NAHB Supports Challenge to HUD’s Rule-Making Authority

NAHB recently filed an amicus brief in National Association of Mutual Insurance Companies v. Department of Housing and Urban Development at the U.S. Court of Appeals for the District of Columbia. The case involves a challenge by the insurance industry to HUD’s Disparate Impact Rule. The rule has a long history dating back to the Obama administration.

In 2013, HUD published a rule formalizing a “burden-shifting” test for determining whether a housing practice being challenged in court has an unjustified discriminatory effect.

Under the test, the plaintiff must first prove a challenged practice caused or predictably will cause a discriminatory effect. If the plaintiff meets its burden of proof, then the defendant must prove the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests. If the defendant meets this burden, then the plaintiff may still prevail upon proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.

The current version of the rule, promulgated early in the Biden administration, basically recodifies the 2013 rule.

On May 8, NAHB filed an amicus brief in the case challenging HUD’s authority to issue the rule. NAHB explained that the rule establishes judicial procedures and evidentiary standards that are usually created by courts.

Furthermore, NAHB argued that HUD exceeded its authority because Congress did not provide it with a clear statement allowing it to develop rules for the judiciary. Because the Constitution allows the executive branch to choose judges, if it can also set the rules for how those judges must try cases, too much power is concentrated in one branch of government.

Finally, one of the reasons HUD provided for developing the rule was that the federal Courts of Appeals were not in agreement on procedures/standards to be used when trying disparate impact cases. NAHB pointed out that when Courts of Appeals disagree, it is the Supreme Court that resolves the split, not federal agencies.

Briefing in this case should be complete by the end of July, and oral argument is expected before the end of the year.