HUD Proposes Rule That Could Make it Harder to Bring Housing Discrimination Lawsuits

Morrison & Foerster LLP

On August 20, 2019, the U.S. Department of Housing and Urban Development (HUD) published a notice of proposed rulemaking (“Proposed Rule”) seeking public comment on amendments to its regulation implementing the disparate impact theory of discrimination under the Fair Housing Act.[1] Disparate impact does not involve intentional discrimination, instead it is a finding that a neutral policy or practice results in a disparate adverse impact on a protected class and is not supported by a business justification.

The Proposed Rule would revise the current HUD regulation to reflect the Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (“Inclusive Communities”).[2] In Inclusive Communities, the Supreme Court held that “disparate impact” discrimination is cognizable under the Fair Housing Act, but the Court went on to discuss the plaintiff’s burden to show “robust causality” between the challenged policy and a disparate impact on a protected class.

Drawing on language in Inclusive Communities, the Proposed Rule would significantly alter the burdens of plaintiffs and defendants, making it more difficult for a plaintiff to survive a motion to dismiss. Although the Proposed Rule only implements the Fair Housing Act, it raises important questions about the disparate impact doctrine under other fair lending laws, including the Equal Credit Opportunity Act. Comments are due on October 18, 2019.


The Fair Housing Act prohibits discrimination in housing based on race, color, religion, sex, disability, familial status, or national origin.[3] In 2013, HUD promulgated a rule setting forth the requirements for a disparate impact claim under the Fair Housing Act (the “2013 Rule”).[4] The 2013 Rule provides that disparate impact is cognizable under the Fair Housing Act and identifies the burdens of proof as follows: the plaintiff must prove that the challenged practice actually or predictably results in a disparate impact on a protected class of persons; the defendant must then prove that the practice meets a substantial, legitimate, nondiscriminatory interest. However, the plaintiff may still prevail by proving that the defendant’s goals can be achieved by another less discriminatory practice.[5]

In Inclusive Communities, the Court acknowledged, but did not analyze, HUD’s 2013 Rule. Instead, the Court analyzed the language of the Fair Housing Act itself, and held that the Act’s prohibition on making housing “otherwise . . . unavailable” authorizes disparate impact claims.[6] However, the Court also discussed the elements of a prima facie case, stating that a plaintiff must identify a specific policy as the cause of the disparity and establish “robust causality” between the policy and the disparity. Otherwise, the Court cautioned, defendants could be liable for discrimination they did not cause, which could lead businesses to adopt quotas and other race-based factors that raise constitutional questions.[7]

On May 15, 2017, HUD solicited public comment on regulatory reform, seeking input on regulations that are unduly burdensome or outdated.[8] Some commenters identified HUD’s 2013 Rule as needing revisions to more closely align the burdens of proof to the Court’s discussion in Inclusive Communities, while other commenters stated that the 2013 Rule was consistent with Inclusive Communities. In 2018, HUD published an Advance Notice of Proposed Rulemaking (ANPR) seeking public comment on whether the 2013 Rule should be amended and, if so, how.[9] Comment was divided between those who supported the 2013 Rule and its approach to burdens of proof, including the requirement that the defendant must prove the business necessity of a challenged practice, and those who believed that the 2013 Rule’s burden-shifting approach needed revision.

HUD’s Proposed Rule

HUD now seeks comment on revisions to the 2013 Rule. HUD states that “[t]hese amendments are intended to bring HUD’s disparate impact rule into closer alignment with the analysis and guidance provided in Inclusive Communities as understood by HUD, and to codify HUD’s position that its rule is not intended to infringe on any state law for the purpose of regulating the business of insurance.”[10]

The Proposed Rule would likely make it more difficult for a plaintiff to survive a motion to dismiss. The HUD proposal would also remove the defendant’s burden to prove a substantial business reason for the challenged policy or practice and instead would require the plaintiff to prove that the policy or practice is unnecessary to achieve a valid business objective. In addition, the Proposed Rule outlines how a defendant could defend its use of a model or other algorithm.

Prime Facie Case

The Proposed Rule would require the plaintiff to plead facts sufficient to establish five elements to make out a prima facie disparate impact case:

1. The policy or practice is “arbitrary, artificial and unnecessary to achieve a valid interest or legitimate objective,” including “a practical business, profit, policy consideration or requirement of law”;[11]

2. A robust causal link between the policy or practice and a disparate impact on members of a protected class “which shows the specific practice is the direct cause of the discriminatory effect”;[12]

3. The policy or practice has an adverse effect on members of a protected class “as a group”;

4. The disparity is significant; and

5. The plaintiff’s injury is directly caused by the policy or practice.

Unlike the HUD Proposed Rule, the 2013 Rule does not address the requirements for a prima facie case, and the five elements could significantly increase the plaintiff’s burden at the pleading stage. While each of the five elements can be traced to language in Inclusive Communities, the Court’s discussion of the plaintiff’s pleading requirements focused on the robust causation element.

