HUD Proposes Rules for Disparate Impact Claims 

Shortly after the Supreme Court agreed to take on the issue, on Nov. 17, the U.S. Department of Housing and Urban Development (HUD) published its own proposed rule to establish uniform standards for disparate impact claims under the Fair Housing Act.

The proposal would establish when acts can be considered discriminatory based on the effects they have regardless of intent. HUD says that while the discriminatory effects theory is well established, there is variation in how HUD and the courts have applied it.

HUD applies what is called “burden shifting” (which is the standard they propose in this rulemaking and described below). However, some federal appeals courts apply a multi-factor balancing test, others a hybrid of the two and yet some use different tests for public and private defendants.

This rule proposes a three-step, burden-shifting approach to determine liability under a disparate impact claim. Once a practice has been shown to have a disparate impact on a protected class, the defendant would have the burden of proving the challenged practice is necessary for legitimate, nondiscriminatory interests.

A plaintiff could still prevail, however, by demonstrating that another policy or decision could serve these legitimate nondiscriminatory interests in a less discriminatory manner.

A final regulation could affect zoning ordinances, multifamily development, resident screening, credit scoring and more. NAA/NMHC are reviewing the proposal for its full impact on the apartment sector. Comments are due Jan. 17, 2012.

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