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Disparate impact, the latest civil rights tool in Ben Carson’s crosshairs, explained

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How the Trump administration plans to weaken housing discrimination regulations

HUD headquarters
HUD Plaza outside the headquarters building of the US Department of Housing and Urban Development, Washington, D.C.
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A recent memo issued by the Department of Justice directed civil rights officials within the department to re-evaluate so-called “disparate impact”—a legal concept that affirms that discrimination can occur even if it wasn’t explicitly intended—regulations that were strengthened in 2013 under President Obama and have underpinned housing discrimination lawsuits since the Fair Housing Act passed in 1968, according to the Washington Post.

There have been several attempts to rollback fair housing regulations since Ben Carson took over as secretary of the Department of Housing and Urban Development in January 2017, and the Justice Department memo signals a renewed push to undermine a key legal tool used to sue landlords, insurance companies, and lenders for practices that have a discriminatory effect on women, people of color, and the disabled.

The term “disparate impact” isn’t specifically used in the Fair Housing Act, but the concept has been repeatedly reaffirmed by courts for 40 years.

For example, if an insurance company decides it won’t insure houses built before 1950 in a certain city, and it’s found that people of color in the city predominantly live in neighborhoods where houses were built before 1950, the insurance company has implemented a policy where the net effect is discriminatory, even if the company isn’t saying it explicitly.

Disparate impact is an important legal concept because the only other way to prove discrimination is if there’s a record of the party in question explicitly stating its discriminatory intent, such as in a memo, recording, or text message. As this almost never happens, civil rights advocates and lawyers have a much more difficult time bringing discrimination cases to court if disparate impact arguments aren’t available to them.

Disparate impact has played a role in some of the country’s biggest fair housing lawsuits, and the insurance and mortgage industries have long sought to end disparate impact because those cases would be harder to pursue without it. In 2011, the Department of Justice settled a case against mortgage lender Countrywide, which had pushed African-American borrowers into subprime mortgages even when they qualified for lower-cost prime mortgages, a practice now coined “predatory lending.”

In 2012, Wells Fargo settled a case with the Department of Justice where the bank charged higher broker fees and interest rates to borrowers of color. Lending data showed that in 2007, Wells Fargo borrowers in Chicago paid an average of $2,937 more if they were African-American and $2,187 more if they were Hispanic. The bank admitted to no wrongdoing in the settlement.

It’s key to note that in these two cases were brought to court by the Department of Justice under President Obama. Under President Trump, the Department of Justice is issuing memos stating its intent to review ways to undo disparate impact regulations.

Sources who spoke with Curbed say they believe there’s only so far the department could go because the origins of disparate impact regulations lie in the Fair Housing Act, a law passed by Congress. The interpretation of disparate impact has also been repeatedly reaffirmed by courts through cases like Wells Fargo and Countrywide, as well as a landmark 2015 Supreme Court case. An independent judiciary can continue to affirm disparate impact even if the Department of Justice says otherwise.

What the Justice Department can do, though, is, essentially, sit on its hands: It can choose to not bring cases to court that use disparate impact to prove systemic discrimination. It can also attempt to undo the 2013 regulations implemented by the Obama administration that strengthen disparate impact rules.

And that is already under way at HUD, which posted to the federal register in June its intent to review those regulations. To reverse those regulations, Carson and HUD would have to follow the Administrative Procedures Act—a 1946 statute that governs the way federal agencies adopt and undo regulations—which has tripped them up on previous attempts to take down a number of Obama-era civil rights regulations.

The Affirmatively Furthering Fair Housing (AFFH) rule—which sought to provide municipalities with tools to identify and alleviate segregation—and the Small Area Fair Market Rent (SAFMR) rule—which is designed to allow Section 8 housing voucher recipients more choices in where to live—were enacted under Obama, but Carson attempted to delay them shortly after becoming secretary. Civil rights groups sued, claiming they didn’t follow the Administrative Procedures Act.

The SAFMR rule survived Carson’s challenge, but a court sided with HUD on the AFFH rule, although the plaintiffs in the case have requested the judge reconsider the ruling. Given Carson’s track record of describing civil rights laws as “social engineering,” a challenge to disparate impact regulations seems likely.