The Department of Housing and Urban Development (HUD) recently introduced a proposal that will affect the 2013 Disparate Impact rule, which created uniform standards for the application of disparate impact, referring to policy that has discriminatory effects despite the intention of the policymakers. In brief, the new rule will place the burden of proof onto the plaintiff in housing discrimination cases, which could make such lawsuits more difficult.
Fair Housing Act and Disparate Impact Rule
Initially passed in 1968, the Fair Housing Act intended to promote equality in the housing sector by prohibiting discrimination on the basis of race, color, national origin, religion, sex, disability or familial status.
An amendment was made in 1974 to include women, and, as a result, a greater share of women have experienced more economic and social benefits due to improved access to housing opportunities. While the act prohibits discrimination and inequality, the realization of the act has been a slow process.
Since its passing, courts interpreted the Fair Housing Act to ban policies that had discriminatory disparate impact, although they had varying opinions about how this should be implemented. According to the current Disparate Impact rule, the party making the accusation (i.e., the plaintiff) has to prove that the policy in question has a discriminatory effect.
The defendant, in turn, must justify the policy by explaining why it is needed for legitimate, nondiscriminatory results. Afterwards, the plaintiff must prove that the defendant’s interest can be achieved with another policy or practice less likely to have discriminatory results.
HUD introduced a rule that some believe will make it harder to bring housing discrimination cases to court. The aforementioned three-step process would be changed to a five-step process involving just the plaintiff, who would have to prove that the policy:
Is “arbitrary, artificial and unnecessary”
Has a causal link with disparate impact on a protected class
Causes significant adverse effects on members of a protected class
Is linked to the disparate impact claimed in the plaintiff’s “alleged injury”
The proposal also creates new defenses for landlords or lenders that utilize algorithmic models to determine creditworthiness, risk and other factors. If the defendants can show that the inputs of their model are not highly correlated to a protected class or that their algorithm was made by a third party, their disparate impact case will be dismissed.
If the third party tests their algorithm for fairness with positive results, the defendant is shielded from liability in disparate impact cases.
Fair housing advocates fear that this change is targeting protections set in place to help defend against discriminatory practices in the housing market, diminish segregation and help recipients of rental subsidies.
Desirée Patno is the CEO and president of Women in the Housing and Real Estate Ecosystem (NAWRB) and Desirée Patno Enterprises, Inc. (DPE), as well as chairwoman of NAWRB’s Diversity & Inclusion Leadership Council (NDILC). With 30 years of experience in housing, Patno is a champion for women’s economic growth and independence. In 2017, Entrepreneur.com named her the Highest-Ranking Woman and 4th Overall Top Real Estate Influencer to Follow. For more information, please visit www.nawrb.com.