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We have previously reported on the tortured history of the disparate impact rule adopted by the U.S. Department of Housing and Urban Development (HUD) under the Fair Housing Act, most recently here. HUD now proposes to remove the rule from its regulations. Comments are due by February 13, 2026.
How did we get here? The original version of the rule was adopted in 2013, during the Obama Administration. The National Association of Mutual Insurance Companies and another insurance trade group swiftly challenged the rule in court, although the second trade group later dropped from the case. Then, in 2015, the U.S. Supreme Court held in a 5 to 4 decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. that disparate impact claims may be brought under the Fair Housing Act. In 2020, during the first Trump Administration, HUD revised the rule to reflect the Inclusive Communities decision and to make other changes. The revised rule was then challenged in multiple courts by various civil rights groups and stayed before it became effective. In 2023, during the Biden Administration, HUD reinstated the original rule.
After the Biden Administration reinstated the original rule, the National Association of Mutual Insurance Companies case, which was then before the federal district court for the District of Columbia, moved forward. In September 2023 the court granted HUD's motion for summary judgment. Addressing the decision, we noted that it is not hard to see that another court may find that the rule is inconsistent with the Inclusive Communities ruling. The district court's decision resulted in an appeal to the DC Circuit Court of Appeals
In a December 5, 2025 status report filed by HUD with the DC Circuit Court of Appeals, HUD included the following statement: "As previously explained, HUD intends to reconsider the 2023 Rule. On or about August 4, 2025, HUD submitted to the Office of Management [and] Budget a draft final rule entitled 'HUD's Implementation of the Fair Housing Act's Disparate Impact Standard.' That draft is pending internal regulatory review under Executive Order 12,866, and thus has not yet been made public." (Footnote omitted.)
Path chosen by HUD. Questions were raised regarding the path that HUD would take with the rule, given the policy of the current Trump Administration on the disparate impact theory of liability. As previously reported, President Trump issued Executive Order 14281 entitled "Restoring Equality of Opportunity and Meritocracy," which provides that "[i]t is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals." We now have the answer to the questions regarding the path—HUD intends to remove the rule.
The specific proposals are to:
- Remove 24 CFR part 100, subpart G, which contains the disparate impact rule in section 100.500; and
- Remove the second sentence of 24 CFR § 100.5(b), which currently provides as follows:
"This part provides the Department's interpretation of the coverage of the Fair Housing Act regarding discrimination related to the sale or rental of dwellings, the provision of services in connection therewith, and the availability of residential real estate-related transactions. 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, consistent with the standards outlined in § 100.500."
In the preamble to the proposal, HUD addresses the Executive Order 14281, and states that it:
"[I]nstructs all federal agencies including HUD to, in coordination with the Attorney General, review existing regulations and rules that impose disparate impact liability and consider amendment or repeal of these regulations as appropriate under applicable law. Consistent with this, HUD has reviewed its disparate impact regulations and related prior rulemakings and determined they are unnecessary. HUD's prior assertion, that its disparate impact regulations provided clarity and predictability for all parties engaged in housing transactions (78 FR 11460), is diminished by the facts that case law continues to develop and HUD's regulation does not provide an up-to-date picture of the legal landscape."
HUD also addresses the 2025 decision of the U.S. Supreme Court in Loper Bright Enterprises v. Raimondo, in which the Court overturned the long-standing Chevron Deference Doctrine, saying that judges—not federal agencies—should interpret federal laws. We previously reported on the decision here and here. We also addressed the decision in two podcasts, available here and here.
In view of Loper, HUD states that:
"A reviewing court is free to consider, or not, an agency's interpretation, and in any case the court may not simply defer to the agency's interpretations where the court finds the underlying statute to be ambiguous. As a result, HUD's prior disparate impact rulemakings, HUD's interpretation of the Fair Housing Act, and the codification of that interpretation in regulations, do not carry deferential weight. A reviewing court may wholly reject HUD's claims in prior rulemakings that the regulations provide greater clarity and predictability and may vacate or set aside HUD's rules. It is appropriate for courts, not a Federal agency, to make determinations related to the interpretation of disparate impact liability under the Fair Housing Act." (Footnotes omitted.)
HUD also addresses the 30-day comment period, in view of the HUD "policy to afford the public" a comment period of not less than 60 days. HUD notes the significant number of public comments it reviewed in connection with the prior three disparate impact rulemakings, and states that "[p]ublic comments covered a vast array of topics and issues, and many comments raised legal concerns including, for example, relevant court opinions, State and local law concerns, and interpretations of underlying legal authorities." HUD then states:
"Given that this rulemaking does not change any requirements or affect any rights or obligations, and given the volume of public comments already submitted, the scope of issues and topics raised by those comments, and HUD's thorough consideration of those comments and other relevant materials over the course of several rulemakings, HUD has determined that it is in the public interest to remove HUD's disparate impact regulations as expeditiously as possible."
Assuming that HUD removes the current rule, it is likely that one or more parties that favor the rule will challenge that action in court. Thus, the torture will likely continue.
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