Last month, HUD issued two rules reinvigorating its enforcement of the Fair Housing Act. Both rules are components of the Biden Administration’s efforts to “ensure that fair and equal access to housing opportunity exists for all throughout the United States.”
First, on June 10, 2021, HUD published an interim final rule that restores definitions and certifications related to its implementation of the Fair Housing Act’s requirement to Affirmatively Further Fair Housing and reinstates HUD’s process for offering related technical assistance. The rule will go into effect on July 31, 2021.
Second, on June 25, 2021, HUD published a proposed rule that reinstates the discriminatory effects standard for Fair Housing Act enforcement, along with a request for public comments by August 24, 2021.
Second, on June 25, 2021, HUD published a proposed rule that reinstates the discriminatory effects standard for Fair Housing Act enforcement, along with a request for public comments by August 24, 2021.
- Restoring Affirmatively Furthering Fair Housing Definitions and Certifications
On June 10, HUD published an interim final rule to restore certain definitions and certifications to its regulations implementing Affirmatively Furthering Fair Housing (“AFFH”) obligations under the Fair Housing Act and to reinstate a process for optional technical assistance and other support for HUD funding recipients engaging in fair housing planning. HUD promulgated this interim final rule (after notice-and-comment rulemaking) to withdraw regulatory definitions and requirements promulgated during the prior administration (without notice-and-comment rulemaking) that conflict with the statutory AFFH requirement as interpreted by judicial precedent and Congressional action.
The Affirmatively Furthering Fair Housing (“AFFH”) mandate is codified in the Fair Housing Act at 42 U.S.C. § 3608(d); the Fair Housing Act explicitly imposes the AFFH duty on HUD at 42 U.S.C § 3608(e)(5). Federal courts have long found that HUD funding recipients are required, at a minimum, to collect and consider socioeconomic and demographic data when making housing policy decisions and to take proactive steps to address barriers to fair housing and undo historic patterns of segregation. Congress regularly reaffirms the AFFH mandate by passing legislation that requires certain HUD program participants to certify their AFFH compliance as a condition of funding receipt. HUD has implemented its own AFFH mandate by imposing it on HUD funding recipients and requiring them to engage in fair housing planning, including analyses of impediments to fair housing choice. On July 16, 2015, HUD published a long-awaited final rule introducing a new AFFH definition and, for consolidated plan and public housing agency program participants, requiring a more comprehensive Assessment of Fair Housing that relied on a HUD-provided Assessment Tool and a certification that the program participant would take meaningful action to advance the goals in its Assessment of Fair Housing.
During the prior administration, HUD’s rulemaking in this area constituted a retreat from fair housing regulation and enforcement. In 2018, HUD issued one rule that withdrew the Assessment Tool and another replacing the requirement to complete an Assessment of Fair Housing with a requirement to conduct the less-robust Analysis of Impediments. Then, on August 7, 2020, HUD promulgated a final rule that repealed the 2015 AFFH rule and rescinded all fair housing planning and reporting requirements, adjusted definitions relating to the AFFH obligation and certifications, and lowered the bar for fair housing compliance.
HUD’s June 10 interim final rule, Restoring Affirmatively Furthering Fair Housing Definitions and Certifications, reintroduces AFFH definitions at 24 CFR § 5.151 that are substantive, legally supported, and consistent with a meaningful implementation of the AFFH mandate. HUD grantees and program participants must once again certify that they will meaningfully address disparities in housing needs and access to opportunity. Lastly, this rule announces that HUD will reinitiate its technical assistance program for jurisdictions that elect to complete fair housing planning to support their certifications, though the rule does not require any particular form of fair housing planning. The final rule notes that HUD will provide additional guidance prior to the effective date of July 31.
- Reinstatement of HUD’s Discriminatory Effects Standard
On June 25, HUD issued a notice of proposed rulemaking that would repeal the prior administration’s 2020 Fair Housing Act disparate impact rule and reinstate HUD’s 2013 discriminatory effects rule. (Notably, the 2013 rule has remained in effect because the 2020 rule was suspended by a federal district court injunction.)
In 2013, HUD published a rule implementing a discriminatory effects standard for Fair Housing Act enforcement that formalized the long-recognized, three-step burden-shifting framework for adjudicating disparate impact discrimination under the Fair Housing Act. The 2013 rule allowed parties to litigate disparate impact discrimination claims under the Fair Housing Act via a discriminatory effects test in which (i) the plaintiff attempts to prove that a challenged practice caused or will cause a discriminatory effect, (ii) the defendant attempts to prove the challenged practice is necessary to achieve a substantial, legitimate, non-discriminatory interest, and (iii) the plaintiff attempts to prove that the substantial, legitimate, non-discriminatory interest can be served by another practice that has a less discriminatory effect. Lower federal courts laid the groundwork for the 2013 rule. They routinely applied the burden-shifting framework in “perpetuation of segregation” cases that litigate policy decisions alleged to forestall housing integration. The U.S. Supreme Court endorsed this burden-shifting framework in their 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project.
In 2020, HUD changed course with a new disparate impact rule that effectively gutted the procedural protections provided under the 2013 rule for those experiencing discriminatory effects. It removed the definition of “discriminatory effects” from fair housing regulations; eliminated “perpetuation of discrimination” as a recognized type of disparate impact; added pleading requirements that made it difficult for plaintiffs to bring suit; altered the burden-shifting framework by inserting unprecedented, unworkable requirements; created new defenses that benefit, among others, lenders that use “big data”; limited the available remedies for disparate impact claims; and created categorical exemptions from fair housing liability for the insurance industry. Prior to its effective date, the U.S. District Court for the District of Massachusetts issued a preliminary injunction halting the implementation and enforcement of the 2020 rule in Massachusetts Fair Housing Center v. HUD, citing that rule’s incongruence with Inclusive Communities and its bias in favor of putative defendants.
HUD now intends to recodify the 2013 rule and reinstall the three-step burden-shifting framework. As HUD explains, the 2013 rule maintains the fundamentals of long-established precedent interpreting the Fair Housing Act and is more consistent with the Fair Housing Act’s remedial purpose. More specifically, it constitutes a better balance between the interests of plaintiffs and defendants, articulates clearer standards for litigating fair housing disputes, and ensures that discriminatory effects liability is not a practical nullity. Whether the Biden Administration will take further action in accordance their January 2021 memorandum to enforce the Fair Housing Act and clarify ambiguities within the Inclusive Communities decision, which the prior administration had seized on for the 2020 rule, waits to be seen.
This housing alert is intended as a source of information for clients and friends of Klein Hornig LLP. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. This housing alert may be considered advertising under certain rules of professional conduct. Copyright © 2021 Klein Hornig LLP. All rights reserved.
