The U.S. Department of Housing and Urban Development (“HUD”) has finally issued its much-debated disparate impact rule. HUD argues that the rule — which it plans to apply retroactively — is simply a codification of its existing position that the Fair Housing Act authorizes disparate impact claims. But the rule goes well beyond that. It articulates a burden-shifting framework that places significant new legal burdens onto defendants, and it “clarifies” the standard for “business justification” that HUD had originally proposed into a test that courts have affirmatively rejected.

The New Rule -

HUD is charged with interpreting and enforcing the Fair Housing Act (“FHA”). The new rule adds a provision entitled “Prohibiting Discriminatory Effects” to HUD’s existing FHA regulations. Under the new provision, a defendant may be liable for practices with a discriminatory effect unless there is a legally sufficient justification. The showings and burdens of proof unfold as follows...