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Financial Services Law Insights and Observations

Court stays HUD’s DI rule

Courts HUD Disparate Impact Fair Housing Act Fair Lending Administrative Procedures Act

Courts

On October 25, the U.S. District Court for the District of Massachusetts issued an order granting a preliminary injunction and stay of effective date of HUD’s disparate impact regulation under the Fair Housing Act (Final Rule). As previously covered by a Buckley Special Alert, in September, HUD issued the Final Rule, which is intended to align its disparate impact regulation, adopted in 2013 (2013 Rule), with the Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. Among other things, the Final Rule includes a modification of the three-step burden-shifting framework in its 2013 Rule, several new elements that plaintiffs must show to establish that a policy or practice has a “discriminatory effect,” and specific defenses that defendants can assert to refute disparate impact claims.

According to the order, two fair housing organizations (collectively, “plaintiffs”) filed the action against HUD seeking to vacate the Final Rule under the Administrative Procedures Act (APA) and subsequently filed for a preliminary injunction and stay, arguing, among other things, that the changes to the 2013 Rule are “arbitrary and capricious.” The court noted that the Final Rule “constitutes a significant overhaul to HUD’s interpretation of disparate impact standards,” and that the alterations to the 2013 Rule “appear inadequately justified.” The court further explained that the Final Rule’s “massive changes pose a real and substantial threat of imminent harm” to the plaintiffs by increasing “the burdens, costs, and effectiveness of disparate impact liability.” Lastly, the court noted that HUD did not identify any “particularized” harm to the government or public should the injunction be granted. Thus, the court granted the preliminary injunction and stayed the implementation date until further order.

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