In the last days of the Trump administration HUD promulgated a new regulation concerning disparate impact claims under the Fair Housing Act whose intent was very clearly to make such claims difficult even to plead, let alone prove.¹ Its implementation remains stayed by a federal court, but in the Fifth Circuit that may not matter because earlier Fifth Circuit cases are even more restrictive. Prompted by the discussion in Treece v. Perrier Condo. Owners Assn., Inc., 2021 WL 533720 (E.D. La. Feb. 12, 2021) I decided to take a hard look at the Fifth Circuit’s decision in Inclusive Communities Project, Inc. v. Lincoln Prop. Co., 920 F.3d 890, 895 (5th Cir. 2019), cert. denied, 140 S. Ct. 2506 (2020). That turned out to be a bigger project than I expected, because as interpreted Lincoln Properties is incredibly restrictive, but those interpretations are almost certainly wrong. Clarification seems inevitable even with the existing conservative Supreme Court. Here’s why. More
FHA Disparate Impact
On October 9, which seems like an eternity ago based on the number of emails and texts I’ve gotten asking for contributions to various political parties and politicians, I reported on HUD’s new regulations on disparate impact claims published on September 24. It was a counterpoint to the decision in Connecticut Fair Housing Center v. CoreLogic Rental Property Solutions, LLC, 2020 WL 4570110 (D.Conn. August 7, 2020) holding that third party service providers could violate the FHA. I had to update the blog on October 22 when the National Fair Housing Alliance and others filed National Fair Housing Alliance v. Ben Carson, Secretary of the Department of Housing and Urban Development, Case No.3:20-cv-07388 in the United States District Court for the Northern District of California. That lawsuit attacked the legality of the new HUD regulations on numerous grounds. (the Complaint is 66 pages long). It wasn’t the only lawsuit in the works though. On October 25, 2020 the United States District Court for the District of Massachusetts entered a Preliminary Injunction staying the effect of the new HUD rule. Massachusetts Fair Housing Center et al v. United States Department of Housing and Urban Development, Case No. 3:20-cv-11765 (October 25, 2020). Judge Mastoianni found that the changes constituted a “massive overhaul of HUD’s disparate impact standards” to the benefit of housing providers and the detriment of buyers and renters. Of the three grounds for ultimately overturning the regulation Judge Mastoianni relied on only one; that the new rule was “arbitrary and capricious.” He found that the regulation went beyond the Supreme Court’s decision in Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519, 524 (2015), the leading case on disparate impact under the Fair Housing Act. Thus, it could not be justified as an effort to align regulations with case law. He also rejected HUD’s other reason for the regulation – that it provided greater clarity – on the ground that the new rule was far from clear.
Because the ruling only concerns a preliminary injunction there is no final decision on whether the HUD rule is arbitrary and capricious. For a preliminary injunction the court must only find that the plaintiff has a “substantial likelihood of success on the merits.” The order can and probably will be appealed. In the meantime the new Rule is stayed and HUD is forbidden to implement it. Stay tuned.