In the Fall of 2020, the Trump Administration implemented changes affecting the requirements affecting complainants and burden of proof. Here is a brief summary. As licensees, we suggest you keep up to date at vww.hud.gov for additional Fair Housing links plus more details and up to date information.

“Through its final rule, HUD aims to adopt the disparate impact analysis applied in Inclusive Communities. The final rule creates a new burden-shifting framework for disparate impact claims. Under the rule, a plaintiff must, as a threshold matter, sufficiently plead facts to support that a specific, identifiable policy or practice has a discriminatory effect, and that the challenged policy or practice was “arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective.” The plaintiff must further plead that the challenged policy or practice has a disproportionately adverse effect on members of a protected class, that the specific policy or practice is the direct cause of the discriminatory effect (i.e., robust causality), that the alleged disparity caused by the policy or practice is significant, and that there is a direct relation between the injury asserted and the injurious conduct alleged.

If a court finds that a plaintiff sufficiently pleads facts to support each of the requirements above, HUD’s rule then provides the new burden-shifting test, which is summarized as follows:

• The plaintiff must first show by a preponderance of the evidence that the challenged policy or practice has a disproportionately adverse effect on members of a protected class, that the specific policy or practice is the direct cause of the discriminatory effect, that the alleged disparity caused by the policy or practice is significant, and that there is a direct relation between the injury asserted and the injurious conduct alleged.
•  A defendant may then rebut the plaintiff’s allegation that the challenged policy or practice is arbitrary, artificial, and unnecessary by producing evidence showing that the challenged policy or practice advances a valid interest and is therefore not arbitrary, artificial, and unnecessary.

If a defendant rebuts a plaintiff’s assertion under (1) above, the plaintiff must prove by a preponderance of the evidence either that the interest(s) advanced by the defendant are not valid or that a less discriminatory policy or practice exists that would serve the defendant’s identified interest(s) in an equally effective manner without imposing materially greater costs or burdens on the defendant.

In addition, the rule lists a number of defenses that may be used during and after the pleading stage, including that the plaintiff failed to sufficiently plead facts to support the allegations and that the defendant’s policy or practice is reasonably necessary to comply with certain third-party requirements. In administrative cases, HUD will only pursue civil money penalties in a disparate impact case where the defendant has previously been adjudged within the last five years to have violated the FHA.

The language of the final disparate impact rule will not prove too surprising to anyone who has followed the rulemaking process. However, the theory of disparate impact liability has always been, and remains, complicated. Although the final rule appears to reduce the burden on defendants, it also provides additional layers of complexity through the new burden-shifting analysis. Thus, while the proposed rule is likely welcome relief to businesses that are vulnerable to disparate impact claims, it will likely not decrease the number of Fair Housing Act claims and may very well increase the costs to defend the claims.

Through its final rule, HUD aims to adopt the disparate impact analysis applied in Inclusive Communities. The final rule creates a new burden-shifting framework for disparate impact claims. Under the rule, a plaintiff must, as a threshold matter, sufficiently plead facts to support that a specific, identifiable policy or practice has a discriminatory effect, and that the challenged policy or practice was “arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective.” The plaintiff must further plead that the challenged policy or practice has a disproportionately adverse effect on members of a protected class, that the specific policy or practice is the direct cause of the discriminatory effect (i.e., robust causality), that the alleged disparity caused by the policy or practice is significant, and that there is a direct relation between the injury asserted and the injurious conduct alleged.

If a court finds that a plaintiff sufficiently pleads facts to support each of the requirements above, HUD’s rule then provides the new burden-shifting test, which is summarized as follows:

• The plaintiff must first show by a preponderance of the evidence that the challenged policy or practice has a disproportionately adverse effect on members of a protected class, that the specific policy or practice is the direct cause of the discriminatory effect, that the alleged disparity caused by the policy or practice is significant, and that there is a direct relation between the injury asserted and the injurious conduct alleged.
• A defendant may then rebut the plaintiff’s allegation that the challenged policy or practice is arbitrary, artificial, and unnecessary by producing evidence showing that the challenged policy or practice advances a valid interest and is therefore not arbitrary, artificial, and unnecessary.

If a defendant rebuts a plaintiff’s assertion under (1) above, the plaintiff must prove by a preponderance of the evidence either that the interest(s) advanced by the defendant are not valid or that a less discriminatory policy or practice exists that would serve the defendant’s identified interest(s) in an equally effective manner without imposing materially greater costs or burdens on the defendant.

In addition, the rule lists a number of defenses that may be used during and after the pleading stage, including that the plaintiff failed to sufficiently plead facts to support the allegations and that the defendant’s policy or practice is reasonably necessary to comply with certain third-party requirements. In administrative cases, HUD will only pursue civil money penalties in a disparate impact case where the defendant has previously been adjudged within the last five years to have violated the FHA.

The language of the final disparate impact rule will not prove too surprising to anyone who has followed the rulemaking process. However, the theory of disparate impact liability has always been, and remains, complicated. Although the final rule appears to reduce the burden on defendants, it also provides additional layers of complexity through the new burden-shifting analysis. Thus, while the proposed rule is likely welcome relief to businesses that are vulnerable to disparate impact claims, it will likely not decrease the number of Fair Housing Act claims and may very well increase the costs to defend the claims.”