Commenters also stated that punitive and exemplary damages should be available in administrative pleadings and that all litigation costs should be covered for plaintiffs in administrative and judicial proceedings so that discrimination challenges are not cost prohibitive. One commenter said the Proposed Rule is essential for smaller banks that do not have the resources to defend costly legal challenges that could drive banks out of the lending market. These commenters wrote that finalizing a rule with such defenses available would cause HUD to violate its statutory duty to affirmatively further fair housing. In 100.5, amend paragraph (b) by revising the second sentence, adding a third sentence, and adding paragraph (d) to read as follows: (b) * * * The illustrations of unlawful housing discrimination in this part may be established by a practice's discriminatory effect, even if not motivated by discriminatory intent, and defenses and rebuttals to allegations of unlawful discriminatory effect may be made, consistent with the standards outlined in 100.500. As otherwise noted, various courts have held the Fair Housing Act to not be preempted by the McCarran-Ferguson Act. While every effort has been made to ensure that 24.713 (b); and hearings concerning actions taken by the Multifamily Participation Review Committee pursuant to 24 C.F.R. 2014). One comment recommended a study be conducted for the adverse impacts of actions such as land use and zoning decisions and tax credit policies rather than focusing solely on real estate transactions and lending. HUD intends these two terms to be synonymous. Thus, as the Supreme Court has explained, a plaintiff challenging the decision of a private developer to construct a new building in one location rather than another will not easily be able to show this is a policy causing a disparate impact because such a one-time decision may not be a policy at all. Inclusive Communities, 135 S. Ct. at 2523; see also Breen v. Chao, 253 F. Supp. Certified Occupancy Specialist Public Housing (COSP) is a comprehensive study of the HUD guidelines and regulations found in the Public Housing Occupancy Guidebook (PHOG). The reference to specific policy in 100.500 is meant to include the practice or policy that forms the basis of a disparate impact claim. Tenants have a right to safe, sanitary and habitable housing in New Jersey. Alternatively, commenters opposed an elevated degree of harm, which they suggested the language in 100.500(b)(3) proposed. at 1112). In administrative proceedings under 42 U.S.C. However, HUD notes that Swierkiewicz's caution that the precise requirements of a prima facie case can vary depending on the context and were never intended to be rigid, mechanized, or ritualistic,[82] Some commenters opposed the Proposed Rule because it conflicts with prior case law by requiring plaintiffs to bear the burden of pleading and proving an artificial, arbitrary, and unnecessary barrier to fair housing in the prima facie stage. Insurers Ass'n of Am. (5) That there is a direct relation between the injury asserted and the injurious conduct alleged. Commenters noted that the proposed revision in 100.500(a) deletes the portion of the 2013 Rule stating that a practice has a discriminatory effect where it actually or predictably results in a disparate impact. Several commenters highlighted the positive impact the 2013 Rule had on families with children, such as challenging restrictions on the number of occupants in a unit, as well as restrictions on the use of amenities, where discriminatory intent may not be shown. Under Executive Order 13891, sub-regulatory guidance does not generally have the force of law and Start Printed Page 60330would not in the context of this Final Rule to the extent it added objections have binding effect. Another commenter stated defendants should be allowed to provide evidence to support the reasons for their policies, defenses, and rebuttals. The comment cited HUD's role in the White House Council on Eliminating Barriers to Affordable Housing, and HUD's recent housing finance reform proposal,[22] While it may be true that in most cases the risk-based factors will be facially neutral, the basis for liability under a disparate impact claim is that practices that are not obviously discriminatory can nonetheless have an unjustified discriminatory impact on a protected class. Such analogies do not limit HUD's significant discretion to impose additional guardrails for Title VIII disparate impact liability that do not exist under Title VII, particularly when Inclusive Communities clarified that the opinion announced cautionary standards for disparate impact liability under the Fair Housing Act.