By: Joseph Squadroni
Blog Category: Housing/Entitlement Programs
Early last month, the US Department of Housing and Urban Development (HUD) codified its prohibition under the Fair Housing Act (FHA) against housing practices that have a disparate impact on members of certain protected classes, including race. While not changing the substance of the law in any way—the disparate impact standard has been employed by HUD and the courts for over 40 years—the new rule brings about a formalistic change in the law with several byproducts.
First, the rule will provide a clear and uniform national standard under which to apply the claim of disparate impact. This means that the minor degrees of variation in the ways different circuit courts have applied the disparate impact standard (i.e. with respect to who bears the burden of proving a less discriminatory alternative housing practice) will be fully resolved. The use of disparate impact claims has long protected home buyers from discrimination on the basis of race, making loans more readily available at lower costs to lower income families, many of whom are minorities.
Second, and more significantly, the new regulation will serve as a protection of the disparate impact standard should the Supreme Court decide to hear the case Mount Holly v. Mt. Holly Gardens Citizens in Action. The case involves a constitutional challenge to the use of disparate impact claims and many think that a conservative majority will rule against the standard. With the passing of the rule, HUD seeks to protect the standard by hoping the Court will defer to its judgment in interpreting the breadth of its enforcement power under the FHA.
Critics of disparate impact rules range from those who argue that they force banks and creditors to ignore risk factors associated with granting loans out of fear of being prosecuted to those who are concerned that the new rule will lead to an increase in frivolous lawsuits. Given the long-standing history and use of the disparate impact standard, my opinion is that it is unlikely the disparate impact standard will be struck down entirely. It is more likely that if any change occurs, it will be only a heightened showing of the disparate impact claimed. Or, perhaps, a doing away with the “less discriminatory alternative” provision.
The opinions expressed herein are strictly those of the author and do not necessarily reflect the opinions of the Widener Journal of Law, Economics & Race.
 Gregory D. Squires, Politics, HUD’s Disparate Impact Rule Praised by Fair Housing Advocates: Misunderstood by Critics, Huffington Post (Feb. 24, 2013), http://www.huffingtonpost.com/gregory-d-squires/huds-disparate-impact-rul_b_2755023.html.
 Paul Sperry, CAMPS Real Time Legislative Information Under the Dome, HUD Formalizes ‘Disparate Impact’ Lending Rule To Sway Supreme Court, California Association of Mortgage Professionals (Mar. 9, 2013), http://realestatemarbles.com/campga/2013/03/09/hud-formalizes-disparate-impact-lending-rule-to-sway-supreme-court/.
 Squires, supra note 1.