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Ten years after the US Department of Housing and Urban Development (HUD) first promulgated its disparate impact rule (the Rule), on September 19, the US District Court for the District of Columbia granted HUD’s motion for summary judgment upholding the Rule. 

HUD first announced the Rule in 2013. Following that, two insurance trade associations challenged the Rule as exceeding HUD’s authority based on the premise that disparate impact claims were not permissible under the Fair Housing Act. In 2014 the court ruled that HUD had exceeded its authority in adopting the Rule, but in 2015 in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 576 US 519 (2015), the US Supreme Court held differently, and laid out certain parameters for disparate impact claims. The associations then argued that the Rule was still unlawful, based on its exceeding the parameters set by the Supreme Court. However, before the case could be heard based on that theory, the Trump Administration proposed and in 2020 finally promulgated a new disparate impact rule that significantly cut back on the scope of the original Rule. Early in 2021 the Biden Administration revoked the Trump Administration’s rule, and basically reinstated the old Rule that a policy is unlawful if it has a “discriminatory effect” on a protected class and was not necessary to achieve a “substantial, legitimate, nondiscriminatory” interest or if there is a less discriminatory alternative. That enabled the action challenging the Rule, now brought by only a single association plaintiff, to proceed.

The court held that the Rule does not exceed limitations on disparate-impact liability under the Fair Housing Act placed by the Supreme Court where those limitations avoid potential constitutional issues and prevent the Act from forcing housing authorities to reorder their legitimate priorities.

Putting It Into Practice: The association may choose to appeal this decision to the Court of Appeals, and ultimately, if necessary, to the Supreme Court. The Inclusive Communities case was a 5-4 decision, and the Court is clearly more conservative now than it was in 2015, so query whether the Court might hold that the Rule is not consistent with the Inclusive Communities decision or it would provide an opportunity for the Court to establish with more specifically the bar that a plaintiff must clear to make a prima facie case of disparate impact under the Act.