A recent rule issued by the Department of Housing and Urban Development (HUD) reinforces an argument used by advocates to promote equality in housing practices and standardizes the way judges and administrators evaluate whether a practice violates the Fair Housing Act.
The disparate impact doctrine is a legal argument that policies and practices can be considered discriminatory if the effects of such policies or practices inordinately impact groups based on race, color, religion, national origin, age, sex, disability, or familial status (the “protected classes”) in a negative way, regardless of intent.
In housing policy, this means that policies that are neutral on their face, but have disproportionately negative effects on a protected class in implementation, can be considered in violation of the Fair Housing Act. Over more than forty years, eleven different federal courts of appeal and HUD administrative courts have confirmed the doctrine as consistent with the broad intent of the Fair Housing Act.
The doctrine has been a critical tool against discrimination especially as our society has developed. As Woodstock President Dory Rand wrote in an American Banker op-ed last summer, “in a society where blatant expressions of discrimination are largely considered to be unacceptable, discrimination often takes on subtler and more insidious forms.”
Our own research in the Chicago area, for example, has shown that mortgage lenders let properties sit vacant longer in predominately African-American neighborhoods. In 2010, 74 percent of properties with a foreclosure filing but no clear outcome in the process—putting them at high risk of vacancy and deterioration—were located in these neighborhoods. The foreclosure policies of these lenders might not be written or intended to discriminate, but they’ve certainly had that effect.
Having a disparate impact on one or more of the protected classes doesn’t necessarily mean a practice violates the Fair Housing Act, of course. The new rule formalizes a three-part burden-shifting test that HUD and most of the federal courts have used to rule on a possible violation:
- The plaintiff—for example, a member of a protected class who was denied housing—first bears the burden of proving that a practice results in, or would result in, a discriminatory effect on the basis of protected characteristic.
- If the charging party proves this case, the burden of proof then falls on the defendant—such as a housing provider—to prove that the challenged practice is necessary to achieve one or more of its legitimate interests.
- If the defendant is successful in proving this, the plaintiff may still establish a violation by proving that the legitimate interest could be achieved via a practice that has a less discriminatory effect.
Although courts have all recognized the disparate effects doctrine, its application has experienced “a small degree of variation,” according to HUD. The new rule provides a single guideline for how the Fair Housing Act’s discriminatory effects standard should be implemented, meaning less variation in judgments and more clarity for those trying to comply.