Rule2023-05836
Reinstatement of HUD's Discriminatory Effects Standard
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 31, 2023
Effective
May 1, 2023
Issuing agencies
Housing and Urban Development Department
Abstract
The Fair Housing Act prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities. This prohibition extends to practices with an unjustified discriminatory effect, regardless of whether there was an intent to discriminate. In 2013, HUD published a rule which formalized a burden- shifting test for determining whether a given practice has an unjustified discriminatory effect. In 2020, HUD published a rule that would have altered the standards set forth in the 2013 rule. However, a preliminary injunction prevented the 2020 rule from ever going into effect. On June 25, 2021, HUD published a proposed rule to recodify the 2013 rule. After considering public comments, HUD in this final rule reinstates and maintains the 2013 rule and rescinds the 2020 rule.
Full Text
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<title>Federal Register, Volume 88 Issue 62 (Friday, March 31, 2023)</title>
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[Federal Register Volume 88, Number 62 (Friday, March 31, 2023)]
[Rules and Regulations]
[Pages 19450-19500]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-05836]
[[Page 19449]]
Vol. 88
Friday,
No. 62
March 31, 2023
Part III
Department of Housing and Urban Development
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24 CFR Part 100
Reinstatement of HUD's Discriminatory Effects Standard; Final Rule
Federal Register / Vol. 88 , No. 62 / Friday, March 31, 2023 / Rules
and Regulations
[[Page 19450]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 100
[Docket No. FR-6251-F-02]
RIN 2529-AB02
Reinstatement of HUD's Discriminatory Effects Standard
AGENCY: Office of the Assistant Secretary for Fair Housing and Equal
Opportunity, U.S. Department of Housing and Urban Development (HUD).
ACTION: Final rule.
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SUMMARY: The Fair Housing Act prohibits discrimination in the sale,
rental, or financing of dwellings and in other housing-related
activities. This prohibition extends to practices with an unjustified
discriminatory effect, regardless of whether there was an intent to
discriminate. In 2013, HUD published a rule which formalized a burden-
shifting test for determining whether a given practice has an
unjustified discriminatory effect. In 2020, HUD published a rule that
would have altered the standards set forth in the 2013 rule. However, a
preliminary injunction prevented the 2020 rule from ever going into
effect. On June 25, 2021, HUD published a proposed rule to recodify the
2013 rule. After considering public comments, HUD in this final rule
reinstates and maintains the 2013 rule and rescinds the 2020 rule.
DATES: Effective: May 1, 2023.
FOR FURTHER INFORMATION CONTACT: Jeanine Worden, Associate General
Counsel for Fair Housing, Office of General Counsel, U.S. Department of
Housing and Urban Development, 451 7th Street SW, Washington, DC 20410-
0500, or telephone number 202-402-3330 (this is not a toll-free
number). HUD welcomes and is prepared to receive calls from individuals
who are deaf or hard of hearing, as well as individuals with speech or
communication disabilities. To learn more about how to make an
accessible telephone call, please visit: <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION:
I. Background
The Fair Housing Act and Its Goals
Title VIII of the Civil Rights Act of 1968, as amended (``Fair
Housing Act'' or ``Act''), prohibits discrimination in the sale,
rental, or financing of dwellings and in other housing-related
activities because of race, color, religion, sex (including sexual
orientation and gender identity), disability, familial status, or
national origin.\1\ Through the Act, Congress expressed its intent to
eradicate discrimination and proclaimed that ``[i]t is the policy of
the United States to provide, within constitutional limitations, for
fair housing throughout the United States.'' \2\ The Act's protections
are meant to be ``broad and inclusive.'' \3\ Congress passed the Act in
the wake of the assassination of Dr. Martin Luther King, Jr.,
recognizing that ``residential segregation and unequal housing and
economic conditions in the inner cities'' were ``significant,
underlying causes of the social unrest'' \4\ and that both open and
covert race discrimination were preventing integrated communities.\5\
As the Supreme Court reiterated more recently, the Act's expansive
purpose is to ``eradicate discriminatory practices within a sector of
the Nation's economy'' and to combat and prevent segregation and
discrimination in housing.\6\ Congress considered the realization of
this policy ``to be of the highest priority.'' \7\
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\1\ 42 U.S.C. 3601-3619, 3631. This preamble uses the term
``disability'' to refer to what the Act and its implementing
regulations term a ``handicap.'' See, e.g., Hunt v. Aimco Props.,
L.P., 814 F.3d 1213, n.1 (11th Cir. 2016) (noting the term
disability is generally preferred over handicap).
\2\ 42 U.S.C. 3601.
\3\ Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 209
(1972).
\4\ Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys.
Project, Inc., 576 U.S. 519, 529 (2015) (citing Report of the
National Advisory Commission on Civil Disorders 91 (1968) (Kerner
Commission Report).
\5\ Id. at 529 (citing Kerner Commission Report).
\6\ Id. at 539.
\7\ Trafficante, 409 U.S. at 211 (1972).
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The Act gives HUD the authority and responsibility for
administering and enforcing the Act, including the authority to conduct
formal adjudications of complaints and to promulgate rules to interpret
and carry out the Act.\8\ Through that authority, HUD promulgates this
rule.
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\8\ See 42 U.S.C. 3608(a), 3612, 3614a. The Supreme Court has
recognized HUD's rulemaking authority in the specific context of
this rule. See Inclusive Cmtys. Project, 576 U.S. at 527-28, 542;
see also id. at 566-67 (Alito, J., dissenting) (``Congress also gave
[HUD] rulemaking authority and the power to adjudicate certain
housing claims'').
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Discriminatory Effects Law Under the Fair Housing Act Prior to HUD's
2013 Rule
HUD's 2013 rule, titled ``Implementation of the Fair Housing Act's
Discriminatory Effects Standard'' (``2013 Rule''), broke no new ground,
but instead largely codified longstanding judicial and agency consensus
regarding discriminatory effects law. Courts had long found that
discrimination under the Act may be established through evidence of
discriminatory effects, i.e., facially neutral practices with an
unjustified discriminatory effect. Indeed, before HUD's issuance of the
2013 Rule, all federal courts of appeals to have addressed the question
had held that liability under the Act could be established by a showing
that a neutral policy or practice either has a disparate impact on a
protected group or creates, perpetuates, or increases segregation, even
if such a policy or practice was not adopted for a discriminatory
purpose.\9\ As the Sixth Circuit explained, the Act ``proscribes not
only overt discrimination but also practices that are fair in form, but
discriminatory in operation.'' \10\
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\9\ See, e.g., Graoch Assocs. # 33, L.P. v. Louisville/Jefferson
Cnty. Metro Hum. Rels. Comm'n, 508 F.3d 366, 378 (6th Cir. 2007)
(citing Arthur v. City of Toledo, 782 F.2d 565, 575 (6th Cir.
1986)); Hallmark Developers, Inc. v. Fulton Cnty., 466 F.3d 1276,
1286 (11th Cir. 2006) (citing Hous. Investors, Inc. v. City of
Clanton, Ala., 68 F. Supp. 2d 1287, 1298 (M.D. Ala. 1999));
Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 937
(2nd Cir. 1988) (citing Metro Hous. Dev. Corp. v. Vill. of Arlington
Heights, 558 F.2d 1283, 1290 (7th Cir. 1977), aff'd, 488 U.S. 15
(1988) (per curium); Betsey v. Turtle Creek Assocs., 736 F.2d 983,
987 n.3 (4th Cir. 1984) (citing Metro Hous. Dev. Corp v. Vill. of
Arlington Heights, 558 F.2d 1283, 1290 (7th Cir. 1977)); Metro.
Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1290
(7th Cir. 1977) (citing Trafficante v. Metro. Life Ins. Co., 409
U.S. 205, 209-10 (1972)); United States. v. City of Black Jack, 508
F. 2d 1179, 1184-86 (8th Cir. 1974).
\10\ Graoch Assocs. #33, L.P., 508 F.3d at 374 (quoting Griggs
v. Duke Power Co., 401 U.S. 424, 431 (1971) (a Title VII case)).
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Consistent with this judicial consensus, HUD has for decades
concluded that facially neutral practices that have an unjustified
discriminatory effect on the basis of a protected characteristic,
regardless of intent, violate the Act.\11\ For example, in 1994, HUD,
along with nine other agencies and the Department of Justice, issued a
[[Page 19451]]
joint policy statement that recognized disparate impact liability under
the Act.\12\ Although there had been some minor variation in the
application of the discriminatory effects framework prior to the 2013
Rule, HUD and the federal appellate courts were largely in agreement.
HUD has always used a three-step burden-shifting approach,\13\ as did
many federal courts of appeals prior to the 2013 Rule.\14\
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\11\ 78 FR 11460, 11461 (Feb. 15, 2013) (citing, e.g., HUD v.
Twinbrook Vill.Apts., HUDALJ Nos. 02-00-0256-8, 02-00-0257-8, 02-00-
0258-8, 2001 WL 1632533, at *17 (HUD ALJ Nov. 9, 2001) (``A
violation of the [Act] may be premised on a theory of disparate
impact.''); HUD v. Carlson, No. 08-91-0077-1, 1995 WL 365009 (HUD
ALJ June 12, 1995) (``A policy or practice that is neutral on its
face may be found to be violative of the Act if the record
establishes a prima facie case that the policy or practice has a
disparate impact on members of a protected class, and the Respondent
cannot prove that the policy is justified by business necessity.'');
HUD v. Ross, No. 01-92-0466-18, 1994 WL 326437, at *5 (HUD ALJ July
7, 1994) (``Absent a showing of business necessity, facially neutral
policies which have a discriminatory impact on a protected class
violate the Act.''); HUD v. Carter, No. 03-90-0058-1, 1992 WL
406520, at *5 (HUD ALJ May 1, 1992) (``The application of the
discriminatory effects standard in cases under the Fair Housing Act
is well established.'').
\12\ 78 FR 11460, 11461 (citing 1994 Joint Policy Statement on
Discrimination in Lending, 59 FR 18266, 18269 (Apr. 15, 1994)).
\13\ See, e.g., HUD v. Pfaff, 1994 WL 592199, at *8 (HUD ALJ
Oct. 27, 1994); HUD v. Mountain Side Mobile Estates P'ship, 1993 WL
367102, at *6 (HUD ALJ Sept. 20, 1993); HUD v. Carter, 1992 WL
406520, at *6 (HUD ALJ May 1, 1992); Twinbrook Vill. Apts., HUDALJ
Nos. 02-00-0256-8, 02-00-0257-8, 02-00-0258-8, 2001 WL 1632533, at
*17 (HUD ALJ Nov. 9, 2001); see also 1994 Joint Policy Statement on
Discrimination in Lending, 59 FR. 18266, 18269 (Apr. 15, 1994)
(applying three-step test without specifying where the burden lies
at each step).
\14\ See, e.g., Oti Kaga, Inc. v. S. Dakota Hous. Dev. Auth.,
342 F.3d 871, 883 (8th Cir. 2003); Lapid-Laurel v. Zoning Bd. of
Adjustment, 284 F.3d 442, 466-67 (3d Cir. 2002); Huntington Branch
NAACP v. Town of Huntington, 844 F.2d 926, 939 (2d Cir. 1988).
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HUD's 2013 Discriminatory Effects Rule
In February 2013, after notice and public comment, and considering
decades of case law, HUD published the 2013 Final Rule.\15\ The 2013
Rule ``formalize[d] [HUD's] long-held recognition of discriminatory
effects liability under the Act and, for purposes of providing
consistency nationwide, formalize[d] a burden-shifting test for
determining whether a given practice has an unjustified discriminatory
effect, leading to liability under the Act.'' \16\ In promulgating the
2013 Rule, HUD noted the Act's ``broad remedial intent;'' \17\ HUD's
prior positions, including that discriminatory effects liability was
``imperative to the success of civil rights law enforcement;'' \18\ and
the consistent application of discriminatory effects liability in the
four previous decades (with minor variations) by HUD, the Department of
Justice, nine other federal agencies, and federal courts.\19\
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\15\ 78 FR 11459.
\16\ 78 FR 11460.
\17\ See also 2011 Notice of Proposed Rulemaking, 76 FR 70922
(Nov. 16, 2011) (``In keeping with the `broad remedial intent' of
Congress in passing the Fair Housing Act, and consequently the Act's
entitlement to a `generous construction' HUD . . . has repeatedly
determined that the Fair Housing Act is directed to the consequences
of housing practices, not simply their purpose.'') (citing Havens
Realty Corp v. Coleman, 455 U.S. 363, 380 (1982); City of Edmonds v.
Oxford House, Inc., 514 U.S. 725, 731-732 (1995) (internal citations
removed)).
\18\ 78 FR 11460, 11461 (citing 126 Cong. Rec. 31,166-31,167
(1980) (statement of Sen. Mathias reading into the record letter of
HUD Secretary)).
\19\ 78 FR 11460, 11461-62.
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Among other things, the 2013 Rule codified a three-part burden-
shifting framework consistent with frameworks on which HUD and courts
had long relied: (1) The plaintiff or charging party is first required
to prove as part of the prima facie showing that a challenged practice
caused or predictably will cause a discriminatory effect; (2) if the
plaintiff or charging party makes this prima facie showing, the
defendant or respondent must then prove that the challenged practice is
necessary to achieve one or more substantial, legitimate,
nondiscriminatory interests of the defendant or respondent; and (3) if
the defendant or respondent meets its burden at step two, the plaintiff
or charging party may still prevail by proving that the substantial,
legitimate, nondiscriminatory interests supporting the challenged
practice could be served by another practice that has a less
discriminatory effect.\20\
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\20\ 78 FR 11460, 11482; see, e.g., Inclusive Cmtys. Project,
Inc., 576 U.S. at 527 (overviewing the 2013 Rule's burden shifting
framework).
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The 2015 Inclusive Communities Supreme Court Decision
In 2015, the Supreme Court confirmed that the Act provides for
discriminatory effects liability in Texas Department of Housing and
Community Affairs v. Inclusive Communities Project, Inc.\21\ The State
of Texas presented two questions to the Court (1) Whether disparate-
impact claims are cognizable under the Act, and (2) if they are, what
standards and burdens of proof should apply,\22\ but the Court declined
to consider the second question.\23\ On the first question, the Court
found that disparate-impact claims are cognizable, concluding that
Congress's use of the phrase ``otherwise make unavailable'' in Section
804(a) of the Act and the term ``discriminate'' in Section 805(a) are
each parallel to language that the Court had previously held to provide
for discriminatory effects liability under other civil rights
statutes.\24\
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\21\ Inclusive Cmtys. Project, Inc. 576 U.S. at 519, 519, 532-
35.
\22\ See Petition for a Writ of Certiorari, in Tex. Dep't of
Hous. & Cmty. Affairs et al., v. Inclusive Cmtys. Project, Inc., 573
U.S. 991, 2014 U.S. S. Ct. Briefs LEXIS 1848, at *9; See Questions
Presented in, <a href="https://www.supremecourt.gov/qp/13-01371qp.pdf">https://www.supremecourt.gov/qp/13-01371qp.pdf</a>.
\23\ Inclusive Cmtys. Project, Inc., 573 U.S. 991 (2014), 2014
U.S. LEXIS 4912 at *1 (``Petition for writ of certiorari to the
United States Court of Appeals for the Fifth Circuit granted limited
to Question 1 presented by the petition.''); See also Questions
Presented in, Inclusive Cmtys Project, Inc., 573 U.S. 991.
\24\ Inclusive Cmtys. Project, Inc., 576 U.S. at 534 (citing
Griggs v. Duke Power Co., 401 U.S. 424 (1971); Bd. of Educ. v.
Harris, 444 U.S. 130 (1979); Smith v. City of Jackson, 544 U.S. 228,
233 (2005).
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In reaching this holding, the Court explained that from its first
decision to recognize disparate impact liability, in Griggs v. Duke
Power Co., it ``put important limits'' on the scope of liability.\25\
For example, with respect to employment discrimination claims under
Title VII of the Civil Rights Act of 1964, Griggs explained that an
employer can justify a practice that has a disparate impact with a
``business necessity'' defense, such that Title VII ``does not prohibit
hiring criteria with a `manifest relationship' to job performance.''
\26\ Similarly, after holding that the Act provided for disparate
impact liability, the Inclusive Communities Court noted that, under the
Act, ``disparate-impact liability has always been properly limited in
key respects . . .' '' \27\ Quoting Griggs, the Court explained that it
has always been true that disparate impact liability under the Act
``mandates the `removal of artificial, arbitrary, and unnecessary
barriers,' not the displacement of valid governmental policies.'' \28\
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\25\ Inclusive Cmtys. Project, Inc., 576 U.S. at 531.
\26\ Id. (quoting Griggs, 401 U.S. at 431-32).
\27\ Id. at 540.
\28\ Id. (quoting Griggs, 401 U.S. at 431).
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The Court then sketched out some of these long-standing limitations
on the scope of disparate-impact liability, including: (1) The
requirement that ``housing authorities and private developers [have]
leeway to state and explain the valid interest served by their policies
. . . analogous to the business necessity standard under Title VII;''
and (2) the requirement that a ``claim that relies on a statistical
disparity must fail if the plaintiff cannot point to a defendant's
policy or policies causing that disparity.'' \29\
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\29\ Id. at 541, 542.
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HUD's 2016 Notice: Application of the Fair Housing Act's Discriminatory
Effects Standard to Insurance
In 2016, HUD published a document (``2016 Notice'') supplementing
its response to certain comments concerning homeowners' insurance
received during rulemaking for the 2013 Rule in accordance with the
district court's decision in Property Casualty Insurers Association of
America (PCIAA) v. Donovan.\30\ In that Notice, HUD stated, among other
things, that ``[a]fter careful reconsideration of the insurance
industry comments in accordance with the court's decision . . . HUD has
determined that categorical exemptions or safe harbors for insurance
practices are unworkable and inconsistent with the broad fair
[[Page 19452]]
housing objectives and obligations embodied in the Act'' and that
``commenters' concerns regarding application of the discriminatory
effects standard to insurance practices can and should be addressed on
a case-by-case basis.'' \31\
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\30\ 81 FR 69012-13.
\31\ Id.
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HUD's 2020 Disparate Impact Rule
On June 20, 2018, HUD published an Advance Notice of Proposed
Rulemaking (``ANPRM''), inviting public comment on ``what changes, if
any'' to the 2013 Rule were necessary as a result of Inclusive
Communities.\32\ HUD then published a Notice of Proposed Rulemaking on
August 19, 2019 (``2019 Proposed Rule'') proposing to change the 2013
Rule.\33\
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\32\ 83 FR 28560.
\33\ 84 FR 42854.
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In response to the 2019 Proposed Rule, HUD received approximately
45,000 comments, most of which opposed the proposed changes and many of
which raised significant legal and policy concerns with the 2019
Proposed Rule. Commenters objected that the proposed changes did not
align with case law, created problematic defenses and made
discriminatory effects claims effectively impossible to plead and prove
in many instances, thus contravening the core holding of Inclusive
Communities.\34\ On September 24, 2020, HUD published a final rule
titled ``HUD's implementation of the Fair Housing Act's Disparate
Impact Standard'' (``2020 Rule''), which, among other things removed
the definition of discriminatory effect, added demanding pleading
elements that made it far more difficult to initiate a case, altered
the burden-shifting framework, created new defenses, and limited
available remedies in disparate impact claims.\35\
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\34\ See, e.g., 85 FR 60317, 60319 (overview of some of the
comments making these points).
\35\ 85 FR 60288.
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Massachusetts Fair Housing Ctr. v. HUD Order Staying Implementation of
the 2020 Rule
Following publication of the 2020 Rule, HUD was sued in three
separate federal courts--: Massachusetts Fair Housing Ctr., et al. v.
HUD, No. 3:20-cv-11765 (D. Mass.); Nat'l Fair Hous. All., et al. v.
HUD, No. 3:20-cv-07388 (N.D. Cal.); Open Cmtys., et al. v. HUD, No.
3:20-cv-01587 (D. Conn.). The plaintiffs in each case contended that
the 2020 Rule was invalid because it was inconsistent with the Act and
its promulgation violated the Administrative Procedure Act (``APA'').
Prior to the effective date of the 2020 Rule, the U.S. District Court
for the District of Massachusetts in Massachusetts Fair Housing Ctr. v.
HUD issued a preliminary injunction staying the implementation and
postponing the effective date of the 2020 Rule.\36\ Because of this
preliminary injunction, the 2020 Rule never took effect, and the 2013
Rule remained in effect.
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\36\ Mass. Fair Hous. Ctr. v. United States HUD, 496 F. Supp. 3d
600, 611 (D. Mass. Oct. 25, 2020).
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In its order, the district court preliminarily found that many
significant changes made by the 2020 Rule were likely not supported by
Inclusive Communities or other case law. Similarly, the court concluded
that the 2020 Rule did not appear to bring the clarity to the
discriminatory effects framework that it was intended to foster, but
rather introduced new concepts that had never been part of disparate
impact case law without fully explaining their meaning. In support of
its conclusions, the court identified numerous provisions in the 2020
Rule as problematic, including Sec. 100.500(b) (``requiring at `the
pleadings stage,' among other things, that plaintiffs `sufficiently
plead facts to support' . . . `[t]hat the challenged policy or practice
is arbitrary, artificial, and unnecessary to achieve a valid interest
or legitimate objective such as a practical business, profit, policy
consideration, or requirement of law' ''); Sec. 100.500(c)(2)
(permitting defendants to `` `rebut a plaintiff's allegation under
(b)(1) . . . that the challenged policy or practice is arbitrary,
artificial, and unnecessary by producing evidence showing that the
challenged policy or practice' merely `advances a valid interest' '')
(emphasis in original); Sec. 100.500(c)(3) (requiring ``at the third
step of the burden-shifting framework that the plaintiff prove `a less
discriminatory policy or practice exists that would serve the
defendant's identified interest (or interests) in an equally effective
manner without imposing materially greater costs on, or creating other
material burdens for, the defendant' '' (emphasis in original)); Sec.
