This article is written by request since it was pointed out that many people are unaware of the change in the approach HUD has mandated, effective February 8, 2013, concerning enforcement of the discrimination laws. The change is commonly referred to as the ‘Disparate Impact Rule’.
The new rule allegedly ‘clarifies’ circumstances under which certain housing practices may violate the 1968 Fair Housing Act (“FHA”). The protected classes under FHA are race, color, religion, sex, handicap, family status, or national origin.
In the past the way the discrimination laws affecting housing were enforced required a showing of a discriminatory intent on the part of the party charged with the alleged discrimination. Under the newly released final rule the disparate impact Rule will utilize statistical analysis to ascertain whether there has been discrimination under the Fair Housing Act.
Under the new rule the person claiming discrimination can prove his/her case without proof of any actual intent to discriminate or even the existence of a violation. Under the disparate impact rule an analysis is provided and relied upon to indicate whether a particular minority group received the same treatment as others.
Under the new rule there is a three part test for determining when a policy or practice results in a discriminatory effect thereby violating the Fair Housing Act:
1. The plaintiff (claimant) bears the initial burden of demonstrating that a particular policy or practice results in, or would predictably result in a discriminatory effect on persons of a particular protected class.
2. If the plaintiff (claimant) proves the burden described in #1 above, then the burden shifts to the defending party to provide a “legally sufficient justification” proving that the action in question was necessary to achieve one or more of its substantial, legitimate, nondiscriminatory interests.
3. If the defendant upholds its burden as stated in #2 above, then the plaintiff (claimant) can still be entitled to recover if he/she can prove that the substantial, legitimate, nondiscriminatory interest could be served by a practice that has a less discriminatory effect.
This is of particular concern to not only individuals or companies providing housing but also to cities and municipalities that provide housing. They may be sued because of an action or policy which appears to be reasonable and nondiscriminatory on the surface but when applied may have an inadvertent or possibly accidental effect or negatively impact a protected class.
So what might be an example of such an action that could have a disparate impact? What if a developer of an upscale development tends to market only to people of a higher economic status? Such an activity could run contrary to the law since it could result in a discriminatory impact.
Now HUD is proposing a new housing regulation requiring government entities to reduce segregation and promote integration. HUD has proposed a rule that would zero in on trying to implement social change in areas it classifies as ‘segregated’. It identifies various cities to be aggressively targeted initially.
It claims there has been exclusionary zoning which it defines as any local zoning code that limits development of affordable housing since it claims such laws create barriers to urban minorities.
Ultimately HUD plans on mapping every U.S. neighborhood as being white, Asian, Black or African American or Latino/Hispanic pointing out racial imbalances. Geographic areas with less than 50% white will be classified as segregated areas. HUDs goal is to reduce disparities in access to key community assets such as quality schools, jobs, transportation, parks and recreation and even fresh air and groceries.
To accomplish its goals HUD would, under the latest proposal, require any cities taking HUD housing development grants to prepare a disparities analysis every five years. The analysis would include comparing the employment number for African Americans and white households. It suggests that lower employment for blacks would indicate that this group might be impeded by insufficient access to important job centers. Then, to rectify these problems HUD suggests modifying local regulations and codes, constructing new developments, creating new amenities and facilitating the movement of people.
Needless to say there are many vocal advocates for this sweeping change and many who are opposed to it. There is insufficient room to list many of the pros and cons of the latest changes starting with the disparate impact rule followed by the latest proposed rules piggy backing on the disparate impact rule.
It will be some time before there are bright lines on what is legitimate action in many areas. For instance, will the new law require lenders to loan money to unqualified borrowers? Do lenders risk expensive litigation if they are perceived as declining applicants from geographic areas labeled as ‘segregated areas’? Only time will tell. If lenders decline to loan to persons with a felony(ies) in their background, is that discriminatory since certain protected classes may have a higher concentration of their class with a felony(ies) in their background? Those in favor of the new law and newly proposed rules say they will decrease the number of lawsuits since the laws ‘clarify’ what actions are permissible and impermissible. The advocates claim that the new law and rules clarify the issues so it will reduce litigation. I suspect you know my opinion on that!
I hope this information is helpful to you.