HUD Finalizes Revisions to the Fair Housing Act Disparate Impact Rule

HUD recently published the final rule implementing revisions to its disparate impact standard under the Fair Housing Act.  These revisions take effect on October 26, 2020. 

Among other changes, the final rule clarifies what a plaintiff must demonstrate at the pleading stage in order to proceed with a disparate impact claim, such as that the practice in question has a robust causal link to the alleged discrimination (i.e., the practice directly caused the discrimination).  The final rule further describes the defenses that a defendant can raise at the pleading stage (including that the plaintiff has failed to plead an element of its prima facie case, or that the practice in question was reasonably necessary to comply with a third-party requirement).

The final rule also provides further defenses that may be raised at later stages in litigation, such as the defendant being able to prove that its predictive analysis systems accurately assessed risk (which is a valid interest), and that the predictive analysis systems were not overly restrictive on members of the protected class in question.  These defenses replace the algorithm defenses in the proposed rule.  WBK’s initial article concerning HUD’s disparate impact rule when it was first proposed is available here.