100.500(d)(1) and (d)(2)(iii) (``conflating of a plaintiff's prima
facie burden and pleading burden''); and Sec. 100.500(d)(2)(i) (the
outcome prediction defense).\37\
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\37\ Id. at 605-07, n.2, 610-11.
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The district court found that the ``practical business, profit,
policy consideration'' language, the ``outcome prediction'' defense,
changes to the third element of the burden-shifting framework, and the
conflating of a plaintiff's prima facie burden and pleading burden, ran
the risk of ``effectively neutering'' discriminatory effects liability
under the Act, and were all likely unsupported by Inclusive Communities
or other judicial decisions.\38\ The district court also stated that
the 2020 Rule's use of ``new and undefined terminology altered the
burden-shifting framework, and perplexing defenses'' accomplished ``the
opposite of clarity'' and were likely ``arbitrary and capricious.''
\39\ The court stated that ``[t]here can be no doubt that the 2020 Rule
weakens, for housing discrimination victims and fair housing
organizations, disparate impact liability under the Fair Housing Act. .
. . In addition, the 2020 Rule arms defendants with broad new defenses
which appear to make it easier for offending defendants to dodge
liability and more difficult for plaintiffs to succeed. In short, these
changes constitute a massive overhaul of HUD's disparate impact
standards, to the benefit of putative defendants and to the detriment
of putative plaintiffs.'' \40\
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\38\ Id. at 611.
\39\ Id.
\40\ Id. at 607.
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HUD's Reconsideration of the 2020 Rule and the 2021 Notice of Proposed
Rulemaking
On January 26, 2021, President Biden issued a Memorandum ordering
the Department to ``take all steps necessary to examine the effects of
the [2020 Rule], including the effect that amending the [2013 Rule] has
had on HUD's statutory duty to ensure compliance with the Fair Housing
Act'' and ``take any necessary steps . . . to implement the Fair
Housing Act's requirements that HUD administer its programs in a manner
that . . . furthers . . . HUD's overall duty to administer the Act [ ]
including by preventing practices with an unjustified discriminatory
effect.'' \41\
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\41\ See 86 FR 7487, 7488.
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Consistent with the President's Memorandum, HUD began a process to
reconsider the 2020 Rule. On June 25, 2021, after reviewing prior
public comments on the previous rulemakings described above, HUD's
responses to those comments, HUD's 2016 supplemental explanation
regarding the 2013 Rule's applicability to the insurance industry,
legal precedent including Inclusive Communities, the Massachusetts Fair
Housing Center court's order, and HUD's own experience with
discriminatory effects cases over 40 years, HUD promulgated a proposed
rule titled ``Reinstatement of HUD's Discriminatory Effects Standard''
(``proposed rule'') that proposed to recodify the 2013 Rule.\42\ The
proposed
[[Page 19453]]
rule advocated returning to the 2013 Rule because HUD believed that the
2013 Rule established a workable framework that was more consistent
with existing case law and the purpose of the Act than the 2020 Rule.
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\42\ 86 FR 33590.
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As HUD described in the proposed rule, in HUD's experience, the
2013 Rule set a more appropriately balanced standard for pleading,
proving, and defending a fair housing case alleging that a policy or
practice has a discriminatory effect. HUD believed that the 2013 Rule
provided greater clarity about what each party must show by relying on
concepts that have a long history in judicial and agency precedent and
that it appropriately balanced the need to ensure that frivolous claims
do not go forward with a realistic understanding of the practical
challenges to litigating these claims. With regard to the 2020 Rule,
HUD's experience investigating and prosecuting discriminatory effects
cases informed its views that many of the points made by commenters and
the District Court in Massachusetts Fair Housing Center were, in HUD's
opinion, correct. In particular, the changes the 2020 Rule made, such
as amending pleading standards, changing the burden shifting framework,
and adding defenses, all operated to tip the scales in favor of
respondents, introduced unnecessary confusion, may have precluded
otherwise valid claims, and, at worst would have made discriminatory
effects liability a practical nullity.
HUD further stated its belief that the 2013 Rule was more
consistent with the Act's purpose; prior case law under the Act,
including Inclusive Communities; other civil rights authorities,
including the Equal Credit Opportunity Act and Title VII; and HUD's
prior interpretations of the Act. In its 2020 Rule, HUD noted that the
rule was intended to better reflect Inclusive Communities, but HUD now
believes that the 2020 Rule was itself inconsistent with the holding of
Inclusive Communities, which maintained the fundamentals of long-
established disparate-impact precedent rather than changing them.
Moreover, based on HUD's experience investigating and litigating
discriminatory effects cases, HUD believed that the practical effect of
the 2020 Rule's amendments was to severely limit HUD's and plaintiffs'
use of the discriminatory effects framework in ways that would
substantially diminish that frameworks' effectiveness in accomplishing
the purposes that Inclusive Communities articulated.
By comparison, in HUD's experience, the 2013 Rule provided a
workable and balanced framework for investigating and litigating
discriminatory effects claims that is consistent with the Act, HUD's
own guidance, Inclusive Communities, and other jurisprudence.
HUD noted that Inclusive Communities heavily relied on Griggs,
which is the foundation of Title VII disparate impact jurisprudence, to
illustrate the well-settled principles of disparate impact under the
Act, and HUD believed Inclusive Communities to be fully supportive of
the 2013 Rule. Inclusive Communities explained that in Griggs, ``[w]hat
is required by Congress [in Title VII cases] is the removal of
artificial, arbitrary, and unnecessary barriers to employment when the
barriers operate invidiously to discriminate on the basis of racial or
other impermissible classification.'' \43\ Quoting from its
foundational decision in Griggs, the Supreme Court in Inclusive
Communities observed that ``[d]isparate impact liability mandates the
`removal of artificial, arbitrary, and unnecessary barriers,' not the
displacement of valid governmental policies.'' \44\ HUD proposed that
this quotation from a seminal decision of longstanding disparate impact
doctrine is properly read as maintaining existing law, not changing it.
HUD highlighted that Inclusive Communities explicitly stated,
``disparate-impact liability has always been properly limited in key
respects'' (emphasis added), making clear that the Court was not adding
additional pleading or proof requirements or calling for a significant
departure from pre-existing precedent under the Act and Title VII.\45\
Furthermore, HUD stated that reading Inclusive Communities to support a
heightened pleading standard is contradicted by the fact that the
``heartland'' cases cited by the Court would not have survived a motion
to dismiss under that standard because plaintiffs in those cases did
not have specific facts to plausibly allege that a policy or practice
was arbitrary, artificial, or unnecessary until after discovery.\46\
Finally, HUD explained that because Inclusive Communities considered a
judgment reached after discovery and bench trial, the Court had no
occasion or opportunity to consider the proper pleading standards for
cases brought under the Act. The parties did not brief or argue such
questions to the Court, making it particularly unlikely that the Court
intended to reach them.
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\43\ Inclusive Cmtys. Project, Inc., 576 U.S. at 578.
\44\ Id. at 540.
\45\ Id.
\46\ See, e.g., Town of Huntington, NY v. Huntington Branch,
NAACP, 488 U.S. 15 (1988); United States v. City of Black Jack, 508
F.2d 1179, 1184, 1187-88 (8th Cir. 1974) (specific facts produced
during the case supported the court's determination that the policy
was one of those ``artificial, arbitrary, and unnecessary''
practices that is properly invalidated under disparate impact
doctrine); Greater New Orleans Fair Hous. Action Ctr. v. St. Bernard
Parish, 641 F. Supp. 2d 563, 567-568 (E.D. La. 2009) (relying on
information gathered after the pleadings to find disparate impact).
---------------------------------------------------------------------------
For these reasons and others, HUD proposed that Inclusive
Communities' quotation of Griggs' decades-old ``artificial, arbitrary,
and unnecessary'' formulation would be best construed as maintaining
continuity with longstanding disparate-impact jurisprudence, as
reflected in the 2013 Rule.\47\ HUD stated in the proposed rule its
belief that other changes the 2020 Rule made would create problems that
could be cured by a return to the 2013 Rule. For example, the 2020 Rule
eliminated the 2013 Rule's definition of ``discriminatory effect,''
stating that the definition was unnecessary because it ``simply
reiterated the elements of a disparate impact claim.'' \48\ In
eliminating this definition, the 2020 Rule erased ``perpetuation of
segregation'' as a recognized type of discriminatory effect distinct
from disparate impact, which was contrary to well established
precedent. HUD proposed to reaffirm that perpetuation of segregation
remains, as it always had been, a basis for contending that a policy
has an unlawful discriminatory effect.
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\47\ 86 FR 33594-5.
\48\ 84 FR 42858.
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HUD described how the 2020 Rule also eliminated from the Act's
prohibitions policies or practices that could ``predictably result[] in
a disparate impact on a group of persons,'' i.e., those for which the
disparate impact has not yet manifested but will predictably do so. HUD
noted, as it stated in 2013, that the Act prohibits discrimination that
is predictable because it defines an ``aggrieved person'' as any person
who ``believes that such person will be injured by a discriminatory
housing practice that is about to occur.'' \49\ HUD noted that courts
have found that predictable discriminatory effects may violate the Act:
``[t]o establish a prima facie case of racial discrimination, the
plaintiff need prove no more than that the conduct of the defendant
actually or predictably results in racial discrimination; in other
words, that it has a discriminatory
[[Page 19454]]
effect.'' \50\ HUD stated in the proposed rule that the 2020 Rule did
not adequately explain how the Act and case law construing it can be
read to require waiting until harm is inflicted before an action with
predictable discriminatory effects can be challenged, nor did HUD
perceive that any such explanation would be availing, given the plain
language of the Act and the case law interpreting it.
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\49\ 42 U.S.C. 3602(i)(2).
\50\ See Inclusive Cmtys. Project, Inc., 576 U.S. at 539-40
(describing City of Black Jack, 508 F.2d at 1184 as ``at the
heartland of disparate-impact liability'').
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In addition, in the 2021 proposed rule, HUD recognized and agreed
with concerns that the 2020 Rule created new and confusing defenses at
both the pleading and post-pleading stage, including the new defense
allowing a defendant to show that the challenged policy or practice is
``reasonably necessary to comply with a third-party requirement.'' \51\
The 2020 Rule's preamble stated that this defense would not require a
showing that the challenged policy is the only way to comply with such
a requirement, only that the policy serves that purpose. In the 2021
proposed rule, HUD stated that this new defense was inconsistent with
the Act, which specifies that state and local laws requiring or
permitting discriminatory housing practices are invalid. HUD expressed
its concern that the defense would preclude many otherwise proper
discriminatory effects claims, because, for example, a plaintiff may
not have any practical means of knowing whether some other party's
policies also contributed to the defendant's practice. HUD reasoned
that nothing in Inclusive Communities suggests this defense is
required, let alone reasonable, for the agency to create.
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\51\ 24 CFR 100.500(d)(1); 85 FR 60333.
---------------------------------------------------------------------------
HUD noted further in the proposed rule that the 2020 Rule also
created a new ``outcome prediction'' defense which HUD believed would
in practice exempt most insurance industry practices (and many other
housing-related practices that rely on outcome predictions, such as
lending practices) from liability under a disparate impact
standard.\52\ In the proposed rule, HUD stated that it considered this
defense to be inconsistent with HUD's repeated finding, including in
the 2020 Rule, that ``a general waiver of disparate impact law for the
insurance industry would be inappropriate.'' HUD reconsidered the
defense and explained in the proposed rule that it believed the defense
was unclear and would suggest that comparators be used, which were, in
HUD's experience, inappropriate. HUD stated that at the very least, the
defense would introduce unnecessary confusion into the doctrine.
---------------------------------------------------------------------------
\52\ 24 CFR 100.500(d)(2)(i), 85 FR 60319, 60333.
---------------------------------------------------------------------------
In the proposed rule, HUD explained that the 2020 Rule
inappropriately limited remedies in discriminatory effects cases in
three respects. It specified that ``remedies should be concentrated on
eliminating or reforming the discriminatory practice so as to eliminate
disparities between persons in a particular protected class and other
persons.'' It prohibited HUD in administrative proceedings from
pursuing anything but ``equitable remedies'' except that ``where
pecuniary damage is proved, HUD will seek compensatory damages or
restitution.'' And it restricted HUD from seeking civil penalties in
discriminatory effects cases unless the respondent had been adjudged
within the last 5 years to have committed intentional unlawful housing
discrimination under the Act. In the proposed rule, HUD proposed that
these limitations have no basis in law and run contrary to public
interest and the purpose of the Act. While the 2020 Rule cited
Inclusive Communities as supporting these limitations, HUD noted that
no part of Inclusive Communities suggested such limitations. Moreover,
HUD viewed these limitations as in conflict with the plain language of
the Act, which provides in all cases for a wide variety of remedies,
including injunctive relief, actual damages, punitive damages, and
civil penalties. HUD clarified that whereas Congress explicitly has
limited the remedies available in disparate impact cases under Title
VII, it has chosen not to do so in cases brought under the Act.
In sum, HUD stated in the proposed rule that it believed that the
2013 Rule would be preferable to the 2020 Rule. It believed the 2013
Rule would be more consistent with judicial precedent construing the
Fair Housing Act, including Inclusive Communities, as well as the Act's
broad remedial purpose. Based on its experience interpreting and
enforcing the Act, HUD also believed the 2020 Rule, if put into effect,
threatened to limit the effectiveness of the Act's discriminatory
effects doctrine in ways that are inconsistent with the doctrine
continuing to play its critical role in ``moving the Nation toward a
more integrated society.'' \53\ Furthermore, HUD stated that it
believed that the 2013 Rule provided clarity, consistency, and a
workable, balanced framework, recognized by the Supreme Court, under
which to analyze discriminatory effects claims, and under which HUD
could better ensure it has the tools to further its ``duty to
administer the Act [ ] including by preventing practices with an
unjustified discriminatory effect.'' \54\
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\53\ Inclusive Cmtys. Project, Inc., 576 U.S. at 547.
\54\ 86 FR 33594.
---------------------------------------------------------------------------
II. This Final Rule
HUD received 10,113 comments in response to the proposed rule. HUD
reviewed and carefully considered these comments and, as explained in
the responses to the comments below, HUD has decided to recodify the
2013 Rule. HUD has confirmed that the concerns it expressed in the
proposed rule are consistent with the public comments received in
response to the proposed rule, HUD's previous rulemakings and notices,
and relevant discriminatory effects case law under the Act, including
cases using the 2013 Rule and the 2020 Rule.
HUD continues to believe that, as compared to the 2020 Rule, the
2013 Rule more accurately describes discriminatory effects law in a
manner that is consistent with both the Act and the Supreme Court's
ruling in Inclusive Communities. As in the 2013 Rule, this final rule
does not impose any new liability, but merely provides a consistent,
nationwide framework for determining whether a given practice has an
unjustified discriminatory effect, leading to liability under the Act.
HUD believes the 2013 Rule best aligns with Fair Housing Act
jurisprudence and is most consistent with the Act's remedial purposes.
As described in greater detail below, HUD believes that the 2013
standard is consistent with and was implicitly endorsed by Inclusive
Communities.
Moreover, even if the 2020 Rule were a permissible approach to
discriminatory effects law and HUD had no doubts about the legality or
appropriateness of the 2020 Rule under the Act, HUD would recodify the
2013 Rule as an exercise of the discretion Congress gave HUD to make
rules under the Act.\55\ The 2013 Rule's framework is practical and, in
contrast to the novel and complicated 2020 Rule, has worked well in
discriminatory effects cases. The 2013 Rule's framework adequately
balances the interests of plaintiffs \56\ and defendants and encourages
the latter to seek a less discriminatory alternative
[[Page 19455]]
when a policy or practice causes a discriminatory effect, without
imposing an excessive burden on their substantial, legitimate, non-
discriminatory interests. As described in greater detail below, HUD
declines to create any exemptions or safe harbors in this rule or to
proscribe specific conduct that per se has an unjustified
discriminatory effect. As Inclusive Communities recognized in affirming
that discriminatory effects claims are cognizable under the Act, ``the
[Fair Housing Act] must play an important part in avoiding the Kerner
Commission's grim prophecy that `[o]ur Nation is moving toward two
societies, one black, one white--separate and unequal.' '' \57\ For the
reasons discussed in HUD's 2013 Rule, in the proposed rule, and below
in response to the public comments, HUD rescinds the 2020 Rule and
recodifies the 2013 Rule.
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\55\ See generally 42 U.S.C. 3614a.
\56\ In the HUD administrative hearing process, HUD is referred
to as the charging party and the housing providers who are alleged
to have violated the Act are referred to as respondents. See 24 CFR
100.500. Rather than repeat those terms throughout this preamble,
HUD uses the terms plaintiff and defendant to include the charging
party and respondent.
\57\ Inclusive Cmtys. Project, Inc., 576 U.S. at 519, 546
(quoting Report of the National Advisory Commission on Civil
Disorders 91 (1968) (Kerner Commission Report at 1).
---------------------------------------------------------------------------
HUD adopts one amendment made by the 2020 Rule to HUD's general
fair housing regulations at Sec. 100.70(d)(5). This amendment provides
additional illustrations of prohibited activities under the Fair
Housing Act generally, though it is not specific to discriminatory
effects cases. HUD proposed keeping these additional examples in the
proposed rule and received no public comments specifically opposing
these additions. In this final rule's amendatory instructions, HUD
includes instructions to ``republish'' Sec. 100.70(d)(5) without
change from the 2020 Rule to clearly show that HUD is adopting this
language in this final rule.
III. Public Comments
General Comments in Support
Commenters generally supported the proposed rule, which would
reinstate the 2013 Rule. Commenters stated that the proposed rule is
consistent with President Biden's memorandum directing agencies to
redress America's history of housing discrimination and the 1994
interagency fair lending guidance under the Act and the Equal Credit
Opportunity Act. Commenters also stated that the proposed rule is an
important and appropriate exercise of HUD's rulemaking authority.
Among the supportive comments were those stating that the proposed
rule: is appropriately broad, inclusive, and will be instrumental in
ensuring optimal compliance with the Act and in challenging covert or
latent discrimination that can be intentionally or unintentionally
embedded in facially neutral policies and practices; is critical for
ensuring equal opportunity under the Act; would help secure equal
opportunity in a wide variety of housing areas, including in land use
and zoning, affordable and public housing, environmental permitting,
air quality, and utility burdens; would be effective in protecting
against housing discrimination based on all of the Act's protected
characteristics, as well as related groups such as persons without
English language proficiency or who are survivors of domestic violence
or sexual assault; would advance sustainable homeownership and
affordable housing programs; would benefit both real estate
professionals and consumers; may prevent segregated housing patterns
that might otherwise result from covert and illicit stereotyping; is
essential to challenging blanket refusals to accept Housing Choice
Vouchers, which are disproportionately used by people of color,
households with children, and persons with disabilities; and would
address de facto and de jure discrimination in housing policies,
construction, and tenancy.
Commenters noted that the proposed rule's burden-shifting framework
is consistent with long-standing case law, including Inclusive
Communities, and well-established agency practice. Commenters explained
that the proposed rule contains the traditional burden shifting
framework for disparate impact claims, which was endorsed by the
Supreme Court in Inclusive Communities and is consistent with the
framework for disparate impact claims under Title VII and the Equal
Credit Opportunity Act.
Commenters stated that out of more than 40 federal appellate and
district court decisions in disparate-impact fair housing cases
following Inclusive Communities, very few, other than Inclusive
Communities Project v. Lincoln Prop. Co.,\58\ found any inconsistency
between the 2013 Rule and the Supreme Court's Inclusive Communities
decision. Commenters pointed to Avenue 6E Investments, LLC v. City of
Yuma,\59\ which cited the 2013 Rule as authority for the proper burden-
shifting framework without noting any inconsistencies between that rule
and Inclusive Communities, and Mhany Mgmt., Inc. v. Cnty. of
Nassau,\60\ which found that the Supreme Court implicitly endorsed the
2013 Rule's framework in Inclusive Communities.\61\ Commenters also
noted that the court in Mhany Mgmt., Inc. v. Cnty. of Nassau, as well
as numerous other cases successfully utilized the 2013 Rule's burden
shifting framework to reach decisions.
---------------------------------------------------------------------------
\58\ Inclusive Communities Project v. Lincoln Prop. Co, 920 F.3d
890 (5th Cir. 2019).
\59\ Avenue 6E Investments, LLC v. City of Yuma, 818 F.3d 493,
510 (9th Cir. 2016).
\60\ Mhany Mgmt., Inc. v. Cnty. of Nassau. 819 F.3d 581, 618-20
(2d Cir. 2016).
\61\ Avenue 6E Investments, LLC v. City of Yuma, 818 F.3d 493,
510 (9th Cir. 2016); Mhany Mgmt., Inc. v. Cnty. of Nassau, 819 F.3d
581, 618-20 (2d Cir. 2016).
---------------------------------------------------------------------------
Commenters supporting the proposed rule stated that it provides a
clear, simple, and effective standard that would promote consistency
between judicial and administrative venues and throughout the housing
industry. Commenters explained that this standard would maintain
continuity for regulated entities and enable them to better comply with
the Act, since this regulatory framework has been in place since 2013.
Commenters described the framework as pragmatic, fostering fair and
sound business practices and finding the appropriate balance between
fair housing concerns and business necessities.
