I wanted to briefly report on the new proposed HUD rules that provide that if a housing practice has a "discriminatory effect," HUD (or a private plaintiff) can prove liability under the Fair Housing Act (FHA), even if there is no discriminatory intent on the part of the defendant.   

As was reported in the media last week, the rule contains a three part burden shifting test for determining if a housing practice with a "discriminatory effect" violates the FHA.  As drafted by HUD, the rules provide that a facially neutral practice has a "discriminatory effect" where "it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin."

To be sure, a housing practice found to have a discriminatory effect can still be legal if management proves it has a "legally sufficient justification" for it.  What this means is that a defendant (in our world the owner, management company or landlord) will need to show that our "substantial, legitimate, nondiscriminatory" interest, could not be served by another practice that has a less discriminatory effect.  

Tellingly, HUD reported that the rule will apply to pending and future cases, describing it in the explanatory materials as "not a change in HUD’s position but rather a formal interpretation of the [FHA] that clarifies the appropriate standards for proving a violation under an effects theory." 

If that is indeed the case, why is HUD moving forward with this rule now if it does not reflect a change in HUD’s practices?  Here is the reason: 

HUD’s new rule could well be tested later this year by the United States Supreme Court, if the Court grants the pending petition for certiorari (legalese for a request that the high court accept a case) in an action which involves a claim that a local redevelopment plan violated the FHA because of a disparate impact on minorities. The potential Supreme Court review focuses on the threshold legal question of whether such claims are even permitted by the FHA.

Should the Supreme Court agree to decide the case (and there is reason to think it will as the Court asked the Department of Justice to file a brief on behalf of the federal government in October 2012), HUD will certainly argue that its new final rule is entitled to administrative deference accorded to federal agencies.  

This point is important because in a related May 2012 decision, the Supreme Court specifically rejected HUD’s position that the department’s interpretation of the Real Estate Settlement Procedures Act was entitled to administrative deference, largely because the plain language of the statute did not support HUD’s position.  

Accordingly, as HUD is correctly concerned that the Supreme Court would similarly reject HUD’s interpretation of the FHA because “disparate impact” is not in the text of the statute, the government hopes that its new rules will be viewed favorably by the justices.  HUD cannot amend the FHA on its own to simply add “disparate impact” to violations of the law. Only Congress can do that. But HUD can write the administrative rules and regulations that help enforce the law. Which it is doing here. And which it hopes will be viewed with favor by the Court.

With apologies to the late Paul Harvey:  Now you know the rest of the story. 

 Just A Thought.