83 FR 28560 - Reconsideration of HUD's Implementation of the Fair Housing Act's Disparate Impact Standard

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 83, Issue 119 (June 20, 2018)

This advance notice of proposed rulemaking (ANPR) invites public comment on possible amendments to HUD's 2013 final rule implementing the Fair Housing Act's disparate impact standard, as well as the 2016 supplement to HUD's responses to certain insurance industry comments made during the rulemaking. HUD is reviewing the final rule and supplement to determine what changes, if any, are appropriate following the Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which held that disparate impact claims were cognizable under the Fair Housing Act and discussed standards for, and the constitutional limitations on, such claims. As HUD conducts its review, it is soliciting public comment on the disparate impact standard set forth in the final rule and supplement, the burden-shifting approach, the relevant definitions, the causation standard, and whether changes to these or other provisions of the rule would be appropriate. HUD is also issuing this ANPR in response to public comments submitted on its May 15, 2017, Federal Register document seeking input on ineffective regulations and an October 26, 2017, recommendation from the Department of the Treasury.

[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Proposed Rules]
[Pages 28560-28562]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-13340]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 100

[Docket No. FR-6111-A-01]
RIN 2529-ZA01


Reconsideration of HUD's Implementation of the Fair Housing Act's 
Disparate Impact Standard

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity, HUD.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: This advance notice of proposed rulemaking (ANPR) invites 
public comment on possible amendments to HUD's 2013 final rule 
implementing the Fair Housing Act's disparate impact standard, as well 
as the 2016 supplement to HUD's responses to certain insurance industry 
comments made during the rulemaking. HUD is reviewing the final rule 
and supplement to determine what changes, if any, are appropriate 
following the Supreme Court's 2015 ruling in Texas Department of 
Housing and Community Affairs v. Inclusive Communities Project, Inc., 
which held that disparate impact claims were cognizable under the Fair 
Housing Act and discussed standards for, and the constitutional 
limitations on, such claims. As HUD conducts its review, it is 
soliciting public comment on the disparate impact standard set forth in 
the final rule and supplement, the burden-shifting approach, the 
relevant definitions, the causation standard, and whether changes to 
these or other provisions of the rule would be appropriate. HUD is also 
issuing this ANPR in response to public comments submitted on its May 
15, 2017, Federal Register document seeking input on ineffective 
regulations and an October 26, 2017, recommendation from the Department 
of the Treasury.

DATES: Comment Due Date: August 20, 2018.

ADDRESSES: Interested persons are invited to submit comments to the 
Office of the General Counsel, Rules Docket Clerk, Department of 
Housing and Urban Development, 451 Seventh Street SW, Room 10276, 
Washington, DC 20410-0001. Communications should refer to the above 
docket number and title and should contain the information specified in 
the ``Request for Comments'' section. There are two methods for 
submitting public comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500. Due to security measures at all federal 
agencies, however, submission of comments by mail often results in 
delayed delivery. To ensure timely receipt of comments, HUD recommends 
that comments submitted by mail be submitted at least two weeks in 
advance of the public comment deadline.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make comments 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov website can be viewed by other 
commenters and interested members of the public. Commenters should 
follow instructions provided on that site to submit comments 
electronically.

    Note:  To receive consideration as public comments, comments 
must be submitted through one of the two methods specified

[[Page 28561]]

above. Again, all submissions must refer to the docket number and 
title of the document.