[108]. PDF HOUSING LAW OF MICHIGAN - Michigan Legislature [FR Doc. Some commenters argued that demographic information is irrelevant and unnecessary to obtaining home insurance, unrelated to risk, and has never affected a claim. This issue would instead be covered by the defense for a policy or practice that was reasonably required by a law or court order. View CPD Notices. PDF 2020 Mandatory Design Standards for Multifamily Housing - HUD User See U.S. Commenters also supported HUD's changes to 100.5, 100.7 and 100.120. For example, a lender could admit to intentionally giving a borrower inaccurate information due to the borrower's race, sex, or gender, and face no liability unless the victim could prove the information was material. Following the Inclusive Communities decision, on May 15, 2017, HUD published a Federal Register notice that invited public comment to assist HUD in identifying existing regulations that may be outdated, ineffective, or excessively burdensome, pursuant to Executive Orders 13771, Reducing Regulation and Controlling Regulatory Costs, and 13777, Enforcing the Regulatory Reform Agenda.[6] Due to the potential variability of State laws, a blanket defense for insurance matters is outside the authority of HUD under the Fair Housing Act. HUD Response: The Final Rule does not interpret the McCarran-Ferguson Act and HUD is neutral regarding its application in specific cases. HUD Response: The Proposed Rule did not intend to, and the Final Rule does not limit claims that result in unlawful segregation. You can count on NCHM to keep you and your team in-the-know. Changes Made at the Final Rule Stage, A. This Rule's language does not Start Printed Page 60307preclude such a claim, it merely does not recognize this specific type of claim. Commenters noted that HUD previously stated in its Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act rule preamble that under traditional principles of agency law, a housing provider may be held vicariously liable for: The discriminatory acts, of an employee or agent regardless of whether the housing provider knew of or intended the discriminatory conduct where the employee was acting within scope of his or her agency, or where the [discrimination] was aided by the agency relationship.[59] The Final Rule is therefore more consistent with the now binding Supreme Court precedent than the 2013 Rule. 2017) (citing In re McDonald, 205 F.3d 606, 612 (3d Cir. Some owners with older properties may decide not to participate if we are requiring significant upgrades to their units in order to pass inspection, upgrades that they are not required to perform if they rent to someone in the private market. Other prohibited sale and rental conduct. The commenter specifically noted that nationwide, very few disparate impact claims were filed since 2013, and those that were brought were resolved at an early stage. Commenters asserted this approach broke from Congress's intent, affirmed by Inclusive Communities, for burden shifting in disparate impact claims, and Title VII case law. [167] This Final Rule is intended to reflect a constant, logical set of pleading requirements consistent with prevailing case law. The arguments that the McCarran-Ferguson Act always precludes application of the Fair Housing Act when it implicates State insurance law has been rejected by Federal courts. One commenter said both Inclusive Communities and the Proposed Rule make disparate impact claims more difficult and complicated, and therefore more expensive, and may discourage such claims because they appear to increase burdens and costs for complainants, shifting those costs from respondents. HUD Response: HUD appreciates these comments, but declines to repeat statute of limitations requirements set forth in statutes. 1999) (Americans with Disabilities Act case preempted when it would interfere with the State's administrative regime). The framework of the burdens and defenses provisions are considered to be severable. at 2522 (quoting Griggs at 431). It was surprising because we thought they were moving in a positive direction in a lot of ways. Box, Science and Statistics, Journal of the American Statistical Association (1976), https://www.jstor.org/stable/2286841. Commenters asked that HUD define arbitrary, artificial, and unnecessary. Other commenters suggested that HUD define the phrase arbitrary, artificial, and unnecessary as applying to a policy that is not reasonably calculated to achieve a legitimate goal within the sound discretion of the policy-maker and that imposes an otherwise unexplained burden on housing opportunities for persons in protected classes. Further, commenters suggest HUD provide examples of policies HUD considers arbitrary, artificial, and unnecessary and suggests zoning rules that artificially restrict the ability to develop multifamily housing as one such example. Commenters suggest a statute of limitations for disparate impact claims arising from lending decisions. . Commenters noted that when Start Printed Page 60320Congress amended the Fair Housing Act in 1988, nine federal courts of appeals had endorsed Black Jack's basic holding that the statute prohibits actions with an unjustified disparate impact. 