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HUD'S NEW DISPARATE IMPACT RULE: A MIXEDHUD'S NEW DISPARATE IMPACT RULE: A MIXEDPICTUREPICTURE

Feb. 15, 2013 — Last week, the U.S. Department of Housing and Urban Development (HUD) issued a rule confirming existing case law: the Fair Housing Act covers not only intentional discrimination but also practices by covered entities (pubilc and private) that are neutral on the face but perpetuate segregation or have a disparate impact on a protected class group (affecting African-Americans, for example, more adversely than whites).  The rule has been published in the Federal Register, and will thus be effective in mid-March.

A disparate impact rule has been under consideration for years at HUD, and despite the unconscionable delay involved in getting it published, it is an important step to have a disparate impact rule in place, most especially because the Supreme Court, when it comes to consider the scope of Fair Housing Act coverage, is supposed to give deference to agency judgment. HUD should be congratulated for doing so.

The fact that the final rule (and the interpretative lanague accompanying it) reflected in some respects a strengthening of protections as compared with the draft version also deserves praise.

Unfortunately, the final rule remains flawed, and some of HUD's explanatory comments warrant concern.

  • Notably, HUD placed on plaintiffs the burden of persuasion for proving that a less discriminatory alternative would serve a defendant's substantial, legitimate interest.  Once it is established that an alternative is plausible, a defendant is the party better situated to have information that could prove that the alternative would not serve its interests as well. Were the Second Circuit Court of Appeals (the juridction of which includes New York) to accept the rule, it would represent a weakening of the protection in place for decades under the landmark Huntington case.

  • HUD's analogizing of the Fair Housing Act to Title VII was ill-considered. Despite the fact that courts have frequently analogized the two laws, they are constructed differently and Congress has treated them differently when amending them. That difference is something that will need to be argued when the disparate impact rule comes to be challenged at the Supreme Court level.

  • Finally, there is very strong indication in HUD's explanatory language that the agency may view turn a blind eye to the perpetuation of segregation that is caused when funding additional affordable housing in areas of high concentrations of poverty and race. The agency undercuts its statutory obligation to affirmatively further fair housing (and misconstrues thelaw) when it invites a the routine invocation of a defense that such siting has a substantial, legitimate, non-discriminatory justification.