Commenters expressed support for the burden-shifting framework,
describing it as clear, easy to follow, practical, and striking the
appropriate balance between competing interests. Commenters stated that
the 2013 Rule settled the law on several important issues, including
whether the burden-shifting framework is appropriate and which party
bears the burden of demonstrating the business necessity for a
particular policy and the existence of a less discriminatory
alternative. A commenter noted that the 2013 Rule is a fair and
accurate codification of longstanding jurisprudence of discriminatory
effects liability under the Act and posed no significant departure from
previous HUD interpretation or the weight of judicial authority.
Commenters noted that plaintiff's burden under the proposed rule is not
easy to meet, which eliminates the danger of an onslaught of groundless
litigation. A commenter described the proposed rule as balancing the
need to prevent frivolous claims from moving forward with a process
that allows potentially meritorious claims to be substantiated or
disproved. A commenter compared the proposed rule's three-tiered
framework to the 2020 Rule's five-tiered test, noting that the former
provides a clear way to challenge policies that may unnecessarily
restrict housing, while the latter is vague and allows discrimination
to continue unchallenged. Comments also stated that the 2020 Rule
conflicted with decades of legal precedent, including
[[Page 19456]]
the Supreme Court's decision in Inclusive Communities and that
discriminatory effects claims that sought to challenge neutral policies
that actually caused discrimination would not survive under the test
contained in the 2020 Rule.
General Comments in Opposition
Other commenters generally opposed the proposed rule, suggesting
that HUD withdraw it and retain the 2020 Rule. A commenter stated that
the 2020 Rule thoroughly explained its reasoning and was consistent
with Inclusive Communities. Another commenter described the proposed
rule as unclear and overly burdensome. Commenters also suggested that
the proposed rule lacks limitations on how and where it applies, thus
adding a new layer of complexity and uncertainty to discriminatory
effects law. A commenter stated that the proposed rule would harm the
people it purports to benefit by applying a complex, court-created
legal framework to a public policy issue and requiring all issues to be
resolved in expensive litigation in federal court. Another commenter
stated that the proposed rule will not create a uniform mechanism to
resolve discriminatory effects disputes but will instead encourage
courts to develop alternative approaches to handling such cases. A
commenter stated that HUD and others have used the 2013 Rule to bully
housing providers into expanding access to housing even if landlords
cite legitimate business reasons for restricting housing based on
certain admission or occupancy policies.
HUD Response: HUD disagrees with the commenters who opposed the
proposed rule. As discussed in the preamble to the proposed rule and
elsewhere in this preamble, HUD believes that this final rule
establishes the appropriate, balanced framework for assessing claims of
discriminatory effects and is entirely consistent with Inclusive
Communities and long-standing judicial precedent. In contrast, HUD
finds that the 2020 rule, if retained, would limit liability in a
manner inconsistent with the Act's purpose and judicial precedent. HUD
further believes that some of the standards announced in the 2020 rule
might lead some courts to develop alternative approaches to assessing
discriminatory effects claims that are inconsistent with the text and
broad remedial purposes of the Act. HUD believes that the framework in
the proposed rule sets out a consistent nationwide approach to
evaluating discriminatory effects claims and adopts the majority view
of judicial opinions interpreting the Act. As a result, this final rule
affords housing providers the opportunity to maintain policies and
practices so long as they do not have an unjustified discriminatory
effect because of a protected characteristic. And it does not require
allegations of discriminatory effects to be resolved in federal court.
Rather, housing providers may avoid potential litigation and liability
by reviewing their policies and practices to ensure that they do not
have an unjustified discriminatory effect. The discriminatory effects
framework is not intended to force housing providers to take any
particular course of action but rather to ensure that an important goal
of the Act--to safeguard fair housing throughout the country--is
accomplished.
General Comments Concerning Clarity
Issue: Commenters disagreed about the clarity that would result
from setting aside the 2020 Rule. A commenter stated that the 2020 Rule
should be retracted because it created a legal landscape in which HUD,
other federal regulators, and courts would have different standards for
analyzing discriminatory effects claims, and because it created
confusion that would disadvantage housing discrimination victims.
However, other commenters asked HUD to retain the 2020 Rule so as to
avoid confusion and uncertainty because different forms of the rule
have been promulgated and retracted over the last several years. A
commenter stated that HUD should recognize the practical implications
of repeatedly and drastically changing policies and justification for
those policies and requested that HUD solidify clear and consistent
long-term standards in order to minimize confusion and uncertainty for
federal funding recipients. The commenter said it makes little sense to
change procedures with each new administration and that reinstating the
2013 Rule will provoke litigation and disputes between courts rather
than provide clarity. Another commenter noted a particular concern
about confusion for businesses and damage to their ability to know and
comply with the law since litigation concerning the 2020 Rule is
pending.
HUD Response: HUD agrees with the commenters who stated that the
2020 Rule introduced a new standard that is incompatible with the
standards used by courts and other federal regulators, creating
confusion and uncertainty. In contrast, this final rule will provide
clarity consistent with well-established judicial and agency
interpretations of the Act by eliminating the novel and undefined
standards introduced by the 2020 Rule. HUD also notes that the 2020
Rule never went into effect and has never been enforced by HUD. HUD has
considered potential reliance interests and believes that no
significant reliance was created by the 2020 rule, because unlike a
regulation that even briefly governed conduct or supplied benefits, the
2020 Rule never did so. While HUD proposed revising the rule in 2019
and subsequently issued a final rule in 2020, the 2013 Rule, which is
recodified in this final rule, is and has been the only promulgated
rule governing the standard for discriminatory effects liability that
has ever taken effect since the Act became law in 1968. HUD agrees that
the 2020 Rule introduced a new standard that is incompatible with the
Act and with the standards used by courts and other federal regulators.
Had HUD used the 2020 Rule, while other federal agencies and courts
used rules analogous to the 2013 Rule or created their own rules in
response to Inclusive Communities, there would be substantial confusion
in discriminatory effects jurisprudence. HUD believes that it is
important that those affected by or accused of discrimination know what
standard governs their housing related activities and that that
standard does not unnecessarily vary depending on the forum in which a
case is decided. Having differing standards would increase litigation
costs for the parties and likely result in the dismissal of claims in
some forums that are upheld in others. Restoring the 2013 Rule will
help ensure the consistency of federal discriminatory effects law and
will avoid the confusion caused by the 2020 Rule.
This final rule sets out a usable and uniform framework that is
fully consistent with the requirements established by courts, as well
as the text and purpose of the Act.
Comments Concerning Harmony Between Other State and Federal Civil
Rights Statutes
Issue: A commenter noted that the Rule will bring HUD's regulations
back into conformity with state civil rights laws.
HUD Response: HUD acknowledges that many state courts and agencies
that interpret and enforce civil rights laws utilize a burden-shifting
framework that is similar to this final rule and that HUD's 2020 Rule
created confusion and conflicting standards.\62\ HUD believes that it
is important for plaintiffs to have
[[Page 19457]]
access to consistent relief in state and federal jurisdictions.
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\62\ See e.g., Tetro v. Elliott Popham Pontiac, Oldsmobile,
Buick, & GMC Trucks, Inc., 173 F.3d 988, 993 (6th Cir. 1999)
(explaining that state civil rights statute is interpreted
consistently with analysis used for federal civil rights statute).
---------------------------------------------------------------------------
Issue: Commenters applauded the rule for being consistent with
other civil rights laws and their discriminatory effects liability
frameworks, including Title VII and ECOA. A commenter also noted that
courts, including the Supreme Court in Inclusive Communities, have
often drawn on Title VII's jurisprudence when interpreting the Act and
vice versa because of the similarities between the statutes' texts,
structures, purposes, and dates of enactment. The commenter expressed
support for the rule because it aligns with judicial precedent that
interprets the Act and Title VII similarly. The commenter also stated
that the proposed rule furthers the principle that language that is
similar across statutes should be given similar meaning.
HUD Response: HUD agrees that the rule is consistent with other
civil rights laws and their discriminatory effects liability
frameworks, including Title VII of the Civil Rights Act of 1964, as
amended (Title VII),\63\ and the Equal Credit Opportunity Act
(ECOA).\64\ HUD acknowledges that courts have generally interpreted
these statutes consistently and agrees that HUD should do the same to
promote consistency and clarity, particularly for entities whose
actions must be compliant with both ECOA and the Act.
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\63\ 78 FR 11468-11471.
\64\ Id.
---------------------------------------------------------------------------
HUD notes that the preamble to the 2013 Rule explained in great
detail how its framework operates harmoniously with other civil rights
laws, including Title VII and ECOA, and best effectuated the important
goals of the Fair Housing Act.\65\ As HUD noted in the 2013 Rule, the
discriminatory effects framework borrowed from Title VII and Griggs is
the fairest and most reasonable approach for resolving disparate impact
claims, in part because it does not require either party to prove a
negative, and it provides the parties the opportunity to obtain
adequate information in discovery to meet their burdens.\66\
---------------------------------------------------------------------------
\65\ Id.
\66\ 78 FR 11474.
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Comments Concerning Massachusetts Fair Housing Center
Issue: Commenters stated that although the district court in
Massachusetts Fair Housing Center[hairsp] \67\ stayed implementation of
the 2020 Rule, it did not require HUD to totally abandon the 2020 Rule.
The commenters stated that the decision primarily addressed three
elements of the 2020 Rule--the outcome prediction defense, the
requirement that plaintiffs present an equally effective alternative,
and the conflation of the plaintiff's prima facie burden and their
pleading burden. The commenters also stated that the court acknowledged
the requirement that a plaintiff must plead that a challenged policy is
``arbitrary, artificial, and unnecessary to achieve a valid interest or
legitimate objective,'' may have some grounding in case law. The
commenters also stated that the court did not address the 2020 Rule's
recognition that the Act does not and cannot supplant state laws
concerning insurance, or its codification of Inclusive Communities'
guidance on remedies.
---------------------------------------------------------------------------
\67\ Mass. Fair Hous. Ctr. v. United States HUD, 496 F. Supp. 3d
600, 603 (D. Mass. Oct. 25, 2020).
---------------------------------------------------------------------------
Other commenters stated that Massachusetts Fair Housing Center
criticized the 2020 Rule for introducing onerous pleading standards,
defenses that lacked precedent in case law, for conflicting with the
remedial purpose of the Act, and for likely being arbitrary and
capricious.
HUD Response: While the Massachusetts Fair Housing Center court
enjoined HUD from implementing or enforcing the 2020 Rule in any manner
and ordered HUD to ``preserve the status quo pursuant to the
regulations in effect as of the date of this Order,'' \68\ HUD is not
basing its decision to abandon the 2020 Rule and recodify the 2013 Rule
on the Massachusetts Fair Housing Center order. Rather, HUD declines to
retain any part of the 2020 Rule's substantive disparate impact
language based on its own interpretation of and decades of experience
in implementing the Act. HUD also finds other aspects of the 2020 Rule
that the court left unaddressed or uncriticized to be equally
troublesome.
---------------------------------------------------------------------------
\68\ Id. at 612.
---------------------------------------------------------------------------
Comments Concerning Inclusive Communities
Issue: Commenters supported reinstatement of the 2013 Rule because
it is consistent with Inclusive Communities. Commenters stated that the
Court cited the 2013 Rule with approval, noting each step in the 2013
Rule's burden-shifting framework without critique. Commenters also
noted that multiple courts since Inclusive Communities, including
courts of appeals, have read Inclusive Communities as affirming or
implicitly adopting the 2013 Rule's burden-shifting test and have
applied the 2013 Rule's framework.\69\ A commenter pointed out that the
district court in Inclusive Communities stated on remand that, ``[a]s a
result of the Fifth Circuit's decision adopting the HUD regulations,
and the Supreme Court's affirmance (without altering the burden-
shifting approach), the following proof regimen now applies to ICP's
disparate impact claim under the [Act].'' \70\ A commenter also cited
multiple district court decisions that have incorporated the language
of Inclusive Communities when applying the 2013 Rule's framework.\71\
Another commenter noted that Inclusive Communities endorsed
``heartland'' cases,\72\ all of which used burden shifting frameworks
consistent with the proposed rule. Commenters also stated that the 2020
Rule did not meaningfully address MHANY Management, Inc., de Reyes v.
Waples Mobile Home Park Limited Partnership,
[[Page 19458]]
or Avenue 6E Investments, LLC v. City of Yuma, which found that the
2013 Rule remained valid after Inclusive Communities. A commenter added
that in Property Casualty Insurance Association of America v.
Carson,\73\ a lawsuit directly challenging the validity of the 2013
Rule, the district court held that Inclusive Communities affirmed HUD's
burden-shifting approach and did not identify any aspect of the
approach that required correction.
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\69\ See. e.g., Mhany Mgmt., Inc. v. Cnty. of Nassau at 618-20;
Oviedo Town Ctr. II, L.L.L.P. v. City of Oviedo, 759 F. App'x 828,
834-35 (11th Cir. 2018); de Reyes v. Waples Mobile Home Park L.P.,
903 F.3d 415, 426 n.6, 428 (4th Cir. 2018); see also Nat'l Fair
Hous. All. v. Travelers Indem. Co., 261 F. Supp. 3d 20, 29-30
(D.D.C. 2017); Nat'l Fair Hous. All. v. Bank of Am., N.A., 401 F.
Supp. 3d 619, 631-632 (D. Md. 2019); See, e.g., River Cross Land
Co., LLC v. Seminole Cty., 2021 WL 2291344, at *66-69, 72-73, 75-76
(M.D. Fla. June 4, 2021); Jones v. City of Faribault, No. 18-1643
(JRT/HB), 2021 U.S. Dist. LEXIS 36531, at *48-49 (D. Minn. Feb. 18,
2021); Conn. Fair Hous. Ctr. v. CoreLogic Rental Prop. Sols., LLC,
478 F. Supp. 3d 259, 296 (Aug. 7, 2020) (and related decisions, see
CoreLogic, No. 3:17-cv-705 (VLB), 2020 WL 401776 (D. Conn. Jan. 24,
2020)); Borum v. Brentwood Vill., LLC, 2020 U.S. Dist. LEXIS 54840,
at *13 (D.D.C. Mar. 30, 2020); NFHA v. Deutsche Bank Nat'l Trust,
2019 WL 5963633 (N.D. Ill. Nov. 13, 2019); Yellowstone Women's First
Step House Inc. v. City of Costa Mesa, 2019 U.S. Dist. LEXIS 221209,
at *4 (C.D. Cal. Nov. 4, 2019); Mass. Fair Hous. Ctr., 496 F. Supp.
3d at 611.
\70\ Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. &
Cmty. Affairs, 2015 WL 5916220 at *3 (N.D. Tex. 2015).
\71\ Prince George's Cty. v. Wells Fargo & Co., 397 F. Supp. 3d
752, 766 (D. Md. 2019); Fortune Soc'y v. Sandcastle Hous. Dev. Fund
Corp., 388 F. Supp. 3d 145, 172-173 (E.D.N.Y. 2019); Conn. Fair
Hous. Ctr. v. Corelogic Rental Prop. Sols., LLC, 369 F. Supp. 3d
362, 377-78 (D. Conn. 2019); Nat'l Fair Hous. All. v. Fannie Mae
(``Fannie Mae''), 294 F. Supp. 3d 940, 947 (N.D. Cal. 2018); Paige
v. N.Y.C. Hous. Auth., 2018 U.S. Dist. LEXIS 137238, at *9 (S.D.N.Y.
Aug. 14, 2018); R.I. Comm'n for Hum. Rights v. Graul, 120 F. Supp.
3d 110, 123-24 (D.R.I. 2015); Price v. Country Brook Homeowners
Ass'n, 2021 U.S. Dist. LEXIS 228914, at *5-6 (S.D. Ohio Nov. 30,
2021); Pickett v. City of Cleveland, No. 1:19 CV 2911, 2020 U.S.
Dist. LEXIS 259242, at *9 (N.D. Ohio Sep. 29, 2020); Winfield v.
City of N.Y., No. 15CV5236-LTS-DCF, 2016 U.S. Dist. LEXIS 146919, at
*18-19 (S.D.N.Y. Oct. 24, 2016); Alexander v. Edgewood Mgmt. Corp.,
Civil Action No. 15-01140 (RCL), 2016 U.S. Dist. LEXIS 145787, at
*6-7 (D.D.C. July 22, 2016).
\72\ See e.g. United States v. City of Black Jack, Mo., 508 F.2d
1179, 1184 (8th Cir. 1974); Huntington Branch, NAACP v. Huntington,
844 F.2d 926, 937 (2nd Cir. 1988); Greater New Orleans Fair Housing
Action Center v. St. Bernard Parish, 641 F. Supp. 2d 563, 567-568
(E.D. La. 2009).
\73\ Prop. Cas. Insurers Ass'n of Am. v. Carson, 2017 WL
2653069, at *8-9 (N.D. Ill. June 20, 2017) (finding that HUD's 2013
adoption of the 3-step burden-shifting framework was a reasonable
interpretation of the Act and that ``in short, the Supreme Court in
Inclusive Communities . . . did not identify any aspect of HUD's
burden-shifting approach that required correction.'')
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Other commenters opposed the proposed rule, stating that it is
inconsistent with Inclusive Communities. In support of this, commenters
noted that the 2013 Rule preceded Inclusive Communities and stated that
the 2013 Rule does not adequately incorporate the holdings of that
case. Commenters requested that HUD retain the 2020 Rule or incorporate
additional language from the Inclusive Communities decision into this
final rule. Commenters stated that although Inclusive Communities
mentioned the 2013 Rule, it did not endorse the rule. Others stated
that the 2013 Rule does not align with the Supreme Court's caution
against injecting racial considerations into every housing decision and
perpetuating race-based considerations rather than moving beyond them.
A commenter said that compliance with the rule, as opposed to Inclusive
Communities, will lead to costly litigation. Commenters noted that the
Supreme Court specifically limited the scope of Inclusive Communities
to the first question presented (whether disparate impact claims were
cognizable under the Act) so references to the 2013 Rule cannot be
viewed as approving the 2013 framework. Commenters further stated that
the Court in Inclusive Communities did not state that the 2013 Rule
incorporates the appropriate limits of disparate impact liability.
Another commenter stated that courts, such as the court in Woda
Cooper Dev., Inc. v. City of Warner Robins, Civ. No. 5:20-CV-159 (MTT),
2021 WL 1093630, *1, at *7 (M.D. Ga. Mar. 22, 2021), have struggled to
apply the 2013 Rule's framework in the wake of Inclusive Communities,
with some choosing to ignore the rule entirely. The commenter stated
that Inclusive Communities identified a number of safeguards to prevent
abusive disparate impact cases but did not provide detailed
explanations of those safeguards or guidance on how courts should apply
those safeguards. The commenter urged HUD to elaborate on those
safeguards in the final rule.
HUD Response: HUD agrees with the commenters who stated that the
2013 Rule is consistent with the Inclusive Communities holding. The
Court in Inclusive Communities did not call into question the 2013
Rule's framework for analyzing discriminatory effects claims, nor did
it suggest that HUD should make any modifications to that framework. To
the contrary, the Court cited HUD's 2013 Rule several times with
approval.\74\ For instance, the Court noted that the burden-shifting
framework of Griggs and its progeny, adopted by HUD in the 2013 Rule
and retained in this final rule, adequately balanced the interests of
plaintiffs and defendants by giving housing providers the ability ``to
state and explain the valid interest served by their policies.'' \75\
The Court also discussed the history of HUD's promulgation of the 2013
Rule, noted that lower courts had relied on it, and repeatedly cited
its three-part burden shifting test.\76\ Notably, other courts have
recognized these findings and relied on the 2013 Rule's burden shifting
framework without difficulty since Inclusive Communities was
decided.\77\ Moreover, HUD agrees that Inclusive Communities'
discussion approving the holdings of the ``heartland cases'' supports
reinstating the 2013 Rule.\78\ HUD also agrees that the 2020 Rule did
not adequately address the well-considered and thorough reasoning of
MHANY Mgmt., de Reyes, and Avenue 6E Investments, LLC, each of which
found that the 2013 Rule remained valid after Inclusive
Communities.\79\
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\74\ Inclusive Cmtys. Project, 576 U.S. at 527, 535-536, 541.
\75\ Id. at 541.
\76\ Id. at 527-28.
\77\ Supra at n.69. See also Robert G. Schwemm, Housing
Discrimination Law and Litigation Sec. 10:5 (August 2022) (``[t]he
basic structure and language of the HUD and Inclusive Communities
standards are nearly identical'' and ``th[e] slight semantic
variation [in the second step of the burden shifting framework] may
not signal any real substantive difference . . .''; de Reyes v.
Waples Mobile Home Park L.P., 903 F.3d 415 fn4 (4th Cir. 2018)
(while not relying on the 2013 Rule, the court noted that ``[t]he
HUD regulation is similar to the framework the Supreme Court
ultimately adopted in Inclusive Communities, and indeed, some courts
believe the Supreme Court implicitly adopted the HUD framework
altogether'').
\78\ Inclusive Cmtys. Project, Inc., 576 U.S. at 519, 539; See
e.g. Huntington v. Huntington Branch, NAACP, 488 U.S. at 16-18;
United States v. City of Black Jack, Mo., 508 F.2d 1179, 1184, 1187-
88 (8th Cir. 1974) (specific facts produced during the case
supported the court's determination that the policy was one of those
``artificial, arbitrary, and unnecessary'' practices that is
properly invalidated under disparate impact doctrine.); Greater New
Orleans Fair Hous. Action Ctr. v. St. Bernard Par., 641 F. Supp. 2d
563, 567-568 (E.D. La. 2009) (relying on information gathered after
the pleadings to find illegal disparate impact).
