The Department of Housing and Urban Development (HUD) proposed a rule on January 14, 2026, to rescind its existing regulations interpreting the Fair Housing Act (FHA) to allow for disparate impact liability.^[1] Specifically, the proposal would eliminate HUD’s regulatory framework for evaluating whether facially neutral housing practices have discriminatory effects on protected groups.^[2] If finalized, the rule would remove HUD’s codified burden-shifting test for disparate impact claims. Instead, courts would determine when such claims are viable under the FHA without guidance from agency regulations.^[3]

Disparate impact liability has long served as an important tool for addressing housing discrimination that does not take the form of intentional exclusion. Rather than targeting policies that are discriminatory on their face, disparate impact claims allow plaintiffs to challenge seemingly neutral policies that disproportionately harm protected groups without sufficient justification.^[4] In practice, this framework has been used to challenge a range of policies related to credit screening, occupancy limits, zoning decisions, and tenant eligibility requirements.^[5] Although these practices may not result from overt discriminatory intent, they often reinforce structural inequalities, making disparate impact liability particularly important in the housing context.

HUD first formalized its interpretation of the FHA to include disparate impact liability in a 2013 rule, which also established a three-step burden-shifting framework for evaluating such claims.^[6] Two years later, the Supreme Court confirmed in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. that disparate impact claims are cognizable under the FHA, while also clarifying that a strong causal connection between the challenged policy and the alleged discriminatory effect must support such claims.^[7] HUD later attempted to revise its disparate impact regulations in 2020 to align with this decision, but that rule was enjoined before it could take effect.^[8] In 2023, HUD reinstated the 2013 burden-shifting framework.^[9]

HUD’s 2026 proposal would go further than prior revisions by removing its disparate impact regulations entirely. HUD is not claiming that disparate impact liability is invalid under the FHA. Instead, it argues that questions regarding the scope and application of disparate impact liability should be resolved by courts rather than through agency rulemaking.^[10] In support of its position, HUD points to recent executive orders directing agencies to review and repeal regulations that impose disparate impact liability, as well as the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which held that courts are no longer required to defer to agency interpretations of ambiguous statutes.^[11] According to HUD, maintaining a regulatory interpretation of disparate impact liability may no longer promote clarity or predictability in light of evolving judicial interpretations of the FHA.^[12]

Although the proposal would not eliminate disparate impact liability outright, it could significantly affect how fair housing protections are enforced in practice. In the absence of a uniform regulatory framework, courts will likely rely more heavily on circuit-specific precedent when adjudicating disparate impact claims, resulting in greater variation across jurisdictions in how such claims are evaluated and whether they succeed. For individuals with limited financial resources, this type of legal uncertainty may create substantial barriers to bringing housing discrimination claims.

Low-income renters and prospective homebuyers often depend on private enforcement of fair housing laws, particularly when discriminatory practices arise from policies that appear neutral on their face.^[13] Without a predictable burden-shifting framework, it may become more difficult, time-consuming, and expensive to show that a given policy has a discriminatory effect. These additional hurdles could discourage attorneys from taking on disparate impact cases, especially when representing clients who cannot afford to pay for legal services out of pocket. As a result, the populations most vulnerable to exclusionary housing practices may also be the least able to challenge them. This concern is especially pronounced in the eviction context, where tenants are unrepresented in up to 90% of proceedings.^[14]

Ultimately, rescinding HUD’s disparate impact regulation would not eliminate protections against discriminatory housing practices under the FHA. However, it could make those protections more difficult to enforce in practice by shifting interpretive authority entirely to the courts and increasing the complexity of disparate impact litigation. For individuals and families already at risk of housing instability, this change may narrow one of the few remaining avenues to address structural barriers to stable, affordable housing.

 

 

^[1] See HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, Proposed Rule, 91 Fed. Reg. 1475 (Jan. 14, 2026).

^[2] Id. at 1475.

^[3] Id. at 1476.

^[4] See, e.g., Tex. Dep’t of Hous. & Cmty. Affs. v. Inclusive Cmtys. Project, Inc., 576 U.S. 519, 524–25 (2015).

^[5] See, e.g., Inclusive Cmtys. Project, 576 U.S. at 539-40; Mhany Mgmt., Inc. v. County of Nassau, 819 F.3d 581, 617-18 (2d Cir. 2016); Graoch Assocs. #33, L.P. v. Louisville/Jefferson Cnty. Metro Hum. Rels. Comm’n, 508 F.3d 366, 371–73 (6th Cir. 2007).

^[6] Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11, 460 (Feb. 15, 2013) (codified at 24 C.F.R. pt. 100).

^[7] See Inclusive Cmtys. Project, 576 U.S. at 532–35.

^[8] See HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, 85 Fed. Reg. 60,288 (Sept. 24, 2020); see also Mass. Fair Hous. Ctr. v. U.S. Dep’t of Hous. & Urb. Dev., 496 F. Supp. 3d 600, 605–06 (D. Mass. 2020).

^[9] See Reinstatement of HUD’s Discriminatory Effects Standard, 88 Fed. Reg. 19, 450 (Mar. 31, 2023) (codified at 24 C.F.R. pt. 100).

^[10] See HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, 91 Fed. Reg. at 1475–77.

^[11] Id. at 1476; see also Loper Bright Enters. v. Raimondo, 603 U.S. 369, 391–92 (2024).

^[12] See HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, 91 Fed. Reg. at 1476.

^[13] See, e.g., Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 209 (1972).

^[14] See Deena Greenberg et al., Discrimination in Evictions: Empirical Evidence and Legal Challenges, 51 HARV. C.R.-C.L. L. REV. 115, 139 (2016).