Civil Rights Rules Weren’t Made to Be Broken

The Trump Administration has drafted a new set of federal rules that have the potential to dismantle civil rights law as we know it. ANHD condemns the proposed Department of Housing and Urban Development (HUD) rules that seek to constrain the Fair Housing Act (FHA). If adopted, these rules will invite structural discrimination and make it nearly impossible to fight “disparate impact” cases in court. These cases - which rely on demonstrating discriminatory results, even without a “smoking gun” that proves discriminatory intent - are a critical means of ensuring that lenders, local governments, insurance companies, and other players in the housing field provide equal access to housing for all, regardless of race, immigration status, and other protected categories. Meanwhile, without the data, it’s also impossible to demonstrate discrimination and disparate impact. Now more than ever, we must stand to defend the civil rights protections that were so hard-won by generations past - and fight to ensure fair and equal access to housing for generations to come.

The Fair Housing Act (FHA), first passed in 1968, was a landmark achievement of the Civil Rights Movement. It prohibits discrimination in the sale, rental, development, and marketing of housing by both government and private actors. The Home Mortgage Disclosure Act (HMDA) requires financial institutions to maintain, report, and publicly disclose loan-level information about mortgages disaggregated by race, location, and other factors; and the Community Reinvestment Act (CRA) requires banks to lend equitably in the places where they do business. The FHA has helped ensure that generations of people of color, immigrants, families, people with disabilities, and others are protected from discrimination in housing and have access to buy and rent homes on an equal basis with all others.

Though the FHA has not served to eradicate discrimination in housing - in great part because the federal government has refused to use the power of its purse to push state and local governments to take active steps to dismantle the segregation and inequality that was already well-entrenched at the time of the FHA’s passage - the FHA remains a critical tool to fight discriminatory practices. Broad in its scope, the FHA bars both disparate treatment, where a party acts in a way motivated by conscious, deliberate discrimination; and disparate impact, where a government, person or institution acts in a way that produces discriminatory results, such as consistent under-investment in historically marginalized communities or failure to provide access to affordable housing in a diverse range of communities. Cases based on disparate impact are critical because they acknowledge that racism and other forms of discrimination are often so deeply embedded in our structures that conscious intent to discriminate may be impossible to identify. And, when people are motivated by discrimination, it’s rare that they will openly admit it. But the proof is in the pudding: if a policy or practice predictably results in protected classes getting the short end of the stick, it is vulnerable to challenge under the FHA disparate impact theory.

In 2015, the Supreme Court upheld the use of disparate impact, following long-standing precedent and affirming that disparate impact cases could continue to be brought under the FHA. But now, the Trump Administration is seeking to do what the Supreme Court wouldn’t: dismantle a critical pillar of the FHA, this time through the HUD rulemaking process. Since taking office, Trump has abused the rulemaking process time and again to undo protections for marginalized groups. We saw this in May, when the Trump administration proposed amending a rule to remove gender identity from the definition of discrimination “on the basis of sex.” We saw it again more recently through HUD’s issuance of proposed rules (which ANHD opposed) to bar “mixed-status households” from public housing - families where some are citizens and others are undocumented. Now, through the HUD rulemaking process, the Trump Administration is proposing a series of changes that together would make it far more difficult to even bring forward disparate impact cases, let alone win them.

Under the existing HUD rules, plaintiffs can move forward with a case with (1) a policy or practice, (2) a disparity in how this policy affects a class of people protected by the FHA, and (3) evidence that the disparity is caused by the defendant's challenged policy. Plaintiffs have been able to win cases if they can present an alternative practice that also meets the defendant’s compelling interest, but with less disparate impact. But under the new rules, the plaintiff must also prove that a disparity is “significant” - a term that isn’t defined - and that the policy is “arbitrary, artificial and unnecessary,” with no legitimate objective that justifies it. And, the plaintiff must do all this before having access to any of the defendant’s information through the discovery process – an almost impossible bar to meet.

One of the proposed rule changes also allows defendants to escape liability by shifting the blame to third parties, effectively encouraging discrimination by algorithm. As the Defend Civil Rights coalition explains, “The proposed rule would provide special defenses for business practices that rely on statistics or algorithms … such as credit scoring, pricing, marketing, and automated underwriting systems,” so long as the program conforms to “industry standards.” The practical result of this rule would be removal of any incentive for banks, landlords, and others to use third-party programs that do not create discriminatory results. This, in turn, will invite vendors to invest less in ensuring that programs are fair, fostering a brave new world of algorithmic discrimination in a field that is already riddled with it.

Worse still, another proposed rule change would invite public and private institutions to stop collecting information related to race, sex, familial status, national origin, and the other identity categories protected by the FHA by making it clear that if institutions fail to keep track of the critical demographic information needed to prove discrimination, it will not be held against them in any way. This dangerous “see no evil, hear no evil” rule will encourage practices that make it impossible to identify, prove, or change any discrimination that may be happening.

HUD’s proposed rules serve as a one-two punch with the CFPB’s new proposed rules, which would limit the data available to demonstrate disparate impact. These rules would release thousands of lenders from reporting any lending data to HMDA and potentially roll back reporting requirements added by the Dodd Frank Act, which aimed to shed light on the types of products and practices that were prevalent leading up to the 2008 financial crisis. These requirements allow community stakeholders to identify signs of predatory lending and see who is and isn’t getting certain types of loans broken out by race, ethnicity, gender, income, age, location, and more. This information has allowed ANHD to reveal stark lending disparities in 1-4 family lending – particularly a lack of lending to Black and Latino borrowers – and identify how well banks are serving their communities. Now that we can delve further into the cost of loans, types of loans offered, and more details on applicants, the CFPB is threatening to take it away.

Within this context, it’s heartening that New York City is going above and beyond what the current HUD rules require with its Where We Live process, which we hope will guide the City toward long-overdue investments in historically marginalized communities and other strategies to shift New York City’s landscape of inequality. ANHD is also working with groups across New York City to ensure that when the City makes major land use decisions, it takes racial equity into account. But federal law exists for an important purpose: to provide basic rights and protections for people across the U.S., even in cities and states that might otherwise discriminate. Taken together, the proposed rule changes at HUD and the CFPB would make it extremely difficult to bring and win fair housing cases under a disparate impact theory, and they are troubling steps in the Trump Administration’s relentless dismantling of civil rights law.

ANHD has joined with members and allies, including national coalitions and attorney generals nationwide, to oppose the rule changes proposed by the CFPB and HUD. We urge our members and allies to join the chorus of advocates fighting for fair housing by submitting comments in advance of tomorrow’s deadline, which you can do for your organization here or as an individual here.