The Trump administration has laid the groundwork to allow insurance companies to create housing-related rules and policies that discriminate against minorities.
The U.S. Department of Housing and Urban Development is reviewing and seeking comment about the Obama administration’s 2013 disparate impact rule, which essentially bans housing industries, housing lenders, and landlords from creating policies that negatively impact a particular minority group if there are other means of achieving what those policies set out to do, in a less discriminatory way.
For example: Landlords are not allowed to impose blanket bans on people with criminal records from renting at their properties. However, homeowners can ban renters with convictions if they are able to prove the exclusion is justified based on factors such as the nature and severity of the crime.
The Obama administration implemented the rule following decades of discriminatory policies and actions taken against minorities in areas of housing sales, rentals, and financing policies, which have helped spur segregation throughout the country — an issue Congress and former president Lyndon Johnson tried to address following Martin Luther King Jr.’s assassination when they enacted the Fair Housing Act of 1968.
Over the last few years, the insurance industry has been fighting HUD over the rule in federal court, arguing it is unlawful and companies should be allowed to offer policies that take into account higher risk populations that typically reside in minority-clustered neighborhoods, and lower-risk populations that tend to live in white or affluent neighborhoods.
HUD Secretary Ben Carson is a critic of the Obama administration’s disparate impact rule, which was deemed lawful by the U.S. Supreme Court in 2015. In a 2015 Washington Times column, Carson wrote the disparate impact rule would “fundamentally change the nature of some communities from primarily single-family to largely apartment-based areas by encouraging municipalities to strike down housing ordinances that have no overtly (or even intended) discriminatory purpose — including race-neutral zoning restrictions on lot sizes and limits on multi-unit dwellings, all in the name of promoting diversity.”
HUD’s decision to review and seek comment on the policy, as it announced in the Federal Register on Wednesday, is a red flag that the administration might give in to the insurance industry’s demands, said Renee Williams, a staff attorney at the National Housing Law Project.
“The fact that we are even talking about opening the rule back up is very concerning, especially given the context of the recent activity at HUD,” Williams said, referring to a number of regulatory rollbacks and harmful policy changes under Carson. “If we are reopening this regulation, there may be carve outs for different industries, it might be harder to bring disparate impact claims and get at these policies and practices that may not be facially discriminatory but would have a discriminatory effect.”
HUD Spokesman Jerry Brown declined to comment on questions about the notice and what it might mean about the agency’s position surrounding disparate impact regulations, as well as the ongoing lawsuit with the insurance industry at the U.S. District Court in Washington D.C.
In early May, HUD issued a press release saying the agency would be seeking comment surrounding disparate impact regulations as it relates to the Supreme Court ruling, predating Wednesday’s official, more-detailed notice in the federal register.
In the federal register notice, HUD said it was reviewing and seeking comment on the 2013 disparate impact rule so it could determine “what changes, if any, are appropriate.” The agency also said it was seeking input on its own responses “to certain insurance industry comments made during the rulemaking.”
The U.S. Treasury Department put out a report last October asking HUD to reconsider its disparate impact policies surrounding the insurance industry, which was cited in Wednesday’s federal register notice.
HUD said it was considering comments on “burden of proof” standards when a person files a claim against a potentially racially biased policy; the threshold for bringing a case forward; more clear revisions to the policy; and on the implementation of “safe harbors,” which are essentially exemptions to different aspects of the rule.
This is troubling because it could shield insurance companies completely from certain disparate impact claims, even if it is proven that they are implementing discriminatory policies and they could achieve what those policies set out to do in a less harmful way, Williams said. “It’s almost a complete defense against the disparate impact claim,” she said.
The insurance agency has been fighting HUD over its disparate impact rules since it was enacted in 2013. At first the industry challenged the legality of the very rule. But in 2015, after the U.S. Supreme Court recognized disparate impact under the Fair Housing Act, the industry changed its course and argued the rule is not consistent with the high court ruling and it should not apply to them.
HUD has continued to defend the rule, however the case has been essentially stalled for over a year. Notoriously conservative-leaning U.S. District Court Judge Richard Leon, who previously ruled against the legality of disparate impact rules, has refused to allow the case to move forward until a pair of legal appointees have been confirmed so they can discuss HUD’s continued defense of the rules in the case with Secretary Carson.
So far, one of those two legal positions have been filled. Paul Compton, also a vocal critic of disparate impact rules, was confirmed as HUD’s general counsel in December. The other, Joseph Hunt, is still awaiting confirmation as the assistant attorney general for the Department of Justice’s civil division.