Defendant’s Rebuttal

The Proposed Rule also sets forth several ways in which a defendant can defeat a plaintiff’s attempt to state a prima facie case.[13] First, drawing on language in Inclusive Communities, the Proposed Rule provides that a defendant could defeat the plaintiff by showing its discretion is materially limited by third parties, “such as through” federal, state or local law, or court order.[14]

More significantly, the Proposed Rule would provide three ways in which a defendant could defeat a claim based on its use of a model. In doing so, HUD explains that “[w]hile disparate impact provides an important tool to root out factors which may cause these models to produce discriminatory outputs, these models can also be an invaluable tool in extending access to credit and other services to otherwise underserved communities.” According to HUD, the proposed defenses “would demonstrate the lack of a robust causal link between the defendant’s use of the model and the alleged disparate impact. . . .”[15]

1. The defendant could show that the model does not “rely in any material part on factors which are substitutes or close proxies for protected classes . . . and the model is predictive of risk or other similar valid objective.” The Proposed Rule’s focus on whether factors are proxies for protected classes could make it easier for a defendant to get a case dismissed if it can show that factors are facially neutral as long as the model predicts risk.

2. The defendant could show that the model is “produced, maintained or distributed by a recognized third party that determines industry standards” and that the defendant does not determine the inputs or methods, and is using the model as intended. In doing so, the Proposed Rule explains that, essentially, a defendant could show that it is not the proper party to be charged, noting that such a defendant is not likely to have access to the inputs to be able to defend a proprietary “black box” model.[16]

3. The defendant could show that an objective third party has reviewed and validated the model and has found that it is “empirically derived and is a demonstrable and statistically sound algorithm which accurately predicts risk or other valid objectives” and does not rely on factors that are “substitutes or close proxies” for protected classes. The Proposed Rule notes that in this case, the model is not “the actual cause of the disparate impact.”[17]

Burdens of Proof

Under the Proposed Rule, the plaintiff would also have the burden of proving each of the elements listed by a preponderance of the evidence. The Proposed Rule’s second and fifth requirements for causality could be more difficult to satisfy than the 2013 Rule’s requirement that the plaintiff prove that the policy or practice “caused or predictably will cause a discriminatory effect.”[18]

In contrast to the 2013 Rule, the Proposed Rule would not shift the burden of proof to the defendant to prove that the policy or practice is necessary to achieve a substantial and legitimate business goal; instead, the Proposed Rule would provide that the defendant would need to produce “evidence showing that the challenged policy or practice advances a valid interest. . . .”[19] Thus the defendant’s burden is only to produce evidence, not to provide proof, and the business interest need only be “valid,” not “substantial.” If the defendant meets its burden, the plaintiff must prove by a preponderance of the evidence that a less discriminatory policy or practice would serve the defendant’s interest “in an equally effective manner without imposing materially greater costs on, or creating other material burdens for the defendant.”[20]

Questions for Commenters

HUD proposes several questions for commenters, including how well its Proposed Rule aligns with the decision in Inclusive Communities. HUD also requests comment on how the Proposed Rule might increase or decrease costs and economic burdens, relative to the 2013 Rule and relative to Inclusive Communities.

In addition to HUD’s specific questions, the Proposed Rule raises questions about interpretation of other fair lending laws. In this regard, Regulation B, issued by the Consumer Financial Protection Bureau (CFPB) to implement the Equal Credit Opportunity Act (ECOA), has also been interpreted by the CFPB to recognize disparate impact discrimination.[21] ECOA is not limited to housing credit and covers nearly all types of credit, including commercial credit. In 2018, the CFPB indicated that it intended to review the disparate impact doctrine under ECOA in light of Inclusive Communities“and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.”[22] While it is unclear if the CFPB is engaged in such a review, HUD’s Proposed Rule may be a precursor to the CFPB’s approach to disparate impact under the ECOA.

[1] 84 FR 42854 (Aug. 19, 2019).

[2] 135 S. Ct. 2507 (2015).

[3] 42 USC 3608(a) and 3614a.

[4] 78 FR 11460 (Feb. 15, 2013).

[5] 24 CFR 100.500.

[6] 135 S. Ct. 2518.

[7] 135 S. Ct. 2523.

[8] 82 FR 22344 (May 15, 2017)

[9] 83 FR 28560 (June 20, 2018).

[10] 84 FR at 42857.

[11] Proposed section 100.500(b)(1).

[12] Proposed section 100.500(b)(2).

[13] Proposed 100.500(c).

[14] Proposed 100.500(c)(1).

[15] 84 FR at 42859.

[16] 84 FR at 42859.

[17] Id.

[18] 24 CFR 100.500(c)(1).

[19] Proposed 100.500(d)(1)(ii).

[20] Proposed 100.500(d)(1)(ii).

[21] 12 CFR part 1002, Supp. I, Comment 6(a)-2.

[22] CFPB Semiannual Regulatory Agenda, Fall 2018, available at

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Written by:

Morrison & Foerster LLP

Morrison & Foerster LLP on:

Readers' Choice 2017
Reporters on Deadline

Related Case Law

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.