Last week, a pair of fair housing organizations got their wish when a federal judge in Massachusetts granted their request for a preliminary injunction and stay of the effective date of the Department of Housing and Urban Development’s (HUD) new disparate impact rule (the “2020 Rule”), discussed in our recent fair lending newsletter. Plaintiffs Massachusetts Fair Housing Center and Housing Works, Inc. filed a motion in the U.S. District Court for the District of Massachusetts seeking to vacate HUD’s 2020 Rule under the Administrative Procedure Act (APA), on the grounds that it is “contrary to law,” “arbitrary and capricious,” and that certain of its provisions violate the APA’s notice and comment requirements. The court only addressed the plaintiffs’ second argument—that the 2020 Rule is arbitrary and capricious—which it found was likely meritorious.

The court compared the disparate impact rule HUD had issued in 2013 (“2013 Rule”) to the 2020 Rule. Both versions of the rule state the general premise that liability may be established under the Fair Housing Act based on a practice’s discriminatory effect, if the practice was not motivated by a discriminatory intent. But as the court noted, the 2020 Rule significantly altered the 2013 Rule’s standards. The court found that the changes HUD had made constituted a “massive overhaul” of HUD’s disparate impact standards, by introducing onerous pleading requirements on plaintiffs while simultaneously easing the burden on defendants and arming them with broad new defenses.
Continue Reading More Uncertainty around the Future of the Disparate Impact Theory of Liability