduce regulatory burdens.
The proposed rule deviates from HUD’s normal process for engaging in a notice and comment process for a new regulation. Normally, “. . . it is HUD’s policy to afford the public ‘not less than sixty days for submission of comments . . . .’” In certain instances, HUD may shorten the public comment period if it provides an explanation for why it is doing so. The Department is shortening the comment period for several reasons: the rule is laying out HUD’s new policy; HUD has previously solicited comments before at various points within the last two decades; and this rule “. . . does not change any requirements or affect any right or obligations . . . .”
The substantive changes made by the rule are relatively simple. The Department is proposing to remove “Subpart G – Discriminatory Effect” (24 CFR §100.500). This section describes how liability may be established under the Fair Housing Act based on discriminatory effect. The proposed rule is also proposing to modify 24 CFR §100.5 which describes the scope of the regulations intended to implement the Fair Housing Act. The proposed rule would remove the sentence “[t]he illustrations of unlawful housing discrimination in this part may be established by a practice’s discriminatory effect, even if not motivated by discriminatory intent, consistent with the standards outlined in § 100.500.”
The proposed rule can be found here.