Friday, November 25, 2011

HUD new rule

The U.S. Department of Housing and Urban Development recently issued aproposed rule to establish a uniform standard of liability for facially neutral housing practices that have a discriminatory effect in supposed violation of the Fair Housing Act.

Under the proposed rule, liability for "discriminatory effects" or "disparate impact discrimination" under the FHA would be determined by a burden-shifting approach. That is:

(1) the plaintiff or complainant first must bear the burden of proving its prima facie case of either disparate impact or perpetuation of segregation;

(2) the burden then shifts to the defendant or respondent to prove that the challenged practice or policy has a necessary and manifest relationship to one or more of the defendant's or respondent's legitimate, nondiscriminatory interests; and

(3) if the defendant or respondent satisfies its burden, the plaintiff or complainant may still establish liability by demonstrating that these legitimate nondiscriminatory interests could be served by a policy or decision that produces a less discriminatory effect.

According to HUD, neither HUD nor any federal court has ever determined that liability under the Fair Housing Act requires a finding of discriminatory intent, and "[i]t is thus well established that liability under the Fair Housing Act can arise where a housing practice is intentionally discriminatory or where it has a discriminatory effect."

However, there has been some variation in the application of the discriminatory effects standard. HUD uses the three-step burden-shifting approach described above, as do many federal courts of appeals. On the other hand, some courts apply a multi-factor balancing test, other courts apply a hybrid between the two, and one court applies a different test for public and private defendants. The proposed rule would standardize the three-step burden-shifting approach.

Another source of variation is in the application of the burden-shifting test. If the defendant or respondent satisfies its burden to justify its challenged practice as having a necessary and manifest relationship with a legitimate nondiscriminatory interest, courts and HUD administrative law judges have differed as to which party bears the burden of proving whether a less discriminatory alternative to the challenged practice exists.

The majority of federal courts of appeals that use a burden-shifting approach place this burden on the plaintiff, analogizing to Title VII's burden-shifting framework. However, other federal courts have kept the burden with the defendant. HUD has, at times, placed this burden of proving a less discriminatory alternative on the respondent and, at other times, on the complainant. The proposed rule would place the burden of rebuttal on the plaintiff or complainant.

The purpose of HUD's proposed rule is to establish uniform standards for determining when a housing practice with a discriminatory effect violates the Fair Housing Act.

Comments are due 60 days from the date of publication of the proposed rule in the Federal Register, which is expected shortly.