90. Given the recent Supreme Court decision, HUD's objective in this rule is to ensure consistency and uniformity, and therefore reduce burden for all who may be involved in a challenged practice. Commenters asserted that third parties have incentives to secure repeat business rather than eliminating discriminatory effects or giving candid advice about potential impacts, and this defense will allow a wide array of practices facilitated by faulty algorithmic models without liability. HUD's proposed changes were meant to clarify that, in accordance with the guidance in Inclusive Communities, informational disparities must be material in order to violate the Fair Housing Act. Thus, commenters' statements about data in itself being sufficient to shift a burden to a defendant is misplaced. At the same time, the agency stressed that other parties are also responsible for oversight, as landlords will be required to conduct yearly self-inspections under the newly proposed system, and HUD requires all properties to comply with state and local laws. cited by the commenter, the disparate impact rule and the Takings Clause of the U.S. Constitution are not mutually exclusive. You should begin keeping files on residents from the time they move in or start receiving services. Another commenter wrote that there is no source supporting that immaterially inaccurate or different requirements are resulting in litigation or costly risk prevention programs that make this change necessary. HUD especially notes that the defendant may show a failure to plead causation by showing that the defendant's alleged actions are reasonably necessary to comply with a third party requirement, such as a state law. Commenters suggested an alternative that plaintiffs should not be required to Start Printed Page 60321prove elements in paragraphs (b)(2) through (5), but should instead be required to demonstrate the elements through preponderance of evidence. Ins. Although not explicitly required in the Proposed Rule, the commenters stated that this should be clarified considering the mitigating evidence required by the courts in prior cases. Commenters stated that the existing doctrine is that a plaintiff who is able to identify a policy or practice and marshal a showing of causation has identified a robust cause of their alleged harm. HUD cites to Lincoln Property only as one of several cases which recognize the robust causality requirement articulated in Inclusive Communities. 17. According to information provided by another commenter, Nebraska, Oklahoma, and Wyoming do not require risk-based pricing. When informed of the changes by NBC News, advocates for tenants and safe housing urged HUD not to weaken health and safety standards in ways that could endanger the 5 million families across the country who live in federally assisted housing. A commenter recommend that Federal financial assistance recipients and all complexes with more than 15 tenants should be required to maintain applications and housing decisions on file for five years, and such information should be made available for review during litigation for use in determining disparate impact of business decisions in order to enforce the Fair Housing Act. U.S. Department of Housing Issues New Rules for Emotional Support Tex. Another commenter stated the Proposed Rule promotes the free market system and removes impediments to increased lending in needy communities. HUD disagrees that the Proposed Rule was designed to restrict the scope of judicial review on Fair Housing Act claims; HUD sought to clarify for all parties the burdens involved in bringing or defending against a disparate impact claim under the Act. 112. Some comments suggest alternatives related to data collection. Exec. Commenters stated that nothing in Inclusive Communities now renders it more appropriate to import Wards Cove into the Fair Housing Act and that although Inclusive Communities includes one favorable citation to Wards Cove, it is to a portion that was not abrogated by the Civil Rights Act of 1991. Similarly, another commenter stated that when read alongside 100.5(d), 100.500(b)(2) imposes a legally impermissible undue burden on the plaintiff. [153], The Proposed Rule and Final Rule make clear that HUD is only clarifying that its disparate impact rule is not specifically related to the business of insurance. One commenter specifically noted that in 2013, HUD found that regulated entities have successfully followed the existing rules since at least 1994, and the existing rules have permitted them to conduct consistent self-testing and compliance reviews, document their substantial, legitimate nondiscriminatory interests, and resolve potential issues so as to prevent future litigation.. As discussed in the preamble and in the Proposed Rule, this question has been the subject of controversy and debate. Commenters stated that failing to provide a definition would increase litigation costs and would reduce the ability of potential litigants to analyze the risk of litigation. Some commenters suggested that the Proposed Rule contained language explicitly stating that experts cannot be deemed biased based on the fact that the expert has received payment or has prior history with litigation under the Fair Housing Act. HUD notes that the less discriminatory alternative is the plaintiff's burden of proof, but the defendant has the burden of rebutting a plaintiff's proposed alternative if the defendant seeks to show that the alternative would impose materially greater costs or burden. Ellis, at 1111 (quoting Inclusive Communities at 2523). Magner.