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Comments. All comments and communications 
submitted to HUD will be available for public inspection and copying 
between 8 a.m. and 5 p.m. weekdays at the above address. Due to 
security measures at the HUD Headquarters building, an advance 
appointment to review the public comments must be scheduled by calling 
the Regulations Division at (202) 708-3055 (this is not a toll-free 
number). Copies of all comments submitted are available for inspection 
and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Krista Mills, Deputy Assistant 
Secretary, Office of Policy, Legislative Initiatives, and Outreach, 
Office Fair Housing and Equal Opportunity, Department of Housing and 
Urban Development, 451 7th Street SW, Room 5246, Washington, DC 20410; 
telephone number 202-402-6577. Individuals with hearing or speech 
impediments may access this number via TTY by calling the toll-free 
Federal Relay Service during working hours at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Title VIII of the Civil Rights Act of 1968, as amended (Fair 
Housing Act or Act),\1\ prohibits discrimination in the sale, rental, 
or financing of dwellings and in other housing-related activities on 
the basis of race, color, religion, sex, disability, familial status, 
or national origin. On February 15, 2013, HUD published a final rule, 
entitled ``Implementation of the Fair Housing Act's Discriminatory 
Effects Standard.'' \2\ The final rule codified HUD's interpretation 
that the Fair Housing Act creates liability for practices with an 
unjustified discriminatory effect, even if those practices were not 
motivated by discriminatory intent.\3\ Relying in part on case law 
under the Fair Housing Act and Title VII of the Civil Rights Act of 
1964 (prohibiting employment discrimination), HUD's Disparate Impact 
Rule established a burden-shifting framework for analyzing claims of 
disparate impact under the Fair Housing Act.\4\ In 2016, HUD published 
a supplement to its responses to certain insurance industry comments 
made during the rulemaking.\5\ This ANPR uses the term ``Disparate 
Impact Rule'' to refer collectively to the 2013 final rule and 2016 
supplement.
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    \1\ 42 U.S.C. 3601-3619, 3631.
    \2\ 78 FR 11460.
    \3\ See 24 CFR 100.5(b), 100.70(d)(5), 100.120(b), 100.130(b), 
and 100.500.
    \4\ See 24 CFR 100.500(c).
    \5\ See ``Application of the Fair Housing Act's Discriminatory 
Effects Standard to Insurance,'' 81 FR 69012 (Oct. 5, 2016).
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    In 2015, in Texas Department of Housing and Community Affairs v. 
Inclusive Communities Project, Inc.,\6\ (Inclusive Communities), the 
Supreme Court held that disparate impact claims are cognizable under 
the Fair Housing Act. The Court's opinion referenced HUD's Disparate 
Impact Rule, but the Court did not extensively review the rule or rely 
on it for its holding. Rather, the Court undertook its own analysis of 
the Fair Housing Act and discussed the standards for, and 
constitutional limitations on, disparate impact claims. The Supreme 
Court's ruling in Inclusive Communities recognized the availability of 
disparate impact claims under the Fair Housing Act independent of HUD's 
Disparate Impact Rule. HUD is reviewing the Disparate Impact Rule to 
determine what changes, if any, may be necessary in light of the 
Inclusive Communities decision. As it conducts this review, HUD 
welcomes public comment on other amendments to the Disparate Impact 
Rule that may be necessary or helpful.
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    \6\ 135 S. Ct. 2507 (2015).
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    The request for comments contained in this ANPR is also consistent 
with HUD's efforts to carry out the Administration's regulatory reform 
efforts. On May 15, 2017, HUD published a Federal Register document 
pursuant to Executive Orders 13771, ``Reducing Regulation and 
Controlling Regulatory Costs,'' and 13777, ``Enforcing the Regulatory 
Reform Agenda,'' inviting public comments to assist HUD in identifying 
existing regulations that may be outdated, ineffective, or excessively 
burdensome.\7\ In response, HUD received numerous comments asserting 
that the Disparate Impact Rule created uncertainty for commercial 
decisionmaking, as well as public policymaking, and that the rule is 
inconsistent with Inclusive Communities. On the other hand, HUD also 
received comments in support of the Disparate Impact Rule, asserting 
that it was cited in Inclusive Communities and is consistent with that 
decision. Additionally, in October 2017, the Secretary of the Treasury 
issued a report that explicitly recommended that HUD reconsider 
applications of the Disparate Impact Rule, especially in the context of 
the insurance industry.\8\
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    \7\ 82 FR 22344.
    \8\ See U.S. Department of the Treasury Report: A Financial 
System That Creates Economic Opportunities, Asset Management and 
Insurance (Oct. 26, 2017), available at: https://www.treasury.gov/press-center/press-releases/Documents/A-Financial-System-That-Creates-Economic-Opportunities-Asset_Management-Insurance.pdf.
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    In light of Inclusive Communities, public comments submitted in 
response to HUD's May 15, 2017, Federal Register document, and the 
recommendation from the Department of the Treasury, HUD is seeking 
public comment on whether the Disparate Impact Rule should be revised 
for any considerations of law or policy raised in those fora or that 
are otherwise appropriate.

II. This Advance Notice of Proposed Rulemaking

    HUD seeks public comment on appropriate changes, if any, to the 
Disparate Impact Rule. While the following list is not exhaustive, HUD 
is particularly interested in comments on the following questions:
    1. Does the Disparate Impact Rule's burden of proof standard for 
each of the three steps of its burden-shifting framework clearly assign 
burdens of production and burdens of persuasion, and are such burdens 
appropriately assigned?
    2. Are the second and third steps of the Disparate Impact Rule's 
burden-shifting framework sufficient to ensure that only challenged 
practices that are artificial, arbitrary, and unnecessary barriers 
result in disparate impact liability?
    3. Does the Disparate Impacts Rule's definition of ``discriminatory 
effect'' in 24 CFR 100.500(a) in conjunction with the burden of proof 
for stating a prima facie case in 24 CFR 100.500(c) strike the proper 
balance in encouraging legal action for legitimate disparate impact 
cases while avoiding unmeritorious claims?
    4. Should the Disparate Impact Rule be amended to clarify the 
causality standard for stating a prima facie case under Inclusive 
Communities and other Supreme Court rulings?
    5. Should the Disparate Impact Rule provide defenses or safe 
harbors to claims of disparate impact liability (such as, for example, 
when another federal statute substantially limits a defendant's 
discretion or another federal statute requires adherence to state 
statutes)?
    6. Are there revisions to the Disparate Impact Rule that could add 
to the clarity, reduce uncertainty, decrease regulatory burden, or 
otherwise assist the regulated entities and other members of the public 
in determining what is lawful?

[[Page 28562]]

II. Findings and Certifications

Environmental Impact

    This ANPR is exclusively concerned with nondiscrimination 
standards. Accordingly, under 24 CFR 50.19(c)(3), it is categorically 
excluded from environmental review under the National Environmental 
Policy Act (42 U.S.C. 4321-4347).

Regulatory Review--Executive Orders 12866 and 13563

    Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and therefore, subject to review by the Office of Management and Budget 
(OMB) in accordance with the requirements of the order. Executive Order 
13563 (Improving Regulations and Regulatory Review) directs executive 
agencies to analyze regulations that are ``outmoded, ineffective, 
insufficient, or excessively burdensome, and to modify, streamline, 
expand, or repeal them in accordance with what has been learned. 
Executive Order 13563 also directs that, where relevant, feasible, and 
consistent with regulatory objectives, and to the extent permitted by 
law, agencies are to identify and consider regulatory approaches that 
reduce burdens and maintain flexibility and freedom of choice for the 
public. This ANPR was reviewed by OMB and determined to likely result 
in a ``significant regulatory action,'' as defined in section 3(f) of 
Executive Order 12866.

    Dated: June 18, 2018.
Anna Maria Far[iacute]as,
Assistant Secretary for Fair Housing and Equal Opportunity.
[FR Doc. 2018-13340 Filed 6-18-18; 4:15 pm]
 BILLING CODE 4210-67-P