HUD