Disparate Impact: A Crucial Fair Housing Protection Under Attack

By Nick Adjami
October 14, 2019

The passage of the Fair Housing Act (FHA) in 1968 made it illegal for landlords, banks, insurance companies, and other housing-affiliated entities to discriminate based on race, color, national origin, and religion. Since then, Congress has amended the Act to include additional protections on the bases of sex, disability, and familial status. But housing discrimination did not end with the passage of the Fair Housing Act. It did become more subtle. Today, landlords may be less likely to explicitly refuse to rent to people with disabilities, but they might implement policies that make it difficult or impossible for people with disabilities to rent from them. Thankfully, there are certain legal protections in place that outlaw these more subtle forms of discrimination – at least for now.

Under the Fair Housing Act, “disparate impact” refers to a policy or practice that seems neutral on its face, but has the effect of disproportionately harming people of a certain protected class. A protected class simply refers to an identity trait against which it is illegal to discriminate. The disparate impact rule provides a framework whereby a policy might violate the Fair Housing Act if it disproportionately and unjustifiably harms, say, people of color, even if it does not explicitly state an intent to discriminate based on race.

In 2017, the ERC sued the largest private housing provider in the nation, Mid-America Apartments (MAA), for violating the FHA. Prior to the lawsuit, the company used an online application system that required applicants to answer whether they had ever been convicted of a felony, and applicants that answered “yes” were not allowed to submit an application. Though seemingly race-neutral, this practice was up to twelve times more likely to bar African American and Latinx individuals from applying to live at the properties than white prospective tenants, due to the over-representation of people of color in the U.S. criminal legal system. The ERC resolved its case against MAA once the company agreed to adopt a new criminal records screening policy that ensured each applicant would get a fair chance. Instead of flatly refusing all applicants with felony convictions, MAA now conducts individualized reviews of each prospective tenant, taking into account factors such as the context of the crime, the age of the individual at the time of the offense, the span of time since then, and evidence of rehabilitation. Such a policy minimizes discrimination and promotes compliance with the law. The concept of disparate impact and a 2015 Department of Housing and Urban Development (HUD) rule implementing it have been crucial in preventing seemingly harmless policies from disproportionately impacting vulnerable populations. Now, HUD is threatening to decimate this crucial protection.

HUD has proposed a rule that they claim would clarify the requirements for bringing a disparate impact case. In reality, the proposed rule would make it virtually impossible to bring disparate impact claims. First, the proposed rule would unfairly shift the burden of proof, essentially requiring victims of discrimination to guess how the defendant might try to justify their policy and preemptively challenge that defense. Second, it could make a discriminatory policy immune from challenge if that policy is profitable, with the burden falling on the victim to somehow show that the company could make at least as much money without discriminating. Third, the proposed rule would provide special defenses for business practices that rely on algorithms. For example, if a bank’s underwriting algorithm disproportionately rejects loan applications from people of color, that bank could be immune from challenge based on the assumption that algorithms cannot discriminate. Spoiler alert: they can and they do. Finally, the rule would disincentivize businesses from collecting important data that could reveal discrimination, making victims less able to prove if discrimination is occurring. Ultimately, these barriers would make it impossible for victims of housing discrimination to defend their rights.

Of course, people with criminal records would not be the only group harmed by this rule change. Disparate impact liability has been used across a wide range of cases – from protecting survivors of domestic violence against discriminatory eviction policies, to protecting people of color against discriminatory lending policies. In each of these cases, the policy challenged did not explicitly discriminate, but in practice disproportionately and unjustifiably harmed members of a protected class, and so was struck down.

When an apartment complex or insurance agency’s policy disproportionately harms members of a protected class, it should not matter whether that was their intention. It should not matter whether the policy helps them turn a profit, or whether an algorithm was involved. The result – discrimination – is the same. HUD’s mission is to “create strong, sustainable, inclusive communities and quality affordable homes for all.” The agency’s revised disparate impact rule ignores this mission, and would have a drastic impact on many vulnerable communities. You can make your voice heard on this important issue by submitting a comment to HUD at defendcivilrights.org. The deadline to do so is October 18th, 2019.


If you believe you may have experienced discrimination in housing, you can contact the Equal Rights Center. To report your experience, please call 202-234-3062 or email info@equalrightscenter.org.

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