[174]. HUD Response: HUD appreciates these comments. HUD believes that this language achieves many of the goals of the proposed defense while addressing many of the concerns raised by commenters. HUD denied weakening protections for residents and said providing safe and sanitary housing is a top priority for the Biden administration. The proposed revisions also included an interpretation of the Fair Housing Act when in conflict with state laws regulating the business of insurance; clarification of vicarious liability; the provision and clarification of examples of acts that constitute discriminatory practices under disparate impact; and implementation of a burden-shifting framework that more closely aligns with the Court's decision in Inclusive Communities. A commenter asserted that the practice of risk-based pricing and underwriting is an objective practice that is necessary for the insurance industry to function and should provide a complete defense to disparate-impact based claims. For instance, this could include situations where the State law is silent or where the State law also prohibits racial discrimination. Under court decisions, the Fair Housing Act applies to insurance when application of the Fair Housing Act would not invalidate, impair, or supersede State laws enacted for the purpose of regulating the business of insurance. Please complete this quiz before you proceed to the next module. If the choice of specific risk factors among permissible alternatives is the cause of a disproportionate adverse effect on the protected population as compared to similarly situated members of a non-protected class with respect to the claim being made, then the causal link between the choice of a specific factor or factors and a disparate impact on a protected class conceivably could be shown. [92] Several commenters objected to the proposed 100.7(b) omission of text imposing liability regardless of whether a defendant knew or should have known of the conduct that resulted in a discriminatory housing practice. Other commenters supported the arbitrary, artificial, and unnecessary language because it prevents abusive claims and the Proposed Rule asserts that a valid objective can be based on practical business considerations and/or profitability. Some commenters supported the proposed defenses against a plaintiff's prima facie case, stating that the defenses in the Proposed Rule will discourage abusive disparate impact filings while still preserving cases that are at the core of disparate impact liability. Commenters believe that the Proposed Rule would exacerbate existing discriminatory outcomes for women of color since it would allow housing providers to evade awareness of the impact of their own discriminatory practices. Therefore, HUD has determined not to implement language that would require the plaintiff to show a minimum number of people are affected. See, e.g., United States v. City of Black Jack, 508 F.2d 1179, 1186 (8th Cir. One commenter recommended that HUD revise 100.5(d) to clarify that while defendants are not required to collect such data, data may be necessary for a plaintiff to prove a prima facie case. National Center for Housing Management. Some commenters stated that courts have erroneously suggested that the 2013 Rule and Inclusive Communities' framework are the same, and conforming HUD's rule to Inclusive Communities will reduce confusion. [2] Reach out today to see if Private Training is a good fit for your organization. Commenters stated that proposed 100.500(e) would create a safe harbor for insurance claims under the Fair Housing Act, or preempt all such possible claims that the McCarran-Ferguson Act has no reverse-preemptive effect on Federal law at all. Paragraph (d) of the Proposed Rule listed the burdens of proof and production throughout a disparate impact case and divided these burdens by plaintiff and defendant. 19. Other commenters said the robust causality element rectifies conflict between the 2013 Rule and cases brought since Inclusive Communities. HUD's Compliance Actions FAQs HUD's past positions in litigation briefs are not binding on HUD in rulemaking. 