What Is Disparate Impact in Housing? A Primer With New Rules for 2021

We’ve all had the experience of hurting someone’s feelings without meaning to — or being the recipient of an unintended slight. While this might be considered a natural part of the human condition, when it comes to housing and discrimination, intention is beside the point. When a real estate professional or entity discriminates against a group of people (and didn’t mean to do it), it’s known as disparate impact, and it’s one of the more insidious forms of inequity around.

Backing up: Fair housing laws protect people from discrimination in housing, so all people can have the freedom to pursue a residence that suits their needs and desires. Since the Civil Rights Movement of the 1960s, legal precedence in the area of fair housing has come a long way.

But that doesn’t mean that housing discrimination has been eliminated entirely. Not by a long shot. Housing discrimination today often takes on a more subtle — but no less dangerous — configuration in the form of disparate impact.

A garbage worker affected by disparate impact.
Source: (Carl Campbell / Unsplash)

What is disparate impact?

Disparate impact, otherwise known as adverse impact, refers to a policy or practice that seems neutral on the surface but in practice has a disproportionately negative effect on a certain group of people. It’s tied to discriminatory practices that may hinder equal access.

Disparate impact is usually unintentional in nature; disparate treatment is the term for outright and willful discrimination. Even though it might be accidental on the part of the offender, it’s nonetheless considered a violation of the Civil Rights Act and is therefore subject to legal intervention.

In the United States, when you hear someone talking about disparate impact, they’re usually referring to employment — or, more recently, housing — practices that adversely affect one group of people more than another. This practice is subtle, because it can emerge in the form of a requirement that applies to everyone equally, but which only harms or limits certain groups of people.

Proving that disparate impact exists and making a legal claim usually involves statistical data, at least in part. For example, if a plaintiff can show statistically that a certain employment requirement caused hiring managers to prefer male job applicants to female job applicants, there may be a case for disparate impact.

However, statistics are not the only thing courts consider when evaluating claims. If an entity can prove that there is a business necessity for a job’s seemingly discriminatory qualifications, disparate impact can be considered legal. For example, let’s say a waste management company might require applicants to perform strength tests for a position that requires lifting heavy trash cans. This type of test may end up having a disparate impact that adversely affects women, but the company would likely be able to claim “business necessity” and keep the strength test requirement.

What are some original examples of disparate impact in housing?

Disparate impact has developed more of a track record in employment situations, but housing practices have come under scrutiny for disparate impact in recent years as well.

Some examples of disparate impact in the housing market could include:

  • Requiring apartment resident applicants to have full-time employment, which discriminates against people with disabilities and veterans. An easy remedy could be instead asking to see proof of income.
  • Rejecting tenant applicants on the basis of criminal history without asking for clarification. According to the Department of Housing and Urban Development (HUD), although landlords do have a responsibility to reasonably keep all tenants safe, blanket rejection based on unspecified criminal histories has disparate impact on minorities who are “arrested, convicted, and incarcerated at rates disproportionate to their share of the general population.”
  • Municipality zoning restrictions that eliminate affordable housing in a certain area. This type of practice perpetuates housing segregation and has an adverse impact on minorities, who suffer income disparities in comparison to white counterparts (33% to 35% lower). It may also adversely impact the elderly population, who inhabit 40% of public housing units.

Thanks to rule changes enacted by HUD over the years, some of these examples have been dealt with on an official level, which sets a precedent for future disputes. Disparate impact in the housing sector has been dealt with to a certain degree, but there’s still progress to be made.

Apartments affected by disparate impact.
Source: (Jace & Afsoon / Unsplash)

What’s the legal history of disparate impact in housing?

1968: Fair Housing Act (Title VIII of the Civil Rights Act)

Title VIII of the Civil Rights Act of 1968, also known as the Fair Housing Act (FHA), prohibits discrimination in the housing sector (rentals, home sales, and financing) on the basis of race, color, religion, sex, familial status, national origin, and disability. The Fair Housing Act followed   and further specified the more general Civil Rights Act of 1964 and was signed into law in the immediate wake of Dr. Martin Luther King Jr.’s assassination. The Fair Housing Act now forms the basis of nearly all housing-related discrimination cases.

2011: HUD acknowledges disparate impact in domestic violence

In a memorandum dated February 9, 2011, the Department of Housing and Urban Development (HUD) sought to rectify disparate impact being experienced by victims of domestic violence.

HUD found that domestic violence survivors were being evicted and/or denied access to housing based on zero-tolerance violence policies, without taking into account the victimization of abuse. Twenty-five percent of women experience domestic assault, and Black, Native American, and immigrant women suffer domestic violence at a disproportionately high rate. Therefore, zero-tolerance violence policies had a disparate impact on those groups.