\79\ See, e.g., de Reyes v. Waples Mobile Home Park Ltd. P'ship,
903 F.3d 415, 424, 432 n.10 (4th Cir. 2018) (noting that ``[i]n
Inclusive Communities, the Supreme Court explained that an FHA
disparate-impact claim should be analyzed under a three-step,
burden-shifting framework [and proceeding to outline the same
framework as under the 2013 Rule]; further disagreeing that the HUD
regulation and guidance conflict with Inclusive Communities and
cannot be relied upon, and thus ``afford[ing] the HUD regulation and
guidance the deference it deserves'') (citations omitted); MHANY
Mgmt. Inc. v. Cnty. of Nassau, 819 F.3d 581, 618-619 (2d Cir. 2016)
(deferring to HUD's [2013] regulation, noting that ``the Supreme
Court implicitly adopted HUD's [burden shifting] approach [in 24 CFR
100.500(c)]''); Avenue 6E Invs., LLC v. City of Yuma, 818 F.3d 493,
512-513 (9th Cir. 2016) (citing Inclusive Communities and the 2013
Rule at 100.500(c) for the same proposition); Nat'l Fair Hous.
Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 29 (D.D.C.
2017) (citing Inclusive Communities and HUD's 2013 Rule at
100.500(c) as standing for the same proposition); Prop. Cas.
Insurers Ass'n of Am. v. Carson, 2017 WL 2653069, at *8-9 (N.D. Ill.
June 20, 2017) (finding that HUD's 2013 adoption of the three-step
burden-shifting framework was a reasonable interpretation of the Act
and that ``in short, the Supreme Court in Inclusive Communities . .
. did not identify any aspect of HUD's burden-shifting approach that
required correction.''); Burbank Apartments Tenant Ass'n v. Kargman,
474 Mass. 107, 126-27 (Mass. 2016) (explaining that it was following
the ``burden-shifting framework laid out by HUD and adopted by the
Supreme Court in [Inclusive Communities].'').
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HUD disagrees with the commenters who stated that the 2020 Rule
should be retained because it is consistent with and incorporates the
``safeguards'' described in Inclusive Communities. As discussed above,
in Inclusive Communities, the Court did not express any disapproval of
the 2013 Rule's framework or specify that it lacked any safeguards.
Rather, the Court observed that ``disparate-impact liability has always
been properly limited in key respects,'' making clear that it was not
calling for any significant departure from pre-existing precedent under
the Act or the 2013 Rule.\80\ HUD believes that had the Court intended
to overhaul disparate impact jurisprudence, the Court would have done
so expressly, rather than citing the 2013 Rule favorably. Moreover, HUD
notes that the Court declined to accept certiorari on the proper
standard for assessing disparate impact cases.\81\And, as noted above,
multiple courts have since read Inclusive Communities as affirming or
endorsing the 2013 Rule's burden-
[[Page 19459]]
shifting framework.\82\ Even if the Court did not endorse the 2013 Rule
in Inclusive Communities, it did not discard or significantly alter
preexisting disparate impact jurisprudence. The 2013 Rule adopts the
majority view of preexisting law. HUD believes that to the extent that
some courts have attempted to impose limitations greater than those
described in the 2013 Rule, they have misread Inclusive Communities.
Moreover, the 2013 Rule did not inject racial considerations into
housing decisions, and nothing in Inclusive Communities indicates that
the Court believed the Rule improperly did so. Accordingly, HUD
continues to believe that the burden-shifting test articulated in the
2013 Rule is the most appropriate framework for litigating
discriminatory effects claims consistent with the Act and Inclusive
Communities.
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\80\ See Inclusive Cmtys. Project, 576 U.S. at 540 (emphasis
added).
\81\ Inclusive Cmtys. Project, Inc., 573 U.S. 991 (2014), 2014
U.S. LEXIS 4912 at *1 (``Petition for writ of certiorari to the
United States Court of Appeals for the Fifth Circuit granted limited
to Question 1 presented by the petition.''); See also Questions
Presented in, Inclusive Cmtys Project, Inc., 573 U.S. 991.
\82\ See, e.g., Prop. Cas. Insurers Ass'n, 2017 WL 2653069, at
*9 (N.D. Ill. June 20, 2017) (``[T]he Supreme Court in Inclusive
Communities expressly approved of disparate-impact liability under
the FHA and did not identify any aspect of HUD's burden-shifting
approach that required correction.''); MHANY Mgmt., Inc.,)
(explaining that in Inclusive Communities, ``[t]he Supreme Court
implicitly adopted HUD's approach''); de Reyes v. Waples Mobile Home
Park Limited Partnership, 903 F.3d 415 (4th Cir. 2018); See Oviedo
Town Ctr. II, L.L.L.P. v. City of Oviedo, 759 F. App'x 828, 834-35
(11th Cir. 2018) (citing Schwarz v. City of Treasure Island, 544
F.3d 1201 (11th Cir. 2008)); Nat'l Fair Hous. All. v. Bank of Am.,
N.A., 401 F. Supp. 3d 619, 631-632 (D. Md. 2019) (explaining that
the Supreme Court in Inclusive Communities ``[h]ew[ed] closely to
regulations promulgated by HUD in 2013'').
---------------------------------------------------------------------------
Issue: Commenters cited Lincoln Property, Oviedo, River Cross Land
Co., County of Cook, Ill. v. Wells Fargo & Co, and Nat'l Fair Hous.
All. v. Travelers Indem. Co. as evidence that several courts have held
that the 2013 Rule was inconsistent with Inclusive Communities.\83\ By
contrast, other commenters stated that out of more than 40 federal
appellate and district court decisions in disparate impact cases
following Inclusive Communities,\84\ only Lincoln Property, an
appellate decision, and district courts bound by Lincoln Property,
found any inconsistency between the 2013 Rule and Inclusive
Communities.\85\
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\83\ Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co., 920
F.3d 890, 902 (5th Cir. 2019); Oviedo Town Ctr, II, L.L.P. v. City
of Oviedo, Florida, 759 Fed. App'x 828, 833-35 (11th Cir. 2018) (per
curiam); River Cross Land Co., LLC v. Seminole Cty., 2021 WL
2291344, at *22-24 (M.D. Fla. June 4, 2021); Cnty. of Cook, Ill. v.
Wells Fargo & Co., 314 F. Supp. 3d 975, 990 (N.D. Ill. 2018); Nat'l
Fair Hous. All. v. Travelers Indem. Co., 261 F. Supp. 3d 20, 22
(D.D.C. 2017).
\84\ See, e.g., de Reyes v. Waples Mobile Home Park Ltd. P'ship,
903 F.3d 415 (4th Cir. 2018); MHANY Mgmt. Inc. v. Cnty, of Nassau,
819 F.3d 581 (2d Cir 2016); Avenue 6E Invs., LLC v. City of Yuma,
818 F.3d 493 (9th Cir. 2016); Prince George's Cnty. v. Wells Fargo &
Co., (397 F. Supp. 3d 752, 766 (D. Md. 2019); Fortune Soc'y v.
Sandcastle Hous. Dev. Fund Corp., 388 F. Supp. 3d 145, 172-173
(E.D.N.Y. 2019); Conn. Fair Hous. Ctr. v. Corelogic Prop. Sols.
LLC,, 369 F. Supp. 3d 362, 377-78 (D. Conn. 2019); National Fair
Hous All. v. Fed. Nat'l Mortg. Ass'n, 294 F. Supp. 3d 940, 947 (N.D.
Cal 2018); City of Philadelphia v. Wells Fargo & Co., No. 17-cv-
2203, 2018 WL 424451, at *4 (E.D. Pa. Jan. 16, 2018); Paige v. New
York City Hous. Auth., No. 17-cv-7481, 2018 WL 3863451, at *3-4
(S.D.N.Y. Aug. 14, 2018); Rhode Island Comm'n for Hum. Rights v.
Graul, 120 F. Supp. 3d 110, 123-24 (D.R.I. 2015); Sams v. Ga West
Gate LLC, No. cv-415-282, 2017 WL 436281, at *5 (S.D. Ga. Jan. 30,
2017); Winfield v. City of New York, No. 15-cv-5236, 2016 WL
6208564, at *5 (S.D.N.Y. Oct. 24, 2016); Alexander v. Edgewood Mgmt.
Corp., No. 15-01140, 206 WL 5957673, at *2-3 (D.D.C. July 25, 2016);
Hall v. Philadelphia Hous. Auth., No. 17-5753, 2019 WL 1545183, at
*5 & n.5 (E.D. Pa. Apr. 9, 2019); Jackson v. Tryon Park Apartments,
Inc., No. 6:18-cv-06238, 2019 WL 331635, at *1 (W.D.N.Y. Jan. 25,
2019); Johnson v. Johnson, No. 4:18-CV-04138-RAL, 2018 WL 5983508,
at *2 (D.S.D. Nov. 14, 2018); Ekas v. Affinity Prop. Mgmt., No.
3:16-cv-1636, 2017 WL 7360366, at *3 (D. Ore. Dec. 7, 2017); Alms
Residents Ass'n v. U.S. Dep't of Hous. & Urban Dev., No. 1:17-cv-
605, 2017 WL 4553401, at *11 (S.D. Ohio Oct. 12, 2017); Oviedo Town
Ctr. II, L.L.L.P. v. City of Oviedo, No. 6:16-cv-1005, 2017 WL
3621940, at *4 (M.D. Fla. Aug. 23, 2017), aff'd, 759 Fed. App'x 828
(11th Cir. ); National Fair Housing. Alliance v. Travelers Indem.
Co., 261 F. Supp. 3d 20, 29 (D.D.C. 2017); Prop. Cas. Insurers
Assoc. v. Carson, 2017 WL 2653069 at *9 (N.D. Ill. June 20, 2017)
(``[T]he Supreme Court in Inclusive Communities expressly approved
of disparate-impact liability under the FHA and did not identify any
aspect of HUD's burden-shifting approach that required
correction''); Martinez v. Optimus Props., LLC, Nos. 2:16-cv-08598-
SVW-MRW, 2017 WL 1040743, at *2 (C.D. Cal. Mar. 14, 2017); Borum v.
Brentwood Vill., LLC, 218 F. Supp. 3d 1, 21-22 (D.D.C. 2016);
Khodeir v. Sayyed, No. C 15-8763, 2016 WL 5817003, at *6 (S.D.N.Y.
Sept. 28, 2016); Crossroads Residents Organized for Stable and
Secure ResiDencieS v. MSP Crossroads Apartments LLC, No. C 16-233,
2016 WL 3661146, at *8 (D. Minn. July 5, 2016); Azam v. City of
Columbia Heights, No. C No. 14-1044, 2016 WL 424966, at *10 (D.
Minn. Feb. 3, 2016).
\85\ See Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co.,
920 F.3d 890, 902 (5th Cir. 2019). For district court decisions
bound by Lincoln Prop., see, e.g., Treece v. Perrier Condominium
Owners Ass'n, Inc., --F. Supp. 3d--, No. 17-10153, 2021 WL 533720
(E.D. La. Feb. 12, 2021); Inclusive Cmtys. Project, Inc. v.
Heartland Community Ass'n, 399 F. Supp. 3d 657 (N.D. Tex. 2019).
---------------------------------------------------------------------------
HUD Response: HUD disagrees that the cases the commenters cited
compel the conclusion that this rule is inconsistent with Inclusive
Communities. As HUD has previously stated on many occasions, including
in the preamble to the 2020 Rule, the 2013 Rule is consistent with
Inclusive Communities.\86\ The vast majority of courts to consider this
issue subsequent to Inclusive Communities, including at least three
federal appellate courts, have agreed.\87\ Multiple courts have
specifically read Inclusive Communities to have affirmed or endorsed
the 2013 Rule's burden-shifting framework.\88\ For example, in River
Cross, one of the decisions commenters characterized as demonstrating
incompatibility between the 2013 Rule and Inclusive Communities, the
court in fact recognized that Inclusive Communities
[[Page 19460]]
approvingly cited the 2013 Rule, applied the 2013 Rule, and found it to
be easily reconciled with Inclusive Communities.\89\ HUD has determined
that the small number of courts that reached contrary conclusions
misinterpreted the scope of the Inclusive Communities holding, and HUD
declines to adopt the minority views of these courts.
---------------------------------------------------------------------------
\86\ See 85 FR 60299 (noting that the 2013 Rule is one but not
the only ``permissible interpretation of disparate impact liability
under the FHA''). See also Defendants' Opposition to Plaintiff's
Motion for Leave to Amend Complaint, Prop. Cas. Ins. Assoc. of Am.
v. Carson and the U.S. Dep't of Hous. and Urb. Dev., No. 1:13-cv-
08564 (2017); Defendants' Memorandum in Support of Their Motion for
Summary Judgment and in Opposition to Plaintiffs' Motion for Summary
Judgment, Am. Ins. Assoc. v. U.S. Dep't of Hous. and Urb. Dev. et
al., No. 1:13-cv-00966 (RJL) (D.D.C. 2016).
\87\ See, e.g., de Reyes v. Waples Mobile Home Park Ltd. P'ship,
903 F.3d 415, 424, 432 n.10 (4th Cir. 2018) (noting that ``[i]n
Inclusive Communities, the Supreme Court explained that an FHA
disparate-impact claim should be analyzed under a three-step,
burden-shifting framework [and proceeding to outline the same
framework as under the 2013 Rule]; further disagreeing that the HUD
regulation and guidance conflict with Inclusive Communities and
cannot be relied upon, and thus ``afford[ing] the HUD regulation and
guidance the deference it deserves'') (citations omitted); MHANY
Mgmt. Inc. v. Cnty. of Nassau, 819 F.3d 581, 618-619 (2d Cir. 2016)
(deferring to HUD's [2013] regulation, noting that ``the Supreme
Court implicitly adopted HUD's [burden shifting] approach [in 24 CFR
100.500(c)]''); Avenue 6E Invs., LLC v. City of Yuma, 818 F.3d 493,
512-513 (9th Cir. 2016) (citing Inclusive Communities and the 2013
Rule at 100.500(c) for the same proposition); Nat'l Fair Hous.
Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 29 (D.D.C.
2017) (citing Inclusive Communities and HUD's 2013 Rule at
100.500(c) as standing for the same proposition); Prop. Cas.
Insurers Ass'n of Am. v. Carson, 2017 WL 2653069, at *8-9 (N.D. Ill.
June 20, 2017) (finding that HUD's 2013 adoption of the 3-step
burden-shifting framework was a reasonable interpretation of the Act
and that ``in short, the Supreme Court in Inclusive Communities . .
. did not identify any aspect of HUD's burden-shifting approach that
required correction.''); Burbank Apartments Tenant Ass'n v. Kargman,
474 Mass. 107, 126-27 (Mass. 2016) (explaining that it was following
the ``burden-shifting framework laid out by HUD and adopted by the
Supreme Court in [Inclusive Communities].'').
\88\ See, e.g., MHANY Mgmt. Inc. v. Cnty. of Nassau, 819 F.3d
581, 618 (2d Cir 2016) (``the Supreme Court implicitly adopted HUD's
approach''); 6E Invs., LLC v. City of Yuma, 818 F.3d 493, 512-513
(9th Cir. 2016) (citing the 2013 Rule in describing the three-prong
analytical structure set forth in Inclusive Communities); Nat'l Fair
Hous. Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 20
(D.D.C. 2017) (stating that the Supreme Court ``carefully explained
that disparate-impact liability has always been properly limited''
and that ``disparate-impact liability under the FHA can be proven
under a burden-shifting framework analogous to that used in
employment discrimination cases.'') (internal citations and
quotations omitted); Prop. Cas. Insurers Ass'n of Am. v. Carson,
2017 WL 2653069, at *8-9 (N.D. Ill. June 20, 2017) (finding that
HUD's 2013 adoption of the 3-step burden-shifting framework a
reasonable interpretation of the Act, finding that ``in short, the
Supreme Court in Inclusive Communities . . . did not identify any
aspect of HUD's burden-shifting approach that required
correction.''); Burbank Apartments Tenant Ass'n v. Kargman, 474
Mass. 107, 126-27 (Mass. 2016) (explaining that it was following the
``burden-shifting framework laid out by HUD and adopted by the
Supreme Court in [Inclusive Communities].''); Jackson v. Tryon Park
Apartments, Inc., No. 6:18-CV-06238 EAW, 2019 U.S. Dist. LEXIS
12473, at *11 (W.D.N.Y. Jan. 25, 2019) (noting that ``the Supreme
Court's 2015 Inclusive Communities Project ruling uph[eld] [HUD's
2013] regulation'').
\89\ River Cross Land Co., LLC v. Seminole Cty., 2021 WL
2291344, at *66-69, 72-73, 75-76 (M.D. Fla. June 4, 2021).
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In light of the views of a majority of courts and HUD's experience
applying the Act, HUD finds that the Fifth Circuit's conclusions in
Lincoln Property do not require it to change course.\90\ In that case,
the majority of a divided panel acknowledged that Inclusive Communities
reviewed and affirmed the Fifth Circuit's earlier judgment in that
case, remanding to the trial court to apply the 2013 Rule's burden-
shifting framework, and that the Court did not explicitly call into
question the 2013 Rule's requirements. Nonetheless, the Lincoln
Property court found that because the Supreme Court in Inclusive
Communities had not explicitly stated that it was adopting the 2013
Rule's framework, whether the Court accepted the framework or modified
it remained unresolved.\91\ The court construed language from Inclusive
Communities as calling for courts to make it more difficult to plead a
discriminatory effects claim in some fashion, but acknowledged that
Inclusive Communities provided no clear direction as to how it was thus
changing the law. While acknowledging that other appellate courts had
interpreted Inclusive Communities to have ``implicitly adopted the 2013
framework,'' the panel's review of certain passages from Inclusive
Communities and of subsequent decisions from the Fourth, Eighth, and
Eleventh Circuits \92\ led the panel to conclude simply that Inclusive
Communities ``announce[d] a more demanding test than that set forth in
the HUD regulation'' but ``did not clearly delineate its meaning or
requirements.'' \93\ Finding no consensus even among those who believed
Inclusive Communities made some change, it concluded that the claim at
issue in that case was not properly pleaded under any of several
possible standards it could apply, making it unnecessary to state with
more specificity how, in its view, Inclusive Communities had changed
the law.
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\90\ Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co., 920
F.3d 890 (5th Cir. 2019).
\91\ Id. at 902.
\92\ Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co., 920
F.3d 890, 902-05 (5th Cir. 2019) (citing de Reyes v. Waples Mobile
Home Park Ltd. P'ship, 903 F.3d 415 (4th Cir. 2018); Ellis v. City
of Minneapolis, 860 F.3d 1106, 1114 (8th Cir. 2017); Oviedo Town
Ctr. II, L.L.P. v. City of Oviedo, 759 Fed. App'x 828 (11th Cir.
2018)) (pinpoint citations omitted).
\93\ See Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co.,
920 F.3d 890, 902 (5th Cir. 2019).
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HUD believes Lincoln Property's language concerning a more
demanding standard is not a reason to change the standard it
promulgated in 2013. As stated earlier, HUD disagrees that anything in
Inclusive Communities is inconsistent with the 2013 Rule's requirements
for discriminatory effects claims. Rather, HUD agrees with the Fourth
Circuit that the 2013 Rule ``is similar to the framework the Supreme
Court ultimately adopted in Inclusive Communities,'' and with its
observation that ``some courts believe the Supreme Court implicitly
adopted the HUD framework altogether.'' \94\ But even if the Fifth
Circuit were correct in identifying inconsistencies between the 2013
Rule and Inclusive Communities, Lincoln Property does not provide
persuasive reasoning for HUD to modify the 2013 Rule, because the court
only found ambiguity in the law after Inclusive Communities rather than
specifying the way in which HUD needed to change course. Additionally,
the other circuit courts that have analyzed the robust causation
discussion in Inclusive Communities have either defined it in a way
that is consistent with this final rule or were similarly non-specific
in explaining robust causality's meaning.\95\
---------------------------------------------------------------------------
\94\ Reyes, 903 F.3d at 424 n.4 (collecting cases).
\95\ See de Reyes v. Waples Mobile Home Park Ltd. P'ship, 903
F.3d 415, 424-27 (4th Cir. 2018) (explaining that identifying policy
that causes disparity establishes robust causation); Ellis v. City
of Minneapolis, 860 F.3d 1106, 1111 (8th Cir. 2017) (quoting
Inclusive Cmtys., but not defining robust causation beyond
identifying the connection between a challenged policy and a
disparate impact); Oviedo Town Ctr. II, L.L.L.P. v. City of Oviedo,
759 F. App'x 828, 834-36 (11th Cir. 2018) (plaintiff must make
statistical showing sufficient to connect challenged policy and
disparate impact)
---------------------------------------------------------------------------
HUD notes that, while acknowledging that other appellate courts had
interpreted Inclusive Communities to have ``implicitly adopted the 2013
framework,'' the Fifth Circuit panel's review of certain passages from
Inclusive Communities as well as subsequent decisions from the Fourth,
Eighth, and Eleventh Circuits,\96\ led the panel to conclude that
Inclusive Communities ``undoubtedly announce[d] a more demanding test
than that set forth in the HUD regulation.'' \97\ HUD believes that in
two of these decisions, the courts gave more deference to the 2013 Rule
than the commenters recognized.\98\ Additionally, in the district court
decisions cited by the commenters, and in Lincoln Property's progeny,
HUD believes that the courts misread Inclusive Communities as creating
heightened pleading standards.\99\ Even Lincoln Property only requires
a plaintiff to plausibly demonstrate a robust causal connection between
a discriminatory practice and an alleged disparate impact.\100\ HUD
adopts the view of courts that found Inclusive Communities endorsed the
2013 Rule's framework.
---------------------------------------------------------------------------
\96\ Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co., 920
F.3d 890, 902-05 (5th Cir. 2019) (citing de Reyes v. Waples Mobile
Home Park Ltd. P'ship, 903 F.3d 415 (4th Cir. 2018); Ellis v. City
of Minneapolis, 860 F.3d 1106, 1114 (8th Cir. 2017); Oviedo Town
Ctr. II, L.L.P. v. City of Oviedo, 759 Fed. App'x 828 (11th Cir.