508 F.3d 366 (6th Cir. 83 FR 28560. Commenters suggested that HUD should impose more substantial penalties against actors responsible for policies that impact disabled individuals' ability to obtain or maintain housing. Commenters pointed to the words significant, robust, and material as meaning the same thing, but are used interchangeably, which causes confusion about whether the intent is for them to be different. HUD Response: HUD appreciates the support from commenters and agrees that business and other requirements by state agencies are already in place to require information collection when relevant to businesses. HUD Response: HUD disagrees with the suggestion that this language will immunize all one-time decisions from disparate impact analysis. ; Web Management and Web Policies | Comment: The Proposed Rule would overly burden the insurance industry. Family Ins. This document has been published in the Federal Register. The language in 100.5(d) is limited to 24 CFR part 100 of the regulations and, as discussed above, clarifies that part 100 itself is not requiring or encouraging data collection. Disparate impact liability is available under this Final Rule to challenge facially neutral policies and practices that relate to dwellings, including land use policies. 160. A commenter asserted that HUD's failure to consider both the direct and quantifiable harms as well as indirect and non-quantifiable harms under the Proposed Rule would result in more entrenched residential segregation, exclusion of protected groups from housing, and discrimination in home purchasing and rental markets. A commenter also objected to the Proposed Rule because HUD failed to provide and publish in the Federal Register a statement providing the factual basis for its determination that the Proposed Rule would not have a significant economic impact on a substantial number of small entities. HUD Response: HUD appreciates all of the comments and suggestions. Housing and Urban Development, U.S. Department of Housing and Urban Development, 451 7th Street, S.W., Washington, DC 20410 Depending on the size of the PHA, there may also be other executive staff. Under the Fair Housing Act, individuals may make complaints about discriminatory policies or practices, including those mandated by statute, to HUD, and HUD has the authority to proceed against various actors, including governments. Further, this Final Rule makes no changes to rules related to civil and administrative procedures relative to records retention, litigation, or the Fair Housing Act's requirement to provide documents and other evidence during an investigation. The commenter argues that this squarely contravenes the FRCP regarding motions to dismiss, summary judgment, and Rule 12(d), which HUD has no authority to repeal or modify. A commenter added that there has been less litigation because of Inclusive Communities and the 2013 Rule. Commenters also wrote that the Proposed Rule needs to clarify materially inaccurate or different information and what it means by accurate or related to an individual's particular circumstances. The section would unnecessarily invite debates over the meaning of ambiguous regulatory text, causing confusion and an increase in burdens on litigants, courts, and entities. A similar result may occur if the State law is silent on risk-based pricing. HUD Response: On the issue of requiring a showing of discriminatory intent, the Inclusive Communities case is clear that a showing of disparate impact does not rely on intent, but is in contrast to a disparate treatment case, which does rely on intent. [138], HUD finds that the analogy to the business necessity standard under Title VII is persuasive. The training program prepares students for the certification exam, which is administered immediately after the instruction when comprehension is the highest. 148. Commenters noted further that HUD's 2013 Rule preamble also explained that every federal court of appeals to have addressed the issue agreed that the Fair Housing Act prohibits practices with the unjustified effect of perpetuating segregation. One commenter noted that the Proposed Rule did not account for existing case law or HUD's own prior positions, and HUD, therefore, did not rely on the administrative knowledge and experience which largely account for the presumption that Congress delegates interpretive lawmaking power to the agency. HUD stands for the United States Department of Housing and Urban Development (HUD). HUD provides guidance on the CDBG Program through CPD Notices and Policy Memoranda. The defendant must then have the opportunity to prove that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests. Commenters urged HUD to consult with other agencies to gain insight on the use of artificial intelligence. As noted, HUD does not believe it is appropriate for HUD to seek to delineate legal and factual issues. Commenters stated that HUD is inferring a materiality requirement through the word significant, which is not supported by Inclusive Communities. Dep't of Hous. for better understanding how a document is structured but A commenter suggested the application