2011: HUD proposes a rule in regards to disparate impact under the FHA

In a proposed rule initiated in November of 2011, HUD drew a direct connection between disparate impact and the Fair Housing Act, saying that the Fair Housing Act prohibited discriminatory housing practices with or without intent. In an effort to establish consistency in legal application, HUD proposed a “shifting” standard regarding the burden of proof, which fell first to the plaintiff, then to the defendant, then back to the plaintiff. (A little more on what that means below.)

2013: Final HUD rule released

Following the proposal, HUD released an official rule as a guideline for practices that had a discriminatory effect but were not intended to be discriminatory —  disparate impact.

The rule stated that HUD or a private party could bring disparate impact cases to court, where they would then attempt to prove that the practice in question was effectively discriminatory, many times through statistical analysis. They did not have to prove that the discrimination was intentional, simply that it was taking place.

The defendant had the opportunity to then prove that such a practice was necessary to create a “substantial and legitimate interest” (basically, the practice was needed for some legitimate business purpose).

At that time, the burden then fell to the plaintiff to prove that there was an alternative, less-discriminatory means to the same ends.

2015: Supreme Court ruling regarding disparate impact

In 2015, the Supreme Court set a new legal precedent, which mostly agreed with the previous HUD rule.

In Texas Department of  Housing and Community Affairs v. Inclusive Communities Project, the Court ruled that the intent of the Fair Housing Act included disparate impact.

Basically, Texas argued that disparate impact cases were discriminatory against white residents under the Equal Protection Clause. But the Supreme Court ruled against Texas and upheld that disparate impact was clearly identifiable within the scope of the Fair Housing Act.

However, during this trial, the Supreme Court deviated from HUD’s 2013 rule to diminish the likelihood of “abusive disparate impact claims.”

New standards, including a “robust causality” burden, protected defendants against potentially arbitrary claims. Instead of relying on statistical data, plaintiffs were expected to prove that the defendant’s policy directly caused a disparity.

2019: HUD issues proposed regulation shifting the burden of proof

In what seemed to be an effort to clarify how disparate impact cases were brought to court, HUD issued proposed guidelines that would change the burden of proof in disparate impact cases to more closely align with the Supreme Court ruling of 2015.

The proposed rule would force the plaintiff to anticipate the defendant’s case and preemptively fight against it. The plaintiff would also need to show that a different, non-discriminating policy would be just as profitable for the defendant.

The guidelines also provided protections for businesses that used algorithms to make decisions that had discriminatory effects, and also disincentivized businesses from collecting data that could ultimately prove discrimination.

This proposed regulation was considered a blow for equal rights, as it would make disparate impact cases more difficult to bring to court.

2020: New HUD rule is enacted

The finalized HUD rule just recently took effect in October of 2020. With little deviation from the 2019 proposal, this new rule adds a layer of complexity to the burden of proof required of the plaintiff in disparate impact cases.

Under this new rule, plaintiffs are required to show significant evidence in order for their claim to be sustained. The evidence includes proof that the policy in question is both arbitrary and unnecessary for doing business.

In addition to the previous (2013) standard that a disparity exists and is statistically significant, the new rule also requires proof that the discrimination was both directly connected to and directly caused by the policy in question.

The National Low Income Housing Coalition (NLIHC) recognizes several problems with this new rule, stating that a “preponderance” of evidence requires unnecessary guesswork on the part of the plaintiff and that language surrounding alternative policies proposed by the plaintiff seems to prioritize the defendant’s profits over eliminating discrimination.

A claim used to report disparate impact.
Source: (Bignai / Shutterstock)

How can you report a claim for disparate impact in housing?

Though this newest HUD rule makes it difficult to bring a disparate impact case to court, equality in housing is never a lost cause.

If you experience disparate impact in the housing sector, your first step could be to file a complaint with HUD, either by phone, mail, or online form.

This complaint could cover claims felt during the practice of:

  • Renting or buying a home
  • Getting a mortgage
  • Seeking housing assistance
  • Engaging in other housing-related activities

And disparate impact might be caused by a:

  • Property manager
  • Property owner
  • Developer
  • Real estate agent
  • Mortgage lender
  • Homeowners association
  • Insurance provider
  • Another individual or entity involved with housing

If you need legal assistance to determine whether your disparate impact case can be brought to trial, consider contacting your local (statewide) housing coalition or housing advocacy group, which should be able to connect you with legal counsel. These groups may also sometimes file class-action suits on behalf of a group of people who have experienced disparate impact.

In addition, NLIHC has put out an Advocacy Guide, which highlights many ways to get involved in the cause of equal housing opportunities, including lobbying, volunteering, organizing, and communicating with the media.

Disparate impact is unintentional, but it is far from harmless. Understanding what it is and how to spot it (and prove it) can help make housing a more equal space for everybody.

Header Image Source: (Chris Zueger / Unsplash)