HUD discriminatory effects rule

Disparate impact is a long-standing legal concept. The United States Department of Housing and Urban Development (HUD) has long employed disparate impact analysis as a tool in enforcing the Fair Housing Act, and the analysis had been upheld in the federal courts. In February 2013, HUD implemented a discriminatory effects rule that provides that liability may be established under the Fair Housing Act (FHA) based on a practice’s discriminatory effect, even if the practice was not motivated by a discriminatory intent.
Supreme court case confirms disparate-impact liability doctrine

On June 25, 2015, the United States Supreme Court confirmed and clarified the components required for disparate-impact liability. In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the court found that the FHA not only prohibits intentional acts of discrimination but also prohibits policies and practices that have a disparate impact and are otherwise not justified by a legitimate rationale. Inclusive Communities Project, Inc. (ICP), alleged that the Texas Department of Housing and Community Affairs violated the federal FHA by allocating a disproportionate number of federal low-income housing tax credits to predominately black, low-income inner-city areas rather than in predominately white suburban neighborhoods, resulting in a disparate impact on minorities. ICP presented statistical evidence that demonstrated an adverse effect on a protected class. The Supreme Court ruled in favor of ICP, finding that disparate-impact liability may be established under the FHA. 

Components of a disparate impact case

In a disparate impact case, a person can challenge practices that have a “disproportionately adverse effect” on those protected by the FHA. A plaintiff must first show facts or statistical evidence demonstrating a causal connection between a policy provision and a disparate impact on a protected group. Then the burden shifts to the defendant to prove the policy is necessary to achieve a substantial, legitimate, nondiscriminatory public or business interest. If this justification is established, then the burden shifts back to the plaintiff to show there is an alternative policy with a less discriminatory effect that would still serve the defendant’s legitimate business interest. The challenged policies must be shown to be “artificial, arbitrary and unnecessary barriers.” Remedial orders by the courts when disparate-impact liability is found strive to eliminate the offending practice in a race-neutral manner. 

HUD policies applying disparate impact analysis

HUD has applied the disparate impact doctrine in fashioning policy guidance on a wide array of issues. One application is with regard to tenant screening standards based on criminal arrests and convictions, as discussed in “HUD’s New Take on Tenant Screening Standards: Coping with the new restrictions for criminal arrests and convictions,” in the May 2016 Wisconsin Real Estate Magazine at www.wra.org/WREM/May16/HUD. Other applications attempt to address and limit disparate impact discrimination found in zoning or other land use ordinances, and housing discrimination based on “Limited English Proficiency” or status as a victim of domestic abuse.

Guidance on state and local land use laws

Even absent a discriminatory intent, state or local governments may be liable under the FHA for any land use, zoning law or practice that has an unjustified discriminatory effect upon a protected group. HUD and the Department of Justice issued the “Joint Statement of the Department of Housing and Urban Development and the Department of Justice on State and Local Land Use Laws and Practices and the Application of the Fair Housing Act.” A land use or zoning practice results in a discriminatory effect if it caused or predictably will cause a disparate impact on a group of persons or if it creates, increases, reinforces or perpetuates segregated housing patterns based on a protected characteristic. A state or local government has the opportunity to show that the practice is necessary to achieve one or more of its substantial, legitimate, nondiscriminatory interests. If these interests could not be served by another practice that has a less discriminatory effect, then the practice does not violate the FHA. 

Examples of land use practices that may violate the FHA under a discriminatory effects standard include minimum floor space or lot size requirements that increase the size and cost of housing if such an increase has the effect of excluding persons from a locality or neighborhood because of their membership in a protected class, without a legally sufficient justification. Similarly, prohibiting low-income or multifamily housing may have a discriminatory effect on persons because of their membership in a protected class and, if so, would violate the FHA absent a legally sufficient justification.

Landlord discrimination based on limited English proficiency

Claims of housing discrimination brought by people because they do not speak, read or write English proficiently are addressed in HUD’s “Limited English Proficiency” (LEP) guidance. People with limited English proficiency are not per se a protected class under the FHA, but the guidance observes that often the lack of English proficiency is used as a proxy for national origin discrimination. National origin is closely linked to the ability to communicate proficiently in English. Housing providers are therefore prohibited from using limited English proficiency selectively as an excuse for intentional housing discrimination, or in a way that causes an unjustified discriminatory effect. 

Allowing a tenant — or homebuyer or mortgage borrower — a reasonable amount of time to take a document, such as a lease, to be translated, could be a less discriminatory alternative than rejection of a housing applicant. Other less discriminatory alternatives in an LEP case might include obtaining written or oral translation services or drawing upon the language skills of staff members. Similarly, if the family has a member who speaks English or brings another person along to interpret, agreeing to communicate through these individuals could be an alternative to refusing to deal with anyone who does not speak English. 

Nuisance ordinances penalizing victims of domestic abuse

HUD’s Nuisance Ordinance Guidance reviews how HUD will assess local nuisance or crime-free housing ordinances, policies or practices alleged to be discriminatory under the FHA. A local government’s enactment or enforcement of a nuisance or crime-free housing ordinance may violate the FHA if the facially neutral policy or practice has a disparate impact on individuals of a particular protected class and is not supported by a legally sufficient justification. Thus, where a policy or practice that restricts the availability of housing on the basis of nuisance conduct has a disparate impact on individuals of a particular protected class, the policy or practice is unlawful if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the local government, or if such interest could be served by another practice that has a less discriminatory effect.

The Nuisance Ordinance Guidance addresses ordinances that penalize residents for a small number of 911 calls to police, even when a person is in need of protection from domestic violence or another crime. Nuisance ordinances often require or allow landlords to evict residents in such circumstances, thereby discouraging victims from reporting domestic abuse or other crimes and obtaining the emergency police and medical assistance they need.

Resources

• HUD discriminatory effects rule: Implementation of the Fair Housing Act’s Discriminatory Effects Standard; Final Rule, 78 Fed. Reg. 11460, 24 C.F.R. § 100.500 (February 15, 2013): portal.hud.gov/hudportal/documents/huddoc?id=discriminatoryeffectrule.pdf.
• “Joint Statement of the Department of Housing and Urban Development and the Department of Justice on State and Local Land Use Laws and Practices and the Application of the Fair Housing Act”: www.justice.gov/crt/page/file/909956/download.
• “Office of General Counsel Guidance on Fair Housing Act Protections for Persons with Limited English Proficiency”: portal.hud.gov/hudportal/documents/huddoc?id=lepmemo091516.pdf.
• “Guidance on Application of Fair Housing Act Standards to the Enforcement of Local Nuisance and Crime-Free Housing Ordinances Against Victims of Domestic Violence, Other Crime Victims, and Others Who Require Police or Emergency Services”: portal.hud.gov/hudportal/documents/huddoc?id=FinalNuisanceOrdGdnce.pdf.
• “Waging the War Against Discrimination,” in the April 2016 Wisconsin Real Estate Magazine: www.wra.org/WREM/Apr16/Discrimination. 
• Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 576 U. S. ____ , 135 S. Ct. 939, 192 L.Ed.2d 514 (2015).