of disparate impact regulations in cases involving state action impacting property should differ from other circumstances, especially when such state action violates the Takings Clause. This historic manual provides instruction on the operation and maintenance of public housing developments, for use by local housing authorities. HUD Response: HUD notes that a regulatory impact analysis is not required if the rule will not have a significant economic impact on a substantial number of small entities. HUD Response: HUD appreciates these comments but notes that punitive damages are not authorized in administrative proceedings by the Fair Housing Act. Ins. This is very concerning, we are facing an extreme housing shortage in our city.. Therefore, the regulatory language does not conflict with the Federal Rules of Civil Procedure (FRCP) or any other law. The social vulnerability index appears inconsistent with applicable law. This Final Rule does not alter that provision. The commenters stated that the Final Rule should allow these terms to be defined contextually, as they traditionally have been, and not create novel safe harbors for acts of discrimination artificially defined as insignificant, immaterial, or negligible or otherwise small. Commenters suggested revising 100.5(b) to read: Liability for unlawful housing discrimination under this part may be established by a Start Printed Page 60301practice's discriminatory effect, even if not motivated by discriminatory intent, and defenses and rebuttals to such allegations may be made, consistent with the standards outlined in 100.500.. As noted by the commenter, this does not mean that such single action may not be unlawful under the Fair Housing Act. Section 100.7Liability for Discriminatory Housing Practices, C. Section 100.120Discrimination in the Making of Loans, D. Section 100.500Discriminatory Effect Prohibited Standard, Paragraph (f)Remedies in Discriminatory Effect Cases, Paragraph (c) Remedies in Administrative Proceedings, Section 100.120(b)(1)Discrimination in the Making of Loans and in the Provision of Other Financial Assistance, Section 100.500Discriminatory Effect Prohibited, (b)(1) Arbitrary, Artificial and Unnecessary, (b)(3) Adverse Effect on Members of a Protected Class, (c) Failure To Allege a Prima Facie Case (General), (c)(1) Prima Facie Case Not Established Because Defendant Discretion Is Materially Limited by a Third Party, (c)(2)Defenses When Disparate Impact Results From Use of System or Risk-Assessment Algorithm, (d) Burdens of Proof for Discriminatory Effect, Regulatory ReviewExecutive Orders 12866 and 13563, PART 100DISCRIMINATORY CONDUCT UNDER THE FAIR HOUSING ACT, https://www.federalregister.gov/d/2020-19887, MODS: Government Publishing Office metadata, https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_and_related_law, https://www.treasury.gov/press-center/press-releases/Documents/A-Financial-System-That-Creates-Economic-Opportunities-Asset_Management-Insurance.pdf, https://www.regulations.gov/docketBrowser?rpp=50&po=0&D=HUD-2019-0067, https://www.hud.gov/sites/documents/FINALNUISANCEORDGDNCE.PDF;, https://www.hud.gov/sites/documents/HUD_OGCGUIDAPPFHASTANDCR.PDF, https://www.cookcountyil.gov/content/just-housing-amendment-human-rights-ordinance, https://www.hud.gov/sites/dfiles/Main/documents/Housing-Finance-Reform-Plan0919.pdf, https://www.govinfo.gov/content/pkg/FR-1994-04-15/html/94-9214.htm, https://www.eeoc.gov/employers/eeo1survey/, https://www.regulations.gov/document?D=HUD-2019-0067-3436, https://www.hud.gov/program_offices/fair_housing_equal_opp/online-complaint. This is consistent with the concept in Inclusive Communities of giving housing authorities and developers leeway to state and explain the valid interest served by their policies. The Proposed Rule would implement this standard in the fair housing context in its section on burden of proof.[140]. See 24 CFR 100.5(b), 100.70(d)(5), 100.120(b), 100.130(b), and 100.500. HUD does not believe that this position contradicts its previous position in the 2013 Rule. Commenters stated that it is unclear from the text of proposed 100.500(b)(2) whether a plaintiff must demonstrate both a `robust causal link' and `direct cause,' or whether a showing of `direct cause' conclusively establishes the `robust causal link.'. As to the comment that Smith v. City of Boston rejected the reading of Inclusive Communities as changing the three-prong burden shifting test, those statements by the District Court in a footnote, which were part of a discussion of the role of the third prong in Title VII analysis (that plaintiffs can rebut a showing of business necessity by identify a less discriminatory alternative that meets the defendant's legitimate needs), were simply dicta, as that part of the burden shifting test was expressly not a factor in the actual holding because the defendant's case failed at an earlier stage.[142].
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