The U.S. Department of Housing and Urban Development (HUD) announced that it will “shortly” seek public comment on whether its controversial disparate impact rule is consistent with the Supreme Court’s Inclusive Communities decision. In Inclusive Communities, the Supreme Court held that disparate impact is a cognizable theory of discrimination under the Fair Housing Act (FHA). Thus, a defendant may be liable for a practice that is facially neutral but that nevertheless has a discriminatory impact, unless there is a legally sufficient justification for the practice. Inclusive Communities did not decide the standard for evaluating disparate impact claims; rather, it provided several guideposts for “necessary” “limitations.” HUD’s disparate impact rule is arguably inconsistent with those limitations and the Supreme Court’s decision in several respects. The agency’s announcement suggests it is now considering revising the rule to conform to the Supreme Court’s holdings.

THE HUD RULE -

HUD’s 2013 disparate impact rule added a provision entitled “Prohibiting Discriminatory Effects” to existing FHA regulations. Under the new provision, a defendant may be liable for practices with a discriminatory effect, unless there is a legally sufficient justification. The showings and burdens of proof unfold as follows...