2018)) (pinpoint citations omitted).
\97\ See Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co.,
920 F.3d 890, 902 (5th Cir. 2019).
\98\ River Cross Land Co., LLC v. Seminole Cty., 2021 WL
2291344, at *66-69, 72-73, 75-76 (M.D. Fla. June 4, 2021); Oviedo
Town Ctr. II, L.L.L.P. v. City of Oviedo, No. 6:16-cv-1005, 2017 WL
3621940, at *4 (M.D. Fla. Aug. 23, 2017) (utilizing 2013 Rule to
analyze disparate impact claim)
\99\ For example, the pleading standards used in Oviedo Town
Ctr, II, L.L.P. v. City of Oviedo, Florida, 759 Fed. App'x at 833-
35, and River Cross Land Co., LLC v. Seminole Cty., 2021 WL 2291344,
at *22-24, are not inconsistent with the 2013 Rule. In addition,
both Cnty. of Cook, Ill. v. Wells Fargo & Co., 314 F. Supp. 3d 975,
990 (N.D. Ill. 2018) and Nat'l Fair Hous. All. v. Travelers Indem.
Co., 261 F. Supp. 3d at 22, incorrectly relied on dicta when they
stated that Inclusive Communities created higher pleading standards
in disparate impact cases.
\100\ Inclusive Cmtys. Project, Inc. v. Lincoln Prop. Co., 920
F.3d at 899 (5th Cir. 2019).
---------------------------------------------------------------------------
HUD also notes that Lincoln Property--a suit between private
parties--was decided without the benefit of input from HUD on what
effect, if any, Inclusive Communities had on Fair Housing Act disparate
impact claims. As the agency to which Congress has delegated the
responsibility to interpret and enforce the Fair Housing Act, HUD
believes that its reasonable reading of any ambiguities in the meaning
of the Act following Inclusive Communities is entitled to
deference.\101\ Thus, to the extent Lincoln Property identified such an
ambiguity and came to conclusions that conflict with those HUD has
reached, HUD declines to adopt the court's conclusions. Any risk that
litigants in the Fifth Circuit would be subject to a different standard
than litigants elsewhere is created by the Lincoln Property decision,
not by HUD's promulgation of this rule.
---------------------------------------------------------------------------
\101\ National Cable & Telecommunications Assn. v. Brand X
internet Services, 545 U.S. 967, 980 (2005) (holding that agency
interpretation of statute can override prior judicial interpretation
when the statute is ambiguous and agency interpretation is
reasonable).
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[[Page 19461]]
In short, HUD does not believe that the cases cited by the
commenters support revisions to the rule.
Issue: Commenters stated that the proposed rule conflicts with what
they characterized as Inclusive Communities' holding that a ``robust
causality requirement . . . protects defendants from being held liable
for racial disparities they did not create.'' Some commenters asked HUD
to expressly add a robust causality requirement to the final rule,
while others asked HUD to retain the 2020 Rule, stating that it
appropriately reflected Inclusive Communities' robust causality
requirement.
Some commenters urged HUD to adopt the view that, in stating that
disparate impact claims may not be established simply by demonstrating
a ``statistical disparity'' in outcomes, Inclusive Communities held
that such claims must meet a higher causation standard than in the
proposed rule. Other commenters stated that the proposed rule does not
require proximate cause or a direct link between the policy and the
discriminatory effect, which, they said, Inclusive Communities
requires. Commenters said that if plaintiffs are not required to
establish ``robust causality'' or ``direct proximate cause,''
defendants would be liable in cases where discrimination does not
actually exist. Commenters also stated that without an explicit robust
causality requirement, race will be used in a pervasive way, leading to
the use of numerical quotas and raising constitutional questions.
Commenters stated that the requirement is necessary so that regulated
entities can make practical business choices and profit-related
decisions. A commenter suggested revising the proposed rule to provide
that to establish robust causality, the plaintiffs have the burden of
proving that a challenged practice is the sole and proximate cause, or
reasonably predicted cause, of a discriminatory effect.
Commenters who supported the proposed rule said that it
incorporates Inclusive Communities' protections for defendants who may
fear liability for disparities their policies did not create.
Commenters noted that the proposed rule does not permit liability based
on statistical disparities alone.
HUD Response: The 2013 Rule and this final rule contain a robust
causality requirement by requiring the plaintiff to prove at the first
step of the framework that a challenged practice caused or predictably
will cause a discriminatory effect. As discussed above, in HUD's view,
the framework in this final rule, which includes the requirement that
the challenged practice causes a discriminatory effect, is consistent
with Inclusive Communities. The Inclusive Communities Court did not
announce a heightened causality requirement for disparate impact
liability, a requirement which would find no support in the statutory
text or case law. Rather, in considering a district court opinion where
the trial court had found a violation of the Act without ever requiring
the plaintiff to identify a causal link between a specific policy and
the challenged disparate impact, the Court merely reiterated that
plaintiffs must identify a causal link between the challenged practice
and the alleged disparate impact that is sufficiently robust to permit
that connection to be scrutinized at each stage of the case. The 2013
Rule, and this final rule require exactly that. The 2013 Rule and this
final rule do not use the precise words ``robust causality'' and (as
explained elsewhere in this preamble) nothing in Inclusive Communities
requires these words. What Inclusive Communities requires is that a
court's examination of causality be robust. Both the 2013 Rule and this
final rule implicitly incorporate this requirement by requiring a
plaintiff to link a specific practice to a current or predictable
disparity. Ultimately, the error identified both by the Fifth Circuit
and then by the Supreme Court in Inclusive Communities came from the
district court's failure to fully apply the 2013 Rule's framework, not
the 2013 Rule's framework itself. Through its framework this rule
ensures that, as required by Inclusive Communities, defendants are not
held liable for racial disparities they did not create.\102\ The rule
thus already requires a showing of causation, not just correlation,
between the policy or practice and the disparate impact, and so is
fully consistent with Inclusive Communities.
---------------------------------------------------------------------------
\102\ See Inclusive Cmtys. Project, Inc., 576 U.S. at 519, 542
(describing robust causality as requiring that a plaintiff draw a
connection between the defendant's challenged policy causing the
alleged disparity, noting that this ensures that racial imbalance
does not, without more, establish a prima facie case of disparate
impact and thus protects defendants from being held liable for
racial disparities they did not create.)
---------------------------------------------------------------------------
HUD also believes that the rule's burden-shifting framework does
not preclude businesses from making business and profit-motivated
choices, even if they cause a discriminatory effect, so long as they do
not create an unjustified discriminatory effect. Once a plaintiff meets
its burden of proving that a policy causes a disparate impact because
of a protected characteristic, the burden then shifts to the defendant
to prove that the policy is necessary to serve the defendant's
substantial, legitimate, nondiscriminatory interest. This safeguard
allows housing providers and others to make practical business choices
and profit-related decisions. The third step of the framework then
shifts the burden back to the plaintiff to prove that an alternative
policy would have a less discriminatory effect than the challenged
policy. This rule balances the interests of the parties by allowing
defendants to implement policies that meet their needs, as long as
there is no unjustified discriminatory effect, while providing
plaintiffs the opportunity to identify policies that serve those needs
with less discriminatory effects based on protected characteristics.
HUD notes further that although the 2013 Rule has been in effect
for ten years--with similar judicial precedent effective even longer,
it is unaware of any case applying the 2013 Rule in a manner that would
impose quotas.
Issue: Commenters requested that HUD include in the final rule a
requirement that plaintiffs plead that the challenged policy is
``artificial, arbitrary, and unnecessary'' in addition to the
traditional elements of a disparate impact claim, as the 2020 Rule did.
Commenters stated that Inclusive Communities required this additional
element when the Court stated that ``[d]isparate-impact liability
mandates the `removal of artificial, arbitrary, and unnecessary
barriers' '' to ``avoid the serious constitutional questions that might
arise under the Act, for instance, if such liability were imposed based
solely on a showing of a statistical disparity.'' \103\ Another
commenter explained that the district court in Massachusetts Fair
Housing Center did not invalidate the ``arbitrary, artificial, and
unnecessary'' language in the 2020 Rule, but rather noted that it came
from Inclusive Communities and other case law, like Ellis v. City of
Minneapolis, 860 F.3d 1106, 1112 (8th Cir. 2017).
---------------------------------------------------------------------------
\103\ Id. at 540.
---------------------------------------------------------------------------
Other commenters disagreed, stating that if such a requirement were
added to the rule, it would be impossible to challenge discriminatory
policies absent facts showing discriminatory intent, thus negating
Inclusive Communities' holding that violations of the Act may be
established through proof of disparate impact. The commenters explained
that pleading that a policy is ``artificial'' is essentially pleading
that a policy is pretextual--a showing required in cases alleging
intentional discrimination, not discriminatory effects. Commenters also
noted that the phrase ``artificial, arbitrary, and
[[Page 19462]]
unnecessary'' originated in Griggs and pointed out that in applying
this phrase in Fair Housing Act cases, courts have applied it
consistent with the 2013 Rule's burden shifting framework, essentially
using it as short-hand for the three-step framework, not as a separate,
independent element. As examples, these commenters cited City of Black
Jack,\104\ which Inclusive Communities describes as a heartland case,
as well as Graoch Assocs. #33, L.P. v. Louisville/Jefferson Cty. Metro
Human Relations Comm'n.\105\ A commenter stated that the three-step
burden-shifting framework, and especially the defense at the second
step--that the policy was necessary to achieve a legitimate interest--
already ensures that as the Inclusive Communities Court described,
``disparate-impact liability mandates the `removal of artificial,
arbitrary, and unnecessary barriers,' not the displacement of valid
governmental policies.''
---------------------------------------------------------------------------
\104\ City of Black Jack, 508 F.2d at 1184-1185.
\105\ Graoch Assocs. #33, L.P., 508 F.3d 366, 374-75 (6th Cir.
2007) (``We use the burden-shifting framework described above--and
especially the final inquiry considering the strength of the
plaintiff's statistical evidence and the strength of the defendant's
business reason--to distinguish the artificial, arbitrary, and
unnecessary barriers proscribed by the FHA from valid policies and
practices crafted to advance legitimate interests.'').
---------------------------------------------------------------------------
HUD Response: HUD declines to add an ``artificial, arbitrary, and
unnecessary'' pleading standard or substantive element to this final
rule. As previously explained, HUD does not construe Inclusive
Communities to require the agency to add specific elements or pleading
standards for disparate impact cases that go beyond what ``has always''
been required.\106\ Rather, when the Inclusive Communities Court quoted
Griggs' decades-old formulation that disparate impact claims require
the removal of artificial, arbitrary, and unnecessary barriers, it did
so as part of restating the safeguards and requirements that it found
(and HUD agrees) have always been a part of disparate impact
jurisprudence. In this context, the Court quoted Griggs' short-hand
formulation for the type of policy that traditionally has been held to
create an unjustified discriminatory effect at the end of the burden
shifting analysis. HUD believes that Inclusive Communities, following
Griggs as well as earlier Fair Housing Act cases, went on to describe
policies invalidated by longstanding precedent as either ``arbitrary''
or ``artificial'' as a shorthand for those found to violate the Fair
Housing Act under traditional jurisprudence.\107\ HUD does not believe
this language, when read in context, is best read to require the agency
to impose a requirement for plaintiffs and the charging party to plead
and prove, in addition to the traditional elements, that policies are
artificial and arbitrary and unnecessary. HUD notes, moreover, that the
source of this language is Griggs, a decades-old case at the bedrock of
disparate impact jurisprudence, and notes that Griggs did not require
plaintiffs to establish that the practice at issue met each of these
three descriptors, let alone that such evidence be pleaded in a
complaint. In addition, HUD believes that reading Inclusive Communities
or other cases to support a heightened pleading standard for
plaintiffs, such as in the 2020 Rule, is contradicted by the fact that
the ``heartland'' cases cited favorably by the Court would not have
survived a motion to dismiss under that standard because plaintiffs in
those cases did not allege facts that would plausibly support a claim
that a policy or practice was arbitrary, artificial, and unnecessary to
the extent those terms are construed as requiring more than
satisfaction of the traditional elements. Simply put, in HUD's
experience implementing the Fair Housing Act, plaintiffs likely would
not have had access to such facts until after discovery.\108\ HUD
further believes that adding such a standard would also conflict with
the text and broad remedial purpose of the Act which provides ``within
constitutional limitations, for fair housing throughout the United
States.'' \109\ HUD thus concludes that a heightened pleading and proof
standard would frustrate the clearly expressed intent to use the
maximum allowable power under the law to secure equal housing
opportunity. Finally, HUD observes that Inclusive Communities did not
specify how courts and agencies should apply a new pleading and proof
standard, nor did it come close to clearly stating that it intended to
create new elements. To the extent that leaves ambiguity in the law, as
a matter of policy, HUD believes it is preferable to retain existing
standards that have decades of case law and administrative actions
specifying their content rather than impose ones that are undefined and
untested.
---------------------------------------------------------------------------
\106\ Inclusive Cmtys, 576 U.S. at 540.
\107\ Inclusive Cmtys. Project, 576 U.S. at 539-541.
\108\ Supra at n. 78.
\109\ 42 U.S.C. 3601.
---------------------------------------------------------------------------
Comments on Bank of America
Issue: Commenters stated that the proposed rule is inconsistent
with Bank of America Corp. v. City of Miami,\110\ a 2017 Supreme Court
case which held that ``proximate cause under the [Act] requires some
direct relation between the injury asserted and the injurious conduct
alleged.'' A commenter suggested that HUD add the phrase ``some direct
relation'' to the proposed rule's burden of proof standard. Another
commenter suggested revising the proposed rule to provide that in order
to establish a ``robust causal link,'' the plaintiffs have the burden
of proving that a challenged practice is the sole and proximate cause,
or reasonably predicted cause, of a discriminatory effect.'' Another
commenter suggested that HUD state that the causation analysis must
consider whether a practice is too remote to give rise to liability.
---------------------------------------------------------------------------
\110\ 137 S. Ct. 1296 (2017).
---------------------------------------------------------------------------
HUD Response: HUD believes that it is not required to add language
to this rule to ensure consistency with Bank of America. In that case,
which involved a municipality suing a lender on the theory that
predatory lending practices had caused foreclosures which in turn
eventually led to damages to the municipality such as reduced tax
revenues, the Supreme Court held that, because actions for damages
under the Act are akin to tort actions, such suits are ``subject to the
common-law requirement that loss is attributable to the proximate
cause, and not to any remote cause.'' \111\ The Court declined to
further explain the proximate cause requirement as applied to Fair
Housing Act claims and did not suggest that such a requirement would
otherwise alter analyses under the Act. For example, HUD believes that
Bank of America has no impact on the ability of organizational
plaintiffs to prove standing by tracing their injuries to the
challenged policy.\112\
---------------------------------------------------------------------------
\111\ Id. at 1305.
\112\ Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982).
---------------------------------------------------------------------------
HUD believes, although the Bank of America decision was in the
context of a disparate impact claim, it is not inherently specific to
and does not create an additional burden for disparate impact claims.
To the contrary, HUD believes that the proximate cause requirement Bank
of America described for standing applies to all Fair Housing Act
cases, not just disparate-impact claims, and so HUD does not believe it
is appropriate to add a proximate-cause requirement to the regulatory
requirements that are specific to disparate-impact claims. More
broadly, this rule does not purport to address the requirements for
Fair Housing Act standing, and neither Bank of America nor any other
case requires HUD to add such considerations to this rule. Accordingly,
HUD believes that
[[Page 19463]]
adding the suggested language to this final rule, which purports only
to set out the framework for analyzing the merits of disparate impact
claims, is unnecessary. Nothing in this rule creates a conflict with
Bank of America or bars a court from applying its requirements. This
rule simply does not touch on that subject matter.
HUD additionally observes that, in its view, Bank of America
applies to claims such as the one in that case that involve unusual
claims in which the policy challenged has an unusually attenuated
connection to the alleged harm to the plaintiff. HUD does not construe
Bank of America as having a larger impact on longstanding principles of
Fair Housing Act standing.
Discriminatory Effects as Applied to Insurance \113\
---------------------------------------------------------------------------
\113\ Many of the issues raised by commenters regarding the
application to insurance in response to the proposed rule were also
raised in commenting on the 2013 rule. HUD's 2016 Supplemental
Responses covers these issues in depth. ``Application of the Fair
Housing Act's Discriminatory Effects Standard to Insurance.'' 81 FR
69012. In considering these comments, HUD has reviewed the 2016
Supplemental Responses and believes the responses made there
continue to accurately reflect HUD's interpretation of
discriminatory effects law.
---------------------------------------------------------------------------
Issue: Commenters asked HUD to exempt homeowners insurance--in
whole or in part, as well as risk-based pricing and underwriting in
particular--from liability for any unjustified discriminatory effects,
advancing a number of reasons. Among other things, commenters stated
that the fundamental nature of insurance does not allow discriminatory
effects liability; such claims cannot succeed as a matter of law; and
the McCarran-Ferguson Act \114\ bars claims. A commenter said that
applying the rule to insurers is unnecessary because there have been no
allegations or findings of unlawful discriminatory effects against an
insurer prior to or since 2013. Other commenters disagreed, stating
that HUD should not create exceptions for any industry, including
insurance, because such categorical exemptions are unworkable and
inconsistent with the Act's purpose, which is broad and inclusive.
Commenters also stated that exemptions would allow some discriminatory
practices to go uncorrected.
---------------------------------------------------------------------------
\114\ 15 U.S.C. 1011 et.seq.
---------------------------------------------------------------------------
HUD Response: HUD declines to provide an exemption for the
insurance industry in whole or in part. HUD responds below to the
specific reasons commenters advanced for exempting homeowners
insurance. However, as a threshold matter, HUD lacks the authority to
create exemptions that are not in the text of the Act. When Congress
passed the Act in 1968 and amended it in 1988, it established
exemptions for certain practices but not for insurance.\115\
Furthermore, courts have routinely applied the Act to insurers and have
found that discriminatory effects liability applies to insurers under
the Act.\116\ Moreover, nothing in this rule precludes insurers from
raising a defense based on the McCarran-Ferguson Act \117\ or from
arguing that claims cannot succeed as a matter of law in particular
cases. What HUD is declining to do, and what it believes it has no
authority to do, is provide a single industry or a set of specific
practices a blanket exemption from liability from all claims regardless
of whether those claims otherwise would satisfy the rule's (and the
Act's) requirements.
---------------------------------------------------------------------------
\115\ See Sierra Club v. EPA, 719 F.2d 436, 453 (D.C. Cir. 1983)
(``The agency relies on its general authority under section 301 of
the Act to `prescribe such regulations as are necessary to carry out
[its] functions under [the Act]' . . . . EPA's construction of the
statute is condemned by the general rule that when a statute lists
several specific exceptions to the general purpose, others should
not be implied.''); see, e.g., Colorado Pub. Int. Rsch. Grp., Inc.
v. Train, 507 F.2d 743, 747 (10th Cir. 1974) rev'd on other grounds,
426 U.S. 1 (1976) (``Another cardinal rule of statutory construction
is that where the legislature has acted to except certain categories
from the operation of a particular law, it is to be presumed that
the legislature in its exceptions intended to go only as far as it
did, and that additional exceptions are not warranted.''); Nat. Res.
Def. Council, Inc. v. Costle, 568 F.2d 1369, 1377 (D.C. Cir. 1977)
(courts cannot manufacture a ``revisory power'' granting agency
authority to act ``inconsistent with the clear intent of the
relevant statute''); Alabama Power Co. v. Costle, 636 F.2d 323, 357
(D.C. Cir. 1979) (``[T]here exists no general administrative power
to create exemptions to statutory requirements based upon the
agency's perceptions of costs and benefits.''); see also Graoch, 508
F.3d at 375. (``[n]othing in the text of the FHA instructs us to
create practice-specific exceptions.'').
\116\ See Ojo v. Farmers Group, Inc., 600 F.3d 1205, 1208 (9th
Cir. 2010) (finding that the Act applies to insurers; NAACP v. Am.
Fam. Mut. Ins. Co., 978 F.2d 287, 297-301 (7th Cir. 1992) (finding
that the Act applies to insurers); Nationwide Mut. Ins. Co. v.
Cisneros, 52 F.3d 1351, 1355-1360 (6th Cir. 1995) (finding that
HUD's interpretation of the Act as applying to insurers was
reasonable); but see Mackey v. Nationwide Ins. Cos., 724 F.2d 419,
423-25 (4th Cir. 1984) (pre-Fair Housing Amendments Act and
regulations pursuant thereto holding that Act does not cover
insurance); see also Dehoyos v. Allstate Corp., 345 F.3d 290, 293
(5th Cir. 2003) (affirming a district court's denial of a motion to
dismiss allegations that a credit scoring system used by an insurer
had an unjustified discriminatory effect because it resulted in
higher rates for non-white customers); Nat'l Fair Hous. All. v.
Travelers Indem. Co., 261 F. Supp. 3d 20, 22 (D.D.C. 2017) (denying
a motion to dismiss allegations that defendant's policy of declining
to insure properties where landlords accept Section 8 vouchers has
an unjustified discriminatory effect); Viens v. Am. Empire Surplus
Lines Ins. Co., 113 F. Supp. 3d 555, 558 (D. Conn. 2015) (denying
motion to dismiss allegations that defendant insurer's insurance
underwriting criteria that charge higher premiums or deny coverage
to landlords who rent apartments to tenants receiving Section 8
housing assistance has an unjustified discriminatory effect); Nat'l
Fair Hous. All. v. Prudential Ins. Co. of Am, 208 F. Supp. 2d 46,
50, 60-61, 63 (D.D.C. 2002) (denying a motion to dismiss allegations
that certain of defendant's minimum underwriting requirements for
certain types of coverages, such as a ``replacement cost'' policy
had an unjustified discriminatory effect).
