HUD has issued a proposed rule that would eliminate its regulatory framework for evaluating disparate impact under the Fair Housing Act. While the proposal removes HUD’s formal test, it does not eliminate disparate impact liability itself. Courts would interpret such claims based on statutory language and Supreme Court precedent.

Most importantly, disparate impact liability is NOT going away.

The U.S. Supreme Court previously confirmed that disparate impact claims are legally recognized under the Fair Housing Act. If HUD finalizes this proposal:

• HUD’s formal three-part regulatory test would be rescinded
• Courts would determine how disparate impact is analyzed
• Legal interpretation may vary by jurisdiction
• State fair housing laws remain fully enforceable

What This Means for PHAs, PBCAs, PBRA Owners, and HCV Programs

Risk exposure continues in areas such as:

• Criminal background screening policies
• Minimum income requirements
• Local or residency preferences
• Occupancy standards
• Screening and denial practices
• Language access policies
• Reasonable accommodation handling

State laws may impose stricter standards than federal law.

Bottom Line

This proposal represents a shift in regulatory structure — not a relaxation of fair housing obligations. Conservative compliance practices, documentation of legitimate business justifications, and periodic policy review remain critical.

Review your screening and eligibility policies now to ensure they are well-documented, consistently applied, and supported by legitimate business necessity.