November 5, 2014

Federal judge calls out HUD; strikes down disparate impact regulations

By Federal judge calls out HUD; strikes down disparate impact regulations

This week a judge from the U.S. District Court for the District of Columbia vacated disparate impact regulations promulgated by the Department of Housing and Urban Development (HUD).  The regulations were based on a twisted interpretation of the Fair Housing Act and prohibited neutral housing practices having a disproportionate adverse effect on protected classes even in the absence of discriminatory intent.  The case is American Insurance Association v. United States Department of Housing and Urban Development, and the decision is here.

The Fair Housing Act was enacted in 1968 to “provide, within constitutional limitations, for fair housing throughout the United States.”  Section 804(a) of the Act prohibits discrimination by making it “unlawful” to “refuse to sell or rent . . . or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, or national origin.”  The statute was subsequently amended to add “sex” and, later, “familial status” to the list of protected traits.  The court ruled that the language in Section 804 “unambiguously prohibits only intentional discrimination,” but does not permit a cause of action premised on disparate impact.  Therefore, the court went on to hold that HUD violated the Administrative Procedure Act by exceeding its statutory authority when it expanded the scope of the Fair Housing Act.

In vacating the disparate impact regulations, the court admonished HUD: “This is, yet another example of an Administrative Agency trying desperately to write into law that which Congress never intended to sanction.”  The court called the regulations “an artful misinterpretation of Congress’s intent that is, frankly, too clever by half.”

The Fair Housing Act’s legislative history, as expressed by its proponents in Congress, establish that the Act was intended to apply solely to disparate treatment, not to acts having a disparate impact on protected classes.  No member of Congress expressed a desire that the Act should force homeowners, lenders, and local governments to consider the racial impacts of all real-estate related and housing decisions that would in all other respects be completely legal and race-neutral.  That’s what HUD’s regulations would have required, as well as pressuring banks and mortgage companies into engaging in risky, race-conscious lending.

HUD will most likely appeal the district court’s ruling, but the Supreme Court is perfectly positioned to make that attempt pointless.  Last month the Court accepted review in Texas Dept. of Hous. & Community  Affairs v. Inclusive Communities Project on the issue of whether the Fair Housing Act encompasses claims for disparate impact.  PLF’s brief in support of review is here.

 

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