\117\ The McCarran-Ferguson Act specifically provides that
``[n]o Act of Congress shall be construed to invalidate, impair, or
supersede any law enacted by any State for the purpose of regulating
the business of insurance . . . unless such Act specifically relates
to the business of insurance.'' 15 U.S.C. 1012(b). As interpreted by
the Supreme Court in Humana v. Forsyth, McCarran-Ferguson applies
only when a particular application of a federal law directly
conflicts with a specific state insurance regulation, frustrates a
declared state policy, or interferes with a State's administrative
regime. Humana v. Forsythe, 525 U.S. 299, 310 (1999) (``When federal
law does not directly conflict with state regulation, and when
application of the federal law would not frustrate any declared
state policy or interfere with a State's administrative regime, the
McCarran-Ferguson Act does not preclude its application.'').
---------------------------------------------------------------------------
As further explained above and below, the Fair Housing Act was
intended to have a very broad impact on housing and communities across
the country. The plain text, purpose, and structure purpose, structure,
and plain language of the Act make clear that the Act was intended to
apply to all sectors of the housing industry so that each would have
common duties under the Act. For example, the plain text of the Act
does not refer to an actor, but rather a prohibited action, meaning
that all actors in all sectors of the housing industry are subject to
the Act.\118\ With regard to purpose, the Act was enacted to replace
segregated neighborhoods with ``truly integrated and balanced living
patterns.'' \119\ It was structured to address discriminatory housing
practices that affect ``the whole community'' as well as particular
segments of the community,\120\ with the goal of advancing equal
opportunity in housing, and to ``achieve racial integration for the
benefit of all people in the United States.'' \121\
---------------------------------------------------------------------------
\118\ E.g. 42. U.S.C. 3604(a) (``it shall be unlawful to refuse
to sell or rent after the making of a bona fide offer, or to refuse
to negotiate for the sale or rental of, or otherwise make
unavailable or deny a dwelling to any person because of'' a
protected trait); NAACP v. American Family Mut. Ins. Co., 978 F.2d
287, 298 (7th Cir. 1992) (noting that Congress banned an outcome
while not saying who the actor is and holding that the Act applies
to insurers); see also Ojo v. Farmers Group Inc., 600 F.3d 1205,
1208 (9th Cir. 2010) (deferring to HUD's reasonable interpretation
of the statutory language that the Act applies to insurance).
\119\ Trafficante, 409 U.S. at 211 (citing 114 Cong. Rec. 3422
(Feb. 20, 1968) (statement of Senator Mondale)).
\120\ Trafficante, 409 U.S. at 211 (citing 114 Cong. Rec. 2706
(1968) (Statement of Senator Javits)).
\121\ H.R. Res. 1095, 110th Cong., 154 Cong. Rec. H2280-01
(April 15, 2008).
---------------------------------------------------------------------------
[[Page 19464]]
The Supreme Court in Inclusive Communities similarly noted that the
Act ``was enacted to eradicate discriminatory practices within a sector
of our Nation's economy'' and discussed that the viability of disparate
impact claims is ``consistent'' with the Act's ``central purpose.''
\122\ In order to ``eradicate'' discriminatory practices within the
housing sector, as the Court acknowledged was the purpose of the Act,
it would logically flow that the Act was intended to apply to all
sectors of the housing industry. Notably, the court used strong
language, saying the purpose was to ``eradicate,'' rather than weaker
language like ``reduce'', making clear that the Act was meant to reach
all sectors, otherwise eradication would not be possible. Nor did the
Court suggest that any portion of the housing sector was not reached by
the Act.
---------------------------------------------------------------------------
\122\ Inclusive Cmtys. Project, Inc., 576 U.S. at 539.
---------------------------------------------------------------------------
In HUD's experience, insurance plays a significant role in the
housing industry and in securing equal opportunity in housing in
communities nationwide. Home seekers must be able to access mortgage
insurance and homeowners insurance in order to become home owners.
Multifamily housing owners and managers must be able to obtain property
and hazard insurance in order to obtain financing and manage the risks
of their operations. These examples show how different sectors of the
housing economy interact, and how the exclusion of one sector of the
housing economy from the Act's coverage would pose a barrier to equal
opportunity in housing. In its fair housing investigations, HUD has
encountered housing providers who will not rent to individuals with
disabilities because of insurance-related concerns.\123\ HUD is also
aware that multifamily housing providers face barriers obtaining
insurance when they attempt to lease to low-income families, including
people of color and individuals with disabilities who use voucher
programs to pay rent.\124\ Because of the pivotal role insurance plays
in all types of housing, an exemption or safe harbor would undermine
and be contrary to the Act's broad purposes.
---------------------------------------------------------------------------
\123\ See. e.g. Charge, HUD v. McClendon, No. 09-04-1103-8,
(2005), <a href="https://www.hud.gov/sites/documents/DOC_14391.PDF">https://www.hud.gov/sites/documents/DOC_14391.PDF</a> (alleging
that landlord ``informed Complainant that she needed to seek housing
elsewhere at a place for persons with moderate to severe
disabilities because the property insurance only covered mild
disabilities''); HUD v. Twinbrook Vill. Apts., HUDALJ Nos. 02-00-
0256-8, 02-00-0257-8, 02-00-0258-8, 2001 HUD ALJ LEXIS 82, (HUD ALJ
Nov. 9, 2001) (respondent requested that complainants obtain
insurance to cover any liability resulting from injury associated
with ramps installed to make unit accessible).
\124\ See e.g. Nat'l Fair Hous. All. v. Travelers Indem. Co.,
261 F. Supp. 3d 20, 22 (D.D.C. 2017) (denying motion to dismiss
allegations that defendant's policy of declining to insure
properties with Section 8 voucher tenants has an unjustified
discriminatory effect); Viens v. Am. Empire Surplus Lines Ins. Co.,
113 F. Supp. 3d 555, 558 (D. Conn. 2015) (denying motion to dismiss
allegations that defendant insurer's underwriting criteria charging
higher premiums or denying coverage to landlords who rent to tenants
receiving Section 8 housing assistance has an unjustified
discriminatory effect).
---------------------------------------------------------------------------
Even if HUD had authority to exempt insurance categorically, HUD
finds that such an exemption for a single industry would neither be
workable nor consistent with the purpose of the Act. HUD makes this
determination for the reasons it stated in its 2016 Supplemental Notice
regarding this subject, some of which is reiterated here, as well as
for the following additional reasons. Congress has stated that the Act
is intended to provide for fair housing throughout the United
States,\125\ and the Supreme Court has recognized the Act's broad
remedial purpose.\126\ The Act's prohibitions on discrimination in
housing are intended to eliminate segregated living patterns and move
the nation toward a more integrated society.\127\ Among other things,
the Act requires HUD to affirmatively further fair housing in all of
its housing-related programs and activities,\128\ one of which is the
administration and enforcement of the Act.\129\ HUD finds that
wholesale exemptions for insurance practices would contravene the text
and purposes of the Act, and, as explained further below, would also
likely be overbroad in most if not all instances, as such an exemption
would allow some practices with unjustified discriminatory effects to
go uncorrected. HUD also finds that wholesale exemptions also would be
likely to immunize potential intentional discrimination in the
insurance market, because as the court in Inclusive Communities stated,
``disparate-impact liability under the [Fair Housing Act] also plays a
role in uncovering discriminatory intent.'' \130\ As the Court found in
that case, the availability of disparate-impact claims, ``permits
plaintiffs to counteract unconscious prejudices and disguised animus
that escape easy classification as disparate treatment.'' \131\
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\125\ See 42 U.S.C. 3601.
\126\ See Havens Realty Corp., 455 U.S. at 380 at 209
(recognizing Congress's ``broad remedial intent'' in passing the
Act); Trafficante,409 U.S. at 209 (recognizing the ``broad and
inclusive'' language of the Act); see also Inclusive Cmtys. Project
Inc., 576 U.S. at 539 (describing the ``central purpose'' of the Act
as ``to eradicate discriminatory practices within a sector of our
Nation's economy'').
\127\ Inclusive Cmtys. Project, Inc., 576 U.S. at 546-47; 114
Cong. Rec. 2276, 3422 (1968) (Statement of Sen. Mondale) (the
purpose of the Act was to replace ``ghettos'' with ``truly
integrated and balanced living patterns.''); 114 Cong. Rec. 2276,
9559 (1968) (Statement of Congressman Celler) (there is a need to
eliminate the ``blight of segregated housing''); 114 Cong. Rec.
2276, 9591 (1968) (Statement of Congressman Ryan) (the Act is a way
to ``achieve the aim of an integrated society'').
\128\ 42 U.S.C. 3608(e)(5).
\129\ See, e.g., 42 U.S.C. 3608 (the Secretary's administrative
responsibilities under the Act), 3609 (education, conciliation,
conferences, and reporting obligations to further the purposes of
the Act), 3610 (investigative authority), 3611 (subpoena power),
3612 (administrative enforcement authority), 3614a (rulemaking
authority), 3616 (authority to cooperate with state and local
agencies in carrying out the Secretary's responsibilities under the
Act), 3616a (authority to fund of state and local agencies and
private fair housing groups to eliminate discriminatory housing
practices prohibited by the Act).
\130\ Inclusive Cmtys. Project, Inc., 576 U.S. at 540.
\131\ Id.
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HUD notes that multiple court decisions have long found
discriminatory effects claims against insurance practices to be
actionable.\132\ And even if the commenters were correct that the
industry's practices generally will not give rise to discriminatory
effects liability, that fact does not provide a sufficient
justification for exempting the entire industry from liability in all
circumstances, even where there is a practice with an unjustified
discriminatory effect. Especially in light of the broad remedial
purposes of the Act, HUD finds that the final rule strikes the
appropriate balance for insurance industry practices. Furthermore, HUD
notes that some types of discrimination are more difficult than others
to prove, and this is particularly true when individuals who are denied
a service or quoted a particular price for a service in a residential
real estate-related transaction would typically have no way of knowing
the specific reasons for a denial or pricing decision. Simply because
claims are difficult to prove and may not end up in litigation does not
mean that the underlying conduct can
[[Page 19465]]
or should be exempted from regulation in all instances.
---------------------------------------------------------------------------
\132\ See Dehoyos, 345 F.3d at 293 (affirming a district court's
denial of a motion to dismiss allegations that a credit scoring
system had an unjustified discriminatory effect because it resulted
in higher rates for non-white customers); see also Nat'l Fair Hous.
All. v. Travelers Indem. Co., 261 F. Supp. 3d 20, 22 (D.D.C. 2017)
(denying a motion to dismiss allegations that defendant's policy of
declining to insure properties where landlords accept Section 8
vouchers has an unjustified discriminatory effect); Viens, 113 F.
Supp. 3d at 558 (denying motion to dismiss allegations that
defendant insurer's insurance underwriting criteria that charge
higher premiums or deny coverage to landlords who rent apartments to
tenants receiving Section 8 housing assistance has an unjustified
discriminatory effect); Nat'l Fair Hous. All. v. Prudential Ins. Co.
of Am, 208 F. Supp. 2d 46, 50, 48-49, 60-61 (D.D.C. 2002) (denying a
motion to dismiss allegations that certain of defendant's minimum
underwriting requirements for certain types of coverages, such as a
``replacement cost:'' policy had an unjustified discriminatory
effect).
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HUD finds that the concerns raised by the insurance industry do not
outweigh these fundamental considerations. This rule sets out a
framework by which liability under the Act may be determined; liability
arises only for those insurance practices that actually or predictably
result in a discriminatory effect and lack a legally sufficient
justification. The framework takes into account any defendant's
legitimate interest in the challenged practice--including an insurance
defendant. As discussed below, HUD finds that any conflict with a
specific state insurance law can and should be addressed on a case-by-
case basis in the context of that state law.
In sum, the case-by-case approach set out in this final rule
appropriately weighs the relevant factors, which include HUD's
obligation to enforce the Act, the diversity of potential
discriminatory effects claims, the variety of insurer business
practices, and the differing insurance laws of the states, as they
currently exist or may exist in the future. Given these considerations,
HUD believes that it would be impossible for the agency to define the
scope of insurance practices covered by an exemption with enough
precision to avoid case-by-case disputes over its application.
Accordingly, HUD has determined that categorical exemptions or safe
harbors for insurance practices are unworkable and inconsistent with
HUD's statutory mandate.
Issue: Commenters stated that if HUD does not provide an exemption
for insurance practices, insurers would be forced to evaluate whether
their practices lead to segregation and to learn what statistical
disparities are permissible.
HUD Response: HUD disagrees. Any obligation to evaluate practices
comes from the language of the Act itself, not this final rule. As
explained above, this final rule does not impose any new liability upon
insurers, so it will not require insurers to start new reviews of their
practices. Any such obligation to review their practices arose long
before the 2013 Rule was promulgated and originates from the statutory
language.\133\ Judicial precedent applying disparate impact analysis to
insurance companies long predates the 2013 Rule, let alone this
rule.\134\ Any costs entities may now choose to incur will not be due
to any new requirement, and in any case will simply be the ordinary
costs of complying with any preexisting statute, administrative
practice, and case law governing nondiscrimination in housing and
housing-related practices. In any event, evaluating and re-evaluating
current practices are not unreasonably burdensome activities for a
business or industry to undertake. As explained elsewhere, many other
industries, such as lending, engage in risk-based practices and show
that it is possible to consistently evaluate and re-evaluate their
policies and practices to endeavor to avoid those that may cause
unjustified discriminatory effects. Yet those industries have not
suffered the dire consequences that the insurance industry claims it
will suffer. HUD does not believe the insurance industry stands on
different footing from other industries in that respect such as to
warrant differential treatment.
---------------------------------------------------------------------------
\133\ 42 U.S.C. 3601 et. seq.; see, e.g., Dehoyos v. Allstate
Corp., 345 F.3d 290, 293 (5th Cir. 2003); see also Owens v.
Nationwide Mut. Ins. Co., Civ. No. 3:03-CV-1184-H, 2005 U.S. Dist.
LEXIS 15701, at *44-53 (N.D. Tex. Aug. 2, 2005); Nat'l Fair Hous.
All. v. Prudential Ins. Co. of Am, 208 F. Supp. 2d 46, 60-61 (D.D.C.
2002); Nat'l Fair Hous. All. v. Travelers Indem. Co., 261 F. Supp.
3d 20, 22 (D.D.C. 2017).
\134\ See Dehoyos, 345 F.3d 290, 293 (5th Cir. 2003) (affirming
a district court's denial of a motion to dismiss allegations that a
credit scoring system had an unjustified discriminatory effect
because it resulted in higher rates for non-white customers); see
also Nat'l Fair Hous. All. v. Travelers Indem. Co., 261 F. Supp. 3d
20, 22 (D.D.C. 2017) (denying a motion to dismiss allegations that
defendant's policy of declining to insure properties where landlords
accept Section 8 vouchers has an unjustified discriminatory effect);
Viens, 113 F. Supp. 3d 555, 558 (D. Conn. 2015) (denying motion to
dismiss allegations that defendant insurer's insurance underwriting
criteria that charge higher premiums or deny coverage to landlords
who rent apartments to tenants receiving Section 8 housing
assistance has an unjustified discriminatory effect); Nat'l Fair
Hous. All. v. Prudential Ins. Co. of Am, 208 F. Supp. 2d 46, 50, 48-
49, 60-61 (D.D.C. 2002) (denying a motion to dismiss allegations
that certain of defendant's minimum underwriting requirements for
certain types of coverages, such as a ``replacement cost:'' policy
had an unjustified discriminatory effect).
---------------------------------------------------------------------------
Issue: Commenters, citing NAACP v. Am. Family Mut. Ins. Co.,\135\
asked HUD to exempt all homeowners insurance practices from liability
for unjustified discriminatory effects, stating that the Act covers
only insurance practices that make housing unavailable, thus
effectively precluding homeownership. Homeowners insurance practices,
they stated, do not make housing unavailable. In addition, citing
Southend Neighborhood Improvement Assoc. v. St. Clair,\136\ commenters
stated that section 804(b)'s prohibition against discrimination in the
provision of services in connection with the sale or rental of a
dwelling applies only to services generally provided by governmental
units, such as police and fire protection or garbage collection, not
insurance.
---------------------------------------------------------------------------
\135\ NAACP v. American Family Mut. Ins. Co., 978 F.2d 287, (7th
Cir. 1992).
\136\ Southend Neighborhood Improvement Assoc. v. St. Clair, 743
F.2d 1207 (7th Cir. 1984).
---------------------------------------------------------------------------
HUD Response: HUD declines to exempt homeowners insurance from
liability for the reasons stated previously and explained more fully
below. Neither NAACP nor Southend Neighborhood Improvement Ass'n
support such an exemption. The commenters are incorrect in stating that
insurance practices cannot make housing unavailable or that the Act
only covers insurance practices that make housing unavailable. A
discriminatory practice that precludes a person from obtaining
homeowners or renters insurance may indeed make housing unavailable to
that person, as insurance is usually required as a condition for
obtaining a mortgage or a lease. Moreover, while section 804(a)
prohibits discrimination that ``make[s] unavailable'' a dwelling, other
provisions in the Act may prohibit insurance practices, including
pricing, regardless of whether they make housing unavailable.\137\ For
example, section 805(a) \138\ prohibits discrimination in the ``terms
or conditions'' of ``residential real estate-related transactions,''
and section 804(b) \139\ prohibits discrimination in the ``terms,
conditions or privileges of sale or rental of a dwelling or in the
provision of services . . . in connection therewith.'' Indeed, since
1989, HUD's fair housing regulations have specifically prohibited
``[r]efusing to provide . . . property or hazard insurance for
dwellings or providing such . . . insurance differently'' because of a
protected characteristic.\140\
[[Page 19466]]
Courts have applied the Act's provisions to various insurance
practices, including insurance pricing,\141\ marketing and claims
processing, irrespective of whether the discriminatory conduct occurred
when the unit became available or in conjunction with or subsequent to
the acquisition of a dwelling.\142\
---------------------------------------------------------------------------
\137\ Depending on the circumstances, discriminatory insurance
practices can violate 42 U.S.C. 3604(a), (b), (c), (f)(1), (f)(2),
3605, and 3617. See, e.g., Cisneros, 52 F.3d at 1360 (holding that
HUD's interpretation that section 3604 of the Act prohibits
discriminatory insurance underwriting is reasonable); Nevels v. W.
World Ins. Co., 359 F. Supp. 2d 1110, 1119-23 (W.D. Wash 2004)
(recognizing that sections 3604(f)(1), 3604(f)(2), 3605 and 3617 of
the Act cover insurance practices); Nat'l Fair Hous. All. v.
Prudential Ins. Co. of Am., 208 F. Supp. 2d at 55-58 (holding that
sections 3604(a), 3604(b), and 3605 of the Act prohibit
discriminatory insurance underwriting practices); Owens v.
Nationwide Mut. Ins. Co., Civ. No. 3:03-CV-1184-H, 2005 U.S. Dist.
LEXIS 15701, at *16-17 (N.D. Tex. Aug. 2, 2005) (holding that
section 3604 of the Act prohibits discriminatory insurance
practices); Francia v. Mount Vernon Fire Ins. Co., No. CV084032039S,
2012 Conn. Super. LEXIS 665, at *24-25 (Conn. Super. Ct. Mar. 6,
2012) (relying on section 3604(c) to interpret an analogous state
law as prohibiting a discriminatory statement in an insurance
quote).
\138\ 42 U.S.C. 3605(a).
\139\ 42 U.S.C. 3604(b).
\140\ 24 CFR 100.70(d)(4) (emphasis added). As used in this
regulation, the phrase ``property or hazard insurance for
dwellings'' includes insurance purchased by an owner, renter, or
anyone else seeking to insure a dwelling. 42 U.S.C. 3602(b)
(defining ``dwelling'' without reference to whether the residence is
owner- or renter-occupied).
\141\ See, e.g., NAACP, 978 F.2d at 301 (``Section 3604 of the
Fair Housing Act applies to discriminatory denials of insurance, and
discriminatory pricing, that effectively preclude ownership of
housing because of the race of the applicant.''); Dehoyos, 345 F.3d
at 293 (holding that a claim alleging discriminatory insurance
pricing was not barred by McCarran-Ferguson).
\142\ See, e.g., Franklin v. Allstate Corp., No. C-06-1909 MMC,
2007 U.S. Dist. LEXIS 51333, at *17-19 (N.D. Cal. July 3, 2007)
(applying the Act to claims processing); Burrell v. State Farm &
Cas. Co., 226 F. Supp. 2d 427 (S.D.N.Y. 2002) (same); see also Owens
v. Nationwide Mut. Ins. Co., Civ. No. 3:03-CV-1184-H, 2005 U.S.
Dist. LEXIS 15701, at *17 (N.D. Tex. Aug. 2, 2005) (Insurance
practices are covered by the Act ``whether the insurance is sought
in connection with the maintenance of a previously purchased home or
with an application to purchase a home.''); Lindsey v. Allstate Ins.
Co., 34 F. Supp. 2d 636, 643 (W.D. Tenn. 1999) (``It would seem odd
to construe a statute purporting to promote fair housing as
prohibiting discrimination in providing property insurance to those
seeking a home, but allowing that same discrimination so long as it
takes place in the context of renewing those very same insurance
policies.'').
