On Feb. 8, 2013, HUD issued a final rule implementing the Fair Housing Act’s Discriminatory Effects Standard. In addition to establishing uniform standards for determining when a real estate practice or policy violates the act, this final rule effectively codifies HUD’s long-standing position that liability under the Fair Housing Act may be established under the “disparate impact” theory. This is when a business practice or policy statistically demonstrates a discriminatory effect, regardless of whether the discrimination was intentional.
It is unclear at this time how big an effect this rule will have on the apartment industry. However, it is reasonable to conclude that rental policies and practices should be reviewed closely for potentially having a disparate effect, especially in the areas of occupancy limitations, resident screening and Section 8 voucher policies.
HUD states that this rule affirms 40 years of long-held policy. Fair housing cases have been successfully pursued through the courts using the theory of disparate impact. HUD cites the decisions of 11 federal courts of appeals and various agency guidance, policy statements and case law to bolster their position.
However, HUD recognizes that the courts have used various standards to prove liability and, therefore, proposed and formalized in the rule a national, uniform three-step, burden-shifting test for determining violations:
- The charging party has the burden of proving a challenged practice caused or predictably will cause a discriminatory effect;
- The respondent then has the burden of proving that the challenged practice can be supported by a legally sufficient justification; and
- The burden shifts back to the plaintiff to prove there are other practices that can be employed that have a less discriminatory effect.
This burden shifting standard is consistent with the approach taken by most courts and may even be an improvement over the standard used by some circuit courts, some of which have placed the burden on the defendant to prove there was no lesser discriminatory alternative that would serve the business purpose of a challenged practice. The rule also states that even if a policy has a discriminatory effect, it may still be legal if supported by a legally sufficient justification.