The U.S. Department of Housing and Urban Development’s (HUD) proposed rule on Disparate Impact removes its discriminatory effects regulations and leaves to the courts key questions about disparate impact liability under the Fair Housing Act. It is a historic reversal of decades of bipartisan agreement on fair housing enforcement and on the principle that impact is one of the most important ways to assess intent. Its impact will be to all but eliminate HUD’s role in fair housing enforcement, shifting the burden almost entirely to plaintiffs, the courts, and the states. This will make fair housing compliance, litigation, and enforcement more expensive, more prolonged, and more complicated, while serving no one.
The change from impact to intent is easily understood by any parent. Most parents have experienced a child breaking a fragile family heirloom and insisting they “didn’t mean it.” Lack of intent does not erase the harm—or the responsibility of parents to “child‑proof” their homes—so the same kind of thing doesn’t happen again and again. The same is true in housing: the absence of explicit animus does not excuse policies that produce discriminatory outcomes. Nor does it excuse the government from setting clear rules, policies, and consequences to prevent, identify, and respond to bad behavior.
NHC strongly opposes this rule and supports HUD’s existing disparate impact framework first adopted in 2013, upheld in principle by the Supreme Court in 2015, and reaffirmed in 2023. Few actors openly declare discriminatory intent. In most circumstances, the only reliable way to detect and prevent discrimination is to examine outcomes and patterns. Rolling back disparate impact tools does not end discrimination—it obscures it. We have made enormous progress over the past 50 years, but discrimination persists, and enforcement matters. Repeal of the disparate impact rule will not shield institutions from liability; it will heighten it by increasing ambiguity, inviting inconsistent enforcement, raising compliance costs, and escalating litigation risk.
The disparate impact standard is essential to ensuring that lenders look beyond the so‑called “invisible hand” of the market and actively seek out underserved communities to close our growing racial and economic gaps. HUD’s position is predicated on President Trump’s Executive Order 14281, which asserts that equal treatment under the law is a “bedrock principle of the United States” that “guarantees equality of opportunity, not outcomes.” The Order claims that disparate impact liability “endangers this foundational principle” by creating a “near insurmountable presumption of discrimination” whenever outcomes differ, “even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.”
It goes on to conclude that “it is the policy of the United States to eliminate the use of disparate impact liability in all contexts to the maximum degree possible.” On this, we strongly disagree. The Fair Housing Act is clear: practices that have a discriminatory effect without sufficient justification remain illegal, and HUD has a duty to enforce that law and uphold its fair housing mission.
HUD claims that under the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo (“Loper Bright”), courts no longer owe deference to federal agency interpretations of statutes and to actions that rely on them. But in 2015, the Supreme Court found that disparate impact claims were cognizable under the Fair Housing Act in its Texas Department of Housing and Community Affairs v. Inclusive Communities Project (“Inclusive Communities”) ruling. The Court found that disparate impact is often the only way to identify discrimination, including discriminatory intent, which is notoriously difficult to prove. Writing for the Court, Justice Anthony Kennedy explained that recognizing disparate impact “plays a role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment. In this way disparate-impact liability may prevent segregated housing patterns that might otherwise result from covert and illicit stereotyping.” Congressional intent, statutory authority, and legal precedent are clear.
HUD’s existing disparate impact rule (2013, updated 2023) is aligned with Inclusive Communities. Through its definition of discriminatory effects, its legal justifications, its burden‑shifting framework, and its process for filing disparate impact claims, the rule provides uniform, clear regulatory guidance that mitigates litigation risk and reduces the likelihood of conflicting court outcomes, especially for entities that operate across multiple jurisdictions. While Loper Bright means courts are not required to defer to agencies on matters of statutory construction, the Fair Housing Act’s text and history still speak with force. Courts may and do consult regulations and guidance in interpreting the law, which promotes consistency and predictability. HUD’s regulations are also essential tools for its own staff as they carry out enforcement.
Under the Fair Housing Act, HUD must investigate Fair Housing Act complaints submitted to the Office of Fair Housing and Equal Opportunity (FHEO) that meet the Act’s jurisdictional and procedural requirements. In a September 16, 2025 memo, HUD revoked longstanding fair housing enforcement guidance and deprioritized discrimination claims based on discriminatory effects, even as significant staffing cuts have crippled FHEO’s ability to fulfill its mission. Earlier this year, investigative reporting revealed that HUD was dropping multiple major fair housing investigations and cases—including some in which HUD had already found civil rights violations—because they raised disparate impact claims. In this proposed rule, HUD further asserts that not only interpretation, but also enforcement of discriminatory effects liability is “best left to the courts.” This retreat from enforcement will expose millions of Americans—especially those in vulnerable communities—to greater risks of discrimination and to lower quality, less affordable, and less accessible housing.
The concept of disparate impact under the Fair Housing Act has been upheld by 11 of the 13 U.S. Courts of Appeals, as well as by the Supreme Court. Yet HUD did not establish a clear regulatory standard on disparate impact until 2013, when it sought to codify and harmonize existing case law. HUD’s suggestion that it must now abandon that framework, in part because it does not reflect the latest case law, is inconsistent with both the Court’s reasoning and decades of enforcement practice.
The current proposed rule was drafted in response to Executive Order 14281, but an executive order cannot override statute or Supreme Court precedent. Practices that have a discriminatory effect without sufficient justification remain unlawful under the Fair Housing Act, and HUD must enforce that law as written. In addition to providing critical protections for communities across the country, disparate impact enforcement is in the mutual interest of landlords, lenders, developers, and other industry participants, as well as renters and consumers, by promoting clear rules, level competition, and fair access to housing and credit.
When NHC first proposed creating a cabinet‑level department dedicated to housing and urban development in 1955, our goal was for the agency to be a bulwark against racial discrimination and against the failures of the private market to build the millions of affordable homes our nation needs. Today, six decades after HUD’s establishment, its mission of building “inclusive and sustainable communities free from discrimination” is more important than ever. The scourge of housing discrimination persists today just as it did in 1968 when the Fair Housing Act became law. Making housing discrimination harder to prevent and enforce will turn back the legal clock by over half a century—mirroring how the homeownership rate for people of color has been pushed backward since subprime lenders disproportionately destroyed the homeownership dreams of Black homeowners throughout the country leading up to the Great Recession. The disparate impact standard remains one of the most important tools for rooting out discrimination outlawed by the Fair Housing Act. It is imperative that it not be eliminated or weakened.