---------------------------------------------------------------------------
In addition, HUD finds that the commenters have misconstrued the
referenced cases. HUD notes, for example, that NAACP did not hold that
the Act only prohibits insurance practices that effectively preclude
homeownership; rather, the court, in considering whether the Act
prohibited intentional insurance redlining practices, concluded that it
did, and affirmed HUD regulations which ``include, among the conduct
prohibited by section 3604: `Refusing to provide . . . property or
hazard insurance for dwellings or providing such . . . insurance
differently because of race.' '' \143\ In that case, the plaintiff
brought suit under both section 804(a), asserting that the insurer made
housing unavailable, and section 804(b), asserting that the insurer
discriminated in the provision of services in connection with the sale
or rental of a dwelling.\144\ The Seventh Circuit, in discussing the
viability of plaintiff's claims, stated that Sec. 804 ``applies to
discriminatory denials of insurance, and discriminatory pricing, that
effectively preclude ownership of housing because of the race of the
applicant.'' \145\ The court could not read section 804(b) as requiring
a showing that housing was otherwise made unavailable as that language
is not present in section 804(b); rather it is in section 804(a).
Accordingly, the court's quote cannot be read as applying to the
section 804(b) claim especially because it was talking about the
plaintiff's claims generally, including its section 804(a) claim, which
has the ``make unavailable'' language. Thus, NAACP cannot be fairly
read to hold that the Act only applies when insurance practices make
housing unavailable.
---------------------------------------------------------------------------
\143\ NAACP v. American Family Mut. Ins. Co., 978 F.2d 287, 290,
300 (7th Cir. 1992).
\144\ Id. at 297.
\145\ Id. at 301.
---------------------------------------------------------------------------
Furthermore in NAACP, the Seventh Circuit also clarified its
earlier statement regarding governmental services in Southend
Neighborhood Improvement Ass'n.\146\ In NAACP, the court stated, ``[w]e
once suggested in passing, [in Southend] that `service' in section 3604
means `services generally provided by governmental units,' but the
subject was not before us--and the suggestion that section [804] is
limited to governments is hard to reconcile with another plain-
statement principle requiring Congress to be especially clear if it
wants to regulate the conduct of state and local governments. . .So it
is hard to understand section [804] as restricted to garbage collection
and like services.'' \147\
---------------------------------------------------------------------------
\146\ Id. at 299.
\147\ Id.
---------------------------------------------------------------------------
Issue: Commenters stated that an exemption for insurance practices
is warranted because the judicial and legislative branches have not
specifically authorized HUD to become involved in insurance.
HUD Response: Congress authorized HUD to interpret and enforce the
Act, and as discussed above, provided no exemption for insurance
practices.\148\ As also discussed above, courts have routinely applied
the Act to insurance practices and have found that, as with other
housing-related practices, insurers may be liable for practices that
create discriminatory effects under the Act.\149\ In promulgating this
final rule, HUD is exercising the authority Congress gave it.\150\ Any
liability originates from the Act itself, not HUD or the rule.
---------------------------------------------------------------------------
\148\ 42 U.S.C. 3610; 42 U.S.C 3612; 42 U.S.C 3614a (HUD has the
authority to make rules to carry out the Act).
\149\ See Dehoyos, 345 F.3d at 293 (affirming a district court's
denial of a motion to dismiss allegations that a credit scoring
system had an unjustified discriminatory effect because it resulted
in higher rates for non-white customers); see also Nat'l Fair Hous.
All. v. Travelers Indem. Co., 261 F. Supp. 3d 20, 22 (D.D.C. 2017)
(denying a motion to dismiss allegations that defendant's policy of
declining to insure properties where landlords accept Section 8
vouchers has an unjustified discriminatory effect); Viens, 113 F.
Supp. 3d at 558 (denying motion to dismiss allegations that
defendant insurer's insurance underwriting criteria that charge
higher premiums or deny coverage to landlords who rent apartments to
tenants receiving Section 8 housing assistance has an unjustified
discriminatory effect); Nat'l Fair Hous. Alliance v. Prudential Ins.
Co. of Am, 208 F. Supp. 2d 46, 50, 48-49, 60-61 (D.D.C. 2002)
(denying a motion to dismiss allegations that certain of defendant's
minimum underwriting requirements for certain types of coverages,
such as a ``replacement cost:'' policy had an unjustified
discriminatory effect).
\150\ 42 U.S.C. 3614a.
---------------------------------------------------------------------------
Fundamental Nature of Insurance
Issue: Commenters requested an exemption for insurance practices
because of the fundamental nature of the industry, alleging that the
proposed rule would fundamentally and problematically alter insurance
practices. Commenters said that the foundation of the business of
insurance is the ability to classify insurance policyholders by risk
and that insurers make decisions based on actuarial and business
principles that group policyholders for the purpose of treating those
with similar risk profiles similarly. Commenters stated that the
industry is predicated on setting rates and making underwriting
decisions based on relevant, mathematical, and objective risk factors
that accurately predict loss. Commenters said that risk-based pricing
has been a bedrock principle of state insurance regulation for more
than 150 years, acting as a primary tool for ensuring rates are
adequate, not excessive, not unfairly discriminatory, accurately
predictive of risk, and protective of the solvency of insurers.
Commenters stated that the insurance market functions best when each
insured pays a rate that accurately reflects the cost of providing
insurance to similarly-situated policy holders. Commenters stated that
although professional underwriters routinely avoid or exclude risks for
which they lack expertise, underwriting judgment, or actuarial data,
they still are required to consider similar factors bearing on risk of
loss and do not consider protected traits.
Commenters noted that risk-based pricing is the primary tool to
ensure that rates are not unfairly discriminatory, as defined by state
insurance codes. Commenters stated that in the context of insurance,
unfair discrimination means treating similar risks in a dissimilar
manner, which is different from discrimination under the Act. They
stated that a rate is unfairly discriminatory if the premium
differences do not correspond to expected losses and average expenses.
Commenters stated that the proposed rule would force insurers to
eliminate
[[Page 19467]]
actuarially sound risk-based practices, which is central to the
effective determination of insurance premiums, in favor of substitutes
that are less effective at furthering an insurer's legitimate,
nondiscriminatory interests. A commenter stated that the proposed rule
would penalize insurers for relying on sound risk factors that
disproportionately affect a protected class, because they would be held
liable for disparities they did not create. A commenter stated that the
rule will require uniform rates, regardless of risk. Commenters
disagreed with the proposed framework's case-by-case analysis. For
example, commenters stated that insurers implement polices accounting
for risk factors through actuarially sound methodologies, and that it
would be impossible for a plaintiff to identify a less discriminatory
alternative because any alternative would necessarily correspond to a
different risk than the factor at issue, identified through actuarially
sound methodology. As a result, if the plaintiff's alternative was
adopted, the risk challenged in the lawsuit would no longer be
reflected in the price of insurance, resulting in overcharging low-risk
customers and likely driving them from the markets.
Other commenters disagreed, stating that the proposed rule
appropriately applies to insurance. A commenter stated that application
of the 2013 Rule and 2016 Supplement \151\ to insurance is consistent
with sound actuarial practices because it accommodates underwriting
decisions that satisfy the shifting burden framework. Commenters
explained that ratemaking, though largely actuarially based, can
incorporate elements of non-actuarially based subjective judgments.
Commenters cited ratemaking, price optimization, and credit scoring as
examples of insurance practices that are not entirely risk-based.
Commenters further noted that consideration of these non-purely risk-
based factors had not led to the demise of the industry. A commenter
indicated that over the past few decades, the insurance industry has
removed barriers that restrict homeowners insurers from writing
policies in communities of color and, in response to disparate-impact
challenges, some insurers have refined underwriting and pricing systems
to eliminate arbitrary barriers to the availability of adequate
homeowners coverage, resulting in business growth. Commenters concluded
that subjecting insurers to disparate impact liability does not
``threaten the fundamental nature of the insurance industry.''
Commenters noted that other risk-based industries, such as mortgage
lending, are subject to liability for unjustified discriminatory
effects under the Act and have not had to forego risk-based analysis to
avoid liability under the Act.
---------------------------------------------------------------------------
\151\ On October 5, 2016, HUD issued supplemental responses to
insurance industry comments in accordance with the court's decision
in Property Casualty Insurers Association of America (PCIAA) v.
Donovan, which upheld the rule's burden-shifting framework for
analyzing discriminatory effects claims as a reasonable
interpretation of the Fair Housing Act, but that HUD had not
adequately explained why case-by-case adjudication was preferable to
using its rulemaking authority to provide exemptions or safe harbors
related to homeowners insurance. 81 FR 69012; Prop. Cas. Insurers
Ass'n of Am. v. Donovan (PCIAA), 66 F. Supp. 3d 1018, 1049-54 (N.D.
Ill. 2014).
---------------------------------------------------------------------------
HUD Response: HUD disagrees that the fundamental nature of
insurance warrants the exemptions requested by some commenters, whose
comments were premised upon the faulty assumption that the proposed
rule generally prohibits risk-based practices. It does not. This final
rule does not declare any activity per se unlawful. It merely provides
a framework for determining if a particular policy or practice causes
an unjustified and unlawful discriminatory effect. HUD recognizes that
risk-based decision making is an important aspect of sound insurance
practices, and nothing in this final rule prohibits insurers from
making decisions that are in fact risk-based. Under the framework
established by this rule, practices that actually are risk-based, and
for which no less discriminatory alternative exists, will not give rise
to discriminatory effects liability. The rule simply requires that if
an insurer's practices are having a discriminatory effect and ``an
adjustment . . . can still be made that will allow both [parties']
interests to be satisfied,'' the insurer must make that change.\152\
---------------------------------------------------------------------------
\152\ Avenue 6E Invs., LLC, 818 F.3d at 513.
---------------------------------------------------------------------------
Risk-based decision making is not unique to insurance, and
discriminatory effects liability has proven workable in other contexts
involving complex risk-based decisions, such as mortgage lending,
without the need for exemptions or safe harbors. Indeed, all businesses
covered by the Act make risk-based decisions. For example, landlords
assess risk when they select tenants, set rental rates, and decide
whether to require deposits. The Act requires that such risk-based
determinations not be based on protected characteristics, in whole or
in part. Moreover, some states specifically provide for discriminatory
effects liability against insurers under state laws, further
undermining the claim that providing for such liability as a matter of
federal law threatens the fundamental nature of the industry.\153\
---------------------------------------------------------------------------
\153\ Viens, 113 F. Supp. 3d at 573 n.20 (stating that
Connecticut ``provides a similar (albeit broader) protection against
housing discrimination as the [Act]'' and finding that McCarran-
Ferguson does not bar an FHA disparate impact claim against an
insurer related to a property located in Connecticut).; Jones v.
Travelers Cas. Ins. Co. of Am., Tr. of Proceedings Before the
Honorable Lucy H. Koh U.S. District Judge, No.5:13-cv-02390 LHK
(N.D. Cal. May 7, 2015), ECF No. 236 (holding that California law
complements the Act and denying an insurer's motion to for summary
judgement); Toledo Fair Hous. Ctr. v. Nationwide Mut. Ins. Co, 94
Ohio Misc. 2d at 157-159 (recognizing discriminatory effects
liability in homeowners insurance under state law in part because
the Superintendent of Insurance lacks ``primary jurisdiction'' over
such claims).
---------------------------------------------------------------------------
Unfortunately, the history of discrimination in the homeowners
insurance industry is long and well documented,\154\ beginning with
insurers overtly relying on race to deny insurance to persons of color
and evolving into more covert forms of discrimination.\155\ For
example,
[[Page 19468]]
minorities were denied access to insurance through property-location
and property-age restrictions, even when data demonstrated that such
restrictions were not justified by risk of loss.\156\ This history of
discrimination led to persons of color being unjustifiably denied
insurance policies or paying higher premiums.\157\ As described more
fully in other responses, HUD believes that discriminatory effects
liability continues to play an important role in preventing
unjustifiable discrimination, including in the insurance industry.
---------------------------------------------------------------------------
\154\ Although the discussion that follows focuses on race and
national origin discrimination because of their historic prevalence,
examples of discrimination in insurance against other protected
classes exist as well. See e.g., Nevels v. W. World Ins. Co., 359 F.
Supp. 2d 1110 (W.D. Wash. 2004) (disability).
\155\ See generally, Homeowners' Insurance Discrimination:
Hearings Before the S. Comm. on Banking, Housing and Urban Affairs,
103d Cong. (1994) [hereinafter 1994 Hearings]; Insurance Redlining
Practices: Hearings before the Subcom. on Commerce, Consumer
Protection & Competitiveness of the H. Comm. on Energy and Commerce,
103d Cong. (1993) [hereinafter Mar. 1993 Hearings]; Insurance
Redlining: Fact or Fiction: Hearing before the Subcom. On Consumer
Credit and Insurance of the H. Comm. on Banking, Finance & Urban
Affairs, 103d Cong. (1993) [hereinafter Feb. 1993 Hearing];
Insurance Redlining: Fact Not Fiction (Feb. 1979) [hereinafter
Comm'n on Civil Rights] (report of the Illinois, Indiana, Michigan,
Minnesota, Ohio and Wisconsin Advisory Committees to the U.S.
Commission on Civil Rights); President's National Advisory Panel on
Insurance in Riot-Affected Areas, Meeting the Insurance Crisis of
Our Cities (1968) [hereinafter Nat'l Advisory Panel]. Further, as
the 2016 Supplement stated at times, agents were given plainly
discriminatory instructions, such as ``'get away from blacks' and
sell to `good, solid premium-paying white people,''' or they simply
were told, ``We don't write Blacks or Hispanics.'' See 139 Cong.
Rec. 22,459 (1993) (statement of Rep. Joseph P. Kennedy, II); see
also, e.g., Nat'l Advisory Panel, at 116 (quoting an insurance
broker as explaining, ``No matter how good [a customer] is, they
[the insurers] take that into consideration, the fact he is a
Negro.''). Underwriting guidelines contained discriminatory
statements, such as listing ``population and racial changes'' among
``red flags for agents.'' Feb. 1993 Hearing at 19, 27 (statement of
Gregory Squires, Prof. U. Wis. Milwaukee). Minorities were offered
inferior products, such as coverage for repairs rather than
replacement, or were subject to additional hurdles during the quote
and underwriting process. 1994 Hearings at 15, 47-48 (statements of
Deval Patrick, DOJ Ass't Attorney Gen. for Civil Rights); id. at 18-
19, 51 (statements of Roberta Achtenberg, HUD Ass't Sec'y of Fair
Hous. & Equal Opportunity). Additionally, discrimination took the
form of insurers redlining predominantly minority neighborhoods and
disproportionately placing agents and offices in predominately white
neighborhoods. 1994 Hearings at 15, 47-48 (statements of Deval
Patrick, DOJ Ass't Attorney Gen. for Civil Rights); id. at 18-19, 51
(statements of Roberta Achtenberg, HUD Ass't Sec'y of Fair Hous. &
Equal Opportunity). Minorities also were denied access to insurance
through property-location and property-age restrictions, even when
data had demonstrated that such restrictions are not justified by
risk of loss. See, e.g., Comm'n on Civil Rights, at 34-39 (``The
greater the minority concentration of an area and the older the
housing, independent of fire and theft, the less voluntary insurance
is currently being written.''); 1994 Hearings, at 18 (statement of
Roberta Achtenberg, HUD Ass't Sec'y of Fair Hous. & Equal
Opportunity) (noting the ``disparate impact on minority
communities'' of property age and value requirements, and explaining
that ``47 percent of black households, but just 23 percent of white
households, live in homes valued at less than $50,000'' and that
``40 percent of black households compared to 29 percent of white
households live in homes build before 1950.'').; see also Transcript
of Proceedings Before the Hon. Lucy H. Koh at 29-33, Jones v.
Travelers Cas. Ins. Co. of Am, (N.D .Cal. 2015) (No.5:13-cv-02390)
ECF No. 236 (denying defendants motion for summary judgement on a
claim alleging that defendant's policy of failing to insure
properties that lease to Section 8 participants has an unlawful
discriminatory effect because plaintiffs have ``presented evidence
purportedly establishing a correlation between members of protected
classes and Section 8 tenants'' and that plaintiffs have presented
sufficient evidence that, presets a ``factual question for the trier
of fact as to whether [defendant] has legitimate, non-discriminatory
justifications.''); Nat'l Fair Hous. All. v. Travelers Indem. Co.,
261 F. Supp. 3d 20, 28-29 (D.D.C. 2017) (denying motion to dismiss
claim alleging that defendant's policy of refusing to insure
properties that are rented to Section 8 voucher holders had an
unlawful discriminatory effect). In addition, HUD, for example, has
issued charges against insurers for intentionally discriminating on
the basis of religion by imposing less favorable policy terms on
people of a particular religion, and on the basis of sex and
familial status when an insurer refused to issue a mortgage
insurance policy until the policyholder returned from maternity
leave.
\156\ See, e.g., Comm'n on Civil Rights, supra n. 155 at 34-39
(``The greater the minority concentration of an area and the older
the housing, independent of fire and theft, the less voluntary
insurance is currently being written.''); 1994 Hearings, supra n.
155, at 18 (statement of Roberta Achtenberg, HUD Ass't Sec'y of Fair
Hous. & Equal Opportunity) (noting the ``disparate impact on
minority communities'' of property age and value requirements, and
explaining that ``47 percent of black households, but just 23
percent of white households, live in homes valued at less than
$50,000'' and that ``40 percent of black households compared to 29
percent of white households live in homes build before 1950.'').
\157\ See, e.g., 139 Cong. Rec. 22,459 (1993) (statement of Rep.
Joseph P. Kennedy, II) (``[S]hocking anecdotal evidence was
supported by 12 years of data submitted by Missouri State Insurance
Commissioner Jay Angoff. . . . It shows that, in the cities of St.
Louis and Kansas City, low-income minorities had to pay more money
for less coverage than their white counterparts, despite the fact
that losses in minority areas were actually less than those in white
areas. This evidence directly challenges industry assertions that
minorities are too risky to insure.'').
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Furthermore, HUD's long experience in administering the Act
counsels that discriminatory effects liability does not threaten the
fundamental nature of the insurance industry. Putting aside the length
of time insurers have been subject to discriminatory effects liability
under the statute itself, the industry has been subject to the 2013
Rule for ten years and the calamitous results commenters claimed would
come to pass have not occurred. HUD's position that discriminatory
effects liability applies to insurance dates back more than three
decades, as does the industry's concern that such liability makes it
``near impossible for an insurer to successfully defend himself.''
\158\ HUD has maintained for decades that remedying discrimination in
insurance, including in cases involving discriminatory effects claims,
requires examination of each allegedly discriminatory insurance
practice on a case-by-case basis, and HUD sees no reason to deviate now
from this longstanding approach.
---------------------------------------------------------------------------
\158\ Fair Housing Act: Hearings before the Subcom. on Civil and
Constitutional Rights of the H. Comm. on the Judiciary, 95th Cong.
20, 616 (1978) (statement of the Am. Ins. Ass'n.).
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Based on its experience in administering and enforcing the Fair
Housing Act, HUD believes that a broad exemption would immunize a host
of potentially discriminatory insurance practices that do not involve
actuarial or risk-based calculations, such as marketing, claims
processing, and payment. In addition, a discriminatory effects claim
can challenge an insurer's underwriting policies as ``not purely risk-
based'' without infringing on the insurer's ``right to evaluate
homeowners insurance risks fairly and objectively.'' \159\ For example,
plaintiffs have challenged insurer policies that deny insurance to
landlords because they rent to Section 8 voucher holders.\160\ Even
practices such as ratemaking that are largely actuarially-based can
incorporate an element of non-actuarially-based subjective judgment or
discretion under state law. Indeed, many of the state statutes
referenced by commenters that mandate that rates be reasonable, not
excessive, not inadequate, or unfairly discriminatory, permit insurers,
in the very same section of the insurance code, to rely on ``judgment
factors'' in ratemaking. The example of price optimization practices,
which some states have started regulating, illustrates how non-
actuarial factors, such as price elasticity of market demand, can
impact insurance pricing in a manner similar to the pricing of products
in non-actuarial industries.\161\ The term ``price optimization'' can
refer to ``the process of maximizing or minimizing a business metric
using sophisticated tools and models to quantify business
considerations,'' such as ``marketing goals, profitability and
policyholder retention.'' \162\ The term ``price elasticity of demand''
refers to ``the rate of response of quantity demanded due to a price
change. Price elasticity is used to see how sensitive the demand for a
good is to a price change.'' \163\ Therefore, by using these practices,
insurers are already using factors unrelated to risk to help determine
price. Relying on factors unrelated to risk, therefore, has not doomed
their business model.
---------------------------------------------------------------------------
\159\ Nat'l Fair Hous. All. v. Prudential Ins. Co. of Am., 208
F. Supp. 2d 46, 60 (D.D.C. 2002).
\160\ Transcript of Proceedings Before the Hon. Lucy H. Koh at
29-33, Jones v. Travelers Cas. Ins. Co. of Am, (N.D.Cal. 2015)
(No.5:13-cv-02390) ECF No. 236 (denying defendants motion for
summary judgement on a claim alleging that defendant's policy of
failing to insure properties that lease to Section 8 participants
has an unlawful discriminatory effect because plaintiffs have
``presented evidence purportedly establishing a correlation between
members of protected classes and Section 8 tenants'' and that
plaintiffs have presented sufficient evidence that, presets a
``factual question for the trier of fact as to whether [defendant]
has legitimate, non-discriminatory justifications.''); Nat'l Fair
Hous. All. v. Travelers Indem. Co., 261 F. Supp. 3d 20, 28-29
(D.D.C. 2017) (denying motion to dismiss claim alleging that
defendant's policy of refusing to insure properties that are rented
to Section 8 voucher holders had an unlawful discriminatory effect).
\161\ Nat'l Ass'n of Ins. Comm'rs, Price Optimization White
Paper (Nov. 19, 2015) <a href="https://content.naic.org/sites/default/files/inline-files/committees_c_catf_related_price_optimization_white_paper.pdf">https://content.naic.org/sites/default/files/inline-files/committees_c_catf_related_price_optimization_white_paper.pdf</a>
[hereinafter NAIC White Paper] at 9 ] 30 (``Price optimization has
been used for years in other industries, including retail and
travel. However, the use of model-driven price optimization in the
U.S. insurance industry is relatively new.'').
\162\ Id. at 4 ] 14(a) (discussing the responses of state
regulators to the rising increase in use of price optimization
practices by insurance providers).
\163\ Id. at 4 ] 14(f) (internal quotations omitted).
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HUD likewise declines to craft a safe harbor for any specific risk-
based factor because it would be overbroad, foreclosing claims where
the plaintiff could prove the existence of a less discriminatory
alternative, such as an alternative risk-based practice.
For HUD to select a few factors for per se exemption as a matter of
law based on commenters' bare assertions about
[[Page 19469]]
their actuarial relevance, without data and without a full survey of
all factors utilized by the homeowners insurance industry, would also
be arbitrary. Even if such data were available and a full survey
performed, safe harbors for specific factors would still be overbroad
because the actuarial relevance of a given factor can vary by
context.\164\ In addition, while use of a particular risk factor may be
generally correlated with probability of loss, the ways in which an
insurer uses that factor may not be. Furthermore, the actuarial
relevance of any given factor may change over time as societal
behaviors evolve, new technologies develop, and analytical capabilities
improve.
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\164\ For example, in some high-crime neighborhoods the higher-
than-average risk of loss from theft could be offset by a lower-
than-average risk of other losses, such as those caused by weather.
Therefore, the legitimacy of declining to issue insurance policies
in all locations with high crime rates would depend on other
features of those locations.
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The Act's broad remedial purpose is ``to provide . . . for fair
housing throughout the United States.'' \165\ Thus, the Act plays a
``continuing role in moving the Nation toward a more integrated
society.'' \166\ Ensuring that members of all protected classes can
access insurance free from discrimination is necessary to achieve the
Act's objective because obtaining a mortgage for housing typically
requires obtaining insurance.\167\ Likewise, obtaining insurance may be
a precondition to securing a home in the rental market.\168\ Insurance
is also critical to maintaining housing because fire, storms, theft,
and other perils frequently result in property damage or loss that
would be too costly to repair or replace without insurance coverage.
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\165\ 42 U.S.C. 3601; See Havens Realty Corp., 455 U.S. at 380
(recognizing Congress's ``broad remedial intent'' in passing the
Act); Trafficante, 409 U.S. at 209 (recognizing the ``broad and
inclusive'' language of the Act); see also Inclusive Cmtys. Project
Inc., 576 U.S. at 538 (describing the ``central purpose'' of the Act
as ``to eradicate discriminatory practices within a sector of our
Nation's economy'').
\166\ Inclusive Cmtys. Project Inc., 576 U.S. at 547.
\167\ NAACP, 978 F.2d at 297 (``No insurance, no loan; no loan,
no house; lack of insurance thus makes housing unavailable.'').
\168\ See, e.g., Or. Rev. Stat. 90.222(1) (``A landlord may
require a tenant to obtain and maintain renter's liability insurance
in a written rental agreement.'').
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In light of the long, documented history of discrimination in the
homeowners insurance industry,\169\ including the use of ``risk
factors'' by insurers and regulators that were subsequently banned as
discriminatory \170\ and the non-actuarial or hybrid nature of many
insurance practices, HUD considers it inappropriate to craft any
exemptions or safe harbors for insurance practices. HUD's longstanding
case-by-case approach can adequately address any concerns and better
serves the Act's broad remedial purpose and HUD's statutory obligation
to affirmatively further fair housing, including by supporting fair
housing efforts undertaken by states.\171\
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\169\ See sources cited supra note 155.
\170\ See sources cited supra note 155.
\171\ Cf. Crossroads Residents Organized for Stable and Secure
ResiDencieS, , 2016 U.S. Dist. LEXIS 86965 at *32 n.6 (declining to
adopt a per se rule that a certain category of disparate impact
claims could not be brought in part because ``HUD has indicated a
preference for case-by-case review of practices alleged to cause a
disparate impact'').
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Issue: Commenters opposed the rule or requested an exemption
because they believe the rule would force insurers to consider
protected traits that are prohibited in the rating and underwriting
process and are not risk predictive, contrary to Inclusive Communities'
caution against injecting race into housing decisions. Commenters wrote
that insurance works best when it is blind to protected traits, as they
have no relationship to ratemaking or underwriting and that state
insurance law prohibits them from using such data to make decisions
concerning eligibility, underwriting, and pricing. Commenters also
stated that the rule will require insurers to charge different rates
for members of different protected classes but similar risk profiles,
violating state insurance laws and regulations and compromising
insurers' ability to set fair, accurate, and non-discriminatory rates
and reliably predict the probable financial consequences of risk.
Commenters stated that an insurer could be liable for considering a
protected trait or not considering the trait.
HUD Response: HUD disagrees that this final rule will force
insurers to consider protected traits of individuals in the rating and
underwriting process. Instead, to ensure compliance, a regulated entity
may wish to examine whether a facially neutral policy or practice
causes an unjustified discriminatory effect, as defined by the
regulation. This is no different from the analysis that any other
entity regulated by the Fair Housing Act, such as mortgage lenders and
housing providers, might want to perform to ensure compliance.
Inclusive Communities rejected the argument that such an analysis would
raise equal-protection concerns, reasoning that ``awareness of race''
can help ``local housing authorities [that] choose to foster diversity
and combat racial isolation with race-neutral tools.'' \172\ Such
awareness of the impact of facially neutral actions can also benefit
other housing providers and entities covered by the Act, including
insurers, to achieve the goals that many commenters stated they share,
i.e., achieving a more equitable and just society. This sort of
awareness of race (and other protected classes), combined with an
understanding of how its own policies, practices, and assessment tools
impact those protected classes, can inform the covered entity on
whether its approach actually or predictably results in a
discriminatory effect. HUD notes that awareness of protected traits and
the impact of policies based on protected traits is different from
considering or making decisions based upon a protected trait, which
would constitute discriminatory treatment. Commenters pointed to no
state law, and HUD knows of no state law, that prohibits insurers from
examining their own underwriting factors and practices to determine
whether these factors and practices unjustifiably cause a disparate
impact on protected classes or otherwise serve as a proxy for race.
This kind of self-examination is encouraged, generally, by this final
rule, is consistent with Inclusive Communities and the Act, and is
intended not to lead to liability under the Act but rather to protect
entities from liability.\173\ Indeed, lenders and others covered by the
Act regularly engage in such self-examination without threat to their
business models. In sum, the industry has been subject to the 2013 Rule
for ten years, and iterations of the same burden-shifting framework as
imposed by courts for even longer, and none of these dire outcomes
predicted by the industry have come to pass.
---------------------------------------------------------------------------
\172\ Inclusive Cmtys. Project Inc., 576 U.S. at 545.
\173\ See 24. CFR. 100.140 (discussing voluntary self-testing
conducted by lenders).
---------------------------------------------------------------------------
Issue: Commenters stated that prohibiting risk-based pricing and
underwriting, and forcing insurers to consider protected traits, would
lead to negative consequences. Commenters stated that the proposed rule
could lead to serious and damaging unintended consequences for the
industry including, interfering with underwriting; destabilizing
insurance coverage; threatening insurer solvency; distorting the
market; collapsing the industry; and increasing insurance costs and
premium rates, having a negative impact on policyholders and small
businesses. As another example, commenters stated that the inability to
rate risks will make it prohibitively expensive to insure high-risk
properties so insurers will withdraw specific lines of business or
insure only low-risk
[[Page 19470]]
properties. Commenters stated, citing to NAACP, that charging the same
rates to individuals posing different levels of risk results in lower-
risk individuals subsidizing higher risks, eliminating incentives for
insureds to mitigate risk, forcing low-risk consumers out of the market
\174\ and diminishing insurers' ability to broadly spread risk.
---------------------------------------------------------------------------
\174\ Some commenters quoted the Seventh Circuit in NAACP in
support of their statement that considering protected traits would
lead to adverse consequences: ``putting young and old, or city and
country, into the same pool would lead to adverse selection: people
knowing that the risks they face are less than the average of the
pool would drop out.
---------------------------------------------------------------------------
HUD Response: HUD disagrees with the commenters' views on the final
rule's impact on the fundamental nature of insurance and that such
negative consequences will come to pass. Each example is premised upon
the faulty assumption that the rule prohibits risk-based practices or
would require insurers to use protected traits. As explained in further
detail above, it does not. The rule merely provides a framework for
determining if a particular policy or practice causes an unlawful
discriminatory effect. Furthermore, as noted above, insurers have been
subject to discriminatory effects liability since well before the 2013
Rule and have been subject to the 2013 Rule for ten years, yet to HUD's
knowledge the commenters' fears have not come to pass.\175\ Certainly,
no commenter has provided any evidence that such fears have
materialized.
---------------------------------------------------------------------------
\175\ Inclusive Cmtys. Project, Inc., 576 U.S. at 546 (the Court
noted that the existence of disparate impact claims ``for the last
several decades `has not given rise to . . . dire consequences.'
''). To HUD's knowledge, insurers continue to use risk-based
pricing. Commenters provided no evidence that over the past ten
years this rule has resulted in an increased risk of insurer
solvency, that it has caused any insurers to go out of business,
that it has caused rates to increase, or that it has caused insurers
to withdraw from insuring certain types of properties.
---------------------------------------------------------------------------
Whether Inclusive Communities Supports an Insurance Exemption
Issue: Commenters cited Inclusive Communities in support of their
request for an exemption for risk-based insurance practices. Commenters
stated that applying the rule to insurance would run afoul of the
limitations on disparate impact liability articulated in Inclusive
Communities, and affect their ability to accurately price for risk,
making risk assessment more expensive, penalizing consumers, and
adversely impacting the insurance market. Some commenters, citing
Inclusive Communities' discussion of ``legitimate business practices,''
asserted that risk-based insurance practices are examples of legitimate
business practices and merit an exemption. Commenters stated that
restricting insurers' use of objective risk-based factors would run
afoul of Inclusive Communities because it would undermine the Act's
purpose and the free-market system by making insurers fearful of
liability, restrict innovation, and hold insurers liable for
disparities they did not create, irreparably distorting the market.
Other commenters opposed an exemption for insurers, with a
commenter specifically noting that Inclusive Communities did not
discuss exemptions from liability. One commenter noted in Nat'l Fair
Hou. All. v. Travelers Indemnity Co., the court rejected defendants'
argument that Inclusive Communities introduced new standards such that
insurers could not be held liable, stating that the refusal to provide
insurance to Section 8 voucher holders remained the ``type of clear,
non-speculative, connection . . . that Inclusive Communities requires
to make out a prima facie claim of disparate impact.'' \176\
---------------------------------------------------------------------------
\176\ Nat'l Fair Hous. All. v. Travelers Indemnity Co., 261 F.
Supp. 3d at 30 (D.D.C. 2017).
---------------------------------------------------------------------------
HUD Response: HUD finds no support in Inclusive Communities for
exempting the insurance industry from discriminatory effects liability.
As discussed above, Inclusive Communities did not introduce any new
limitations to discriminatory effects law, did not address the
application of the 2013 Rule or disparate impact principles to risk-
based homeowners insurance practices, and did not discuss or suggest
exemptions to liability for insurers or anyone else. Inclusive
Communities discusses ``business necessity,'' \177\ and ``legitimate
needs'' \178\ in the context of the Title VII disparate impact
framework, which, like this rule, provides that a practice that is
deemed a ``business necessity'' may still violate the statute if the
plaintiff proves there is a less discriminatory alternative.\179\
Rather than support an exemption for risk-based insurance practices,
this language supports the framework of this final rule. The Court in
Inclusive Communities also stated that governmental entities ``must not
be prevented from achieving legitimate objectives.'' \180\ This
requirement is consistent with the final rule which, at the second step
allows the defendant to show that a challenged practice serves a
substantial, legitimate, non-discriminatory interest, so as to defeat a
disparate impact claim unless the plaintiff can prove there is a less
discriminatory alternative that serves that substantial, legitimate,
nondiscriminatory interest.
---------------------------------------------------------------------------
\177\ Inclusive Cmtys. Project Inc., 576 U.S. at 541.
\178\ Id.. at 533.
\179\ For instance, the court stated explained, describing the
rule for Title VII that ``[b]efore rejecting a business
justification--or a governmental entity's analogous public
interest--a court must determine that a plaintiff has shown that
there is ``an available alternative . . . practice that has less
disparate impact and serves the [entity's] legitimate needs.''
Inclusive Cmtys. Project, Inc., 576 U.S. at 533.
\180\ Inclusive Cmtys. Project, inc., 576 U.S. at 544.
---------------------------------------------------------------------------
Issue: Commenters stated that because the facts in Inclusive
Communities involve decisions on the location of housing, which are
distinguishable from the facts and decisions in insurance cases, the
principles of Inclusive Communities are inapplicable to the insurance
industry. This distinction, they said, supports an exemption for
insurance.
HUD Response: HUD agrees that Inclusive Communities had different
facts than a case involving insurance. That does not mean that
Inclusive Communities supports an exemption or safe harbor for
insurance. Inclusive Communities did not limit the use of
discriminatory effects claims to any particular industry \181\ and
provides no support for exempting insurance practices. The Court's
holding that discriminatory effects claims are cognizable under the Act
applies to all such claims under the Act, and does not exclude
practices particular to any industry, including insurance. HUD notes
that the potential application of disparate-impact analysis to the
insurance industry long predated Inclusive Communities, which generally
reaffirmed disparate-impact doctrine.
---------------------------------------------------------------------------
\181\ The Court stated ``the issue here is whether, under a
proper interpretation of the FHA, housing decisions with a disparate
impact are prohibited,'' and did not limit the holding to certain
fact patterns. Inclusive Cmtys. Project, Inc., 576 U.S. at 530.
---------------------------------------------------------------------------
Whether Other Supreme Court Precedent Supports an Exemption
Issue: Commenters stated that Wards Cove and Watson require an
exemption for insurance because they set a higher burden of proof for
plaintiffs than the proposed rule does.
HUD Response: HUD disagrees with the commenters. Neither Wards Cove
nor Watson provide a basis for an exemption for insurance practices.
Both cases, which involve Title VII claims, were decided prior to the
Supreme Court's controlling precedent in Inclusive Communities, with
which the final rule is consistent. And as explained more fully below,
neither case necessitates a revision to plaintiff's burden of proof in
Fair Housing Act cases. Simply stated, they provide no basis to exempt
insurance practices.
[[Page 19471]]
Whether Claims Against Insurers Will Fail as a Matter of Law
Issue: Commenters stated that insurance practices should be exempt
because challenges to risk-based pricing and underwriting will fail as
a matter of law under Inclusive Communities and Graoch. They stated
that insurance claims will fail as a matter of law because Inclusive
Communities mandates the removal only of ``artificial, arbitrary, or
unnecessary barriers'' and risk-based pricing does not create such
barriers and because plaintiffs would be unable to identify less-
discriminatory practices that will allow the insurer to pursue their
valid interest. According to the commenters, this is because it is
grounded in mathematics, is objective and fair, and advances
substantial, legitimate, nondiscriminatory interests. Other commenters
stated that making sure that insurance rates accurately reflect the
risk of future loss is a valid interest and that Inclusive Communities
requires that businesses have ``leeway to state and explain the valid
interest served by their policies.'' In addition, commenters said that
the Graoch court held that categorical bars are justified when
plaintiffs have no chance of success, a holding that commenters argued
the proposed rule ignores.
Commenters further stated that all insurance claims will fail as a
matter of law because there can never be a robust causal link between
legitimate risk factors and any disparate impact. According to them,
risk-based factors do not consider protected characteristics, and they
are mandated or approved by state law, limiting insurer discretion.
These commenters stated that any disparate impact caused by
socioeconomic factors is beyond the control of insurers. Moreover, they
stated that because state laws limit insurer discretion, these laws
make it impossible to ascribe any discriminatory effects in
underwriting and pricing to an insurer's own choices.
A commenter suggested that if HUD does not exempt or provide a
defense for insurers, HUD should state in the final rule that disparate
impact claims against risk-based pricing and underwriting practices
cannot succeed. Commenters also asked HUD to commit not to bring
disparate-impact challenges to risk-based insurance practices.
HUD Response: HUD disagrees with the commenters who claimed that
lawsuits against insurers based on a discriminatory effects theory will
necessarily fail as a matter of law and that therefore insurers are
entitled to an exemption.\182\ As discussed in detail above, courts
have found that insurers are subject to discriminatory effects
liability under the Act. HUD also declines to commit not to bring
discriminatory effects challenges against insurers or to specify that
any claims based on insurance practices will necessarily fail. As
discussed at length, insurance practices may be subject to disparate
impact liability and insurers may be proper defendants in lawsuits
alleging disparate impact under the Act. Indeed, the Act requires HUD
to file charges of discrimination if reasonable cause exists to believe
discrimination occurred.\183\
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\182\ See Dehoyos, 345 F.3d at 293; see also; Nat'l Fair Hous.
All. v. Prudential Ins. Co. of Am, 208 F. Supp. 2d 46,48 (D.D.C.
2002); Nat'l Fair Hous. All. v. Travelers Indem. Co., 261 F. Supp.
3d 20, 22 (D.D.C. 2017).
\183\ 42 U.S.C. 3610(g)(2)(A) (``If the Secretary determines
that reasonable cause exists to believe that a discriminatory
housing practice has occurred or is about to occur, the Secretary
shall . . . immediately issue a charge on behalf of the aggrieved
person'').
---------------------------------------------------------------------------
Graoch provides no basis for such an exemption. First, the Graoch
court stated that ``we cannot create categorical exemptions from [the
Act] without a statutory basis'' and ``[n]othing in the text of the
[Act] instructs us to create practice-specific exceptions. Absent such
instruction, we lack the authority to evaluate the pros and cons of
allowing disparate-impact claims challenging a particular housing
practice and to prohibit claims that we believe to be unwise as a
matter of social policy.'' \184\ While the Graoch court said that
``categorical bars are justified when . . . plaintiffs have no chance
of success,'' \185\ it did not find such a situation and in fact noted
the possibility of success on a claim against a landlord seeking to
withdraw from a Section 8 program. It made no finding that challenges
against insurance practices--which were not the subject of the
lawsuit--were impossible under the Act.\186\ To the extent that Graoch
is relevant, it establishes a high bar--the literal impossibility of
making out a particular type of claim--that would have to be
established before a categorical bar would be appropriate. And in HUD's
belief, it is, in fact, possible for a claim against an insurer to
succeed, as demonstrated by several court opinions, so the standard set
out by Graoch is not met.\187\
---------------------------------------------------------------------------
\184\ Graoch, 508 F.3d at 375.
\185\ Id. at 376.
\186\ The Graoch court did not identify homeowners insurance as
an example of where application of the disparate impact rule is
never appropriate. The court in dicta incorrectly read NAACP v. Am.
Family Mut. Ins. Co. to hold ``that insurers never can face
disparate-impact liability for `charging higher rates or declining
to write insurance for people who live in particular areas.' ''
Graoch, 508 F.3d at 375. HUD believes that the Graoch court read
NAACP incorrectly. NAACP overturned a dismissal of a claim under the
Act, holding that it ``is reversed to the extent it holds that the
Fair Housing Act is inapplicable to property and casualty insurance
written or withheld in connection with the purchase of real
estate.'' NAACP, 978 F.2d at 302. The plaintiff in that case made
claims of disparate treatment and disparate impact. Id. at 290. In
discussing the two, the NAACP court stated that it must presume that
plaintiffs can prevail under a disparate treatment theory because
the Supreme Court had not yet decided whether disparate impact is a
viable legal theory under Title VIII and because of the nature of
insurance. Id. The court ultimately narrowed the holding to state
``[a]ll we decide is whether the complaint states claims on which
the plaintiffs may prevail if they establish that the insurer has
drawn lines according to race rather than actuarial calculations.''
Id. at 291. Further, NAACP was about redlining in insurance and does
not describe any/all practices of the insurance industry. Id. at
290. So, even if Graoch's reading were correct, the holding, and
Graoch's description of the holding is limited to one practice used
by insurers.
\187\ HUD is unaware of any trial on the merits of a
discriminatory effects claim against an insurer, but notes that many
have survived a motion to dismiss and subsequently settled. See
Dehoyos, 345 F.3d at 293 (affirming a district court's denial of a
motion to dismiss allegations that a credit scoring system had an
unjustified discriminatory effect because it resulted in higher
rates for non-white customers); Nat'l Fair Hous. All. v. Travelers
Indem. Co., 261 F. Supp. 3d 20, 22 (D.D.C. 2017) (denying a motion
to dismiss allegations that defendant's policy of declining to
insure properties where landlords accept Section 8 vouchers has an
unjustified discriminatory effect); Viens, 113 F. Supp. 3d at 558
(denying motion to dismiss allegations that defendant insurer's
insurance underwriting criteria that charge higher premiums or deny
coverage to landlords who rent apartments to tenants receiving
Section 8 housing assistance has an unjustified discriminatory
effect); Nat'l Fair Hous. All. v. Prudential Ins. Co.
[…truncated; see source link]Indexed from Federal Register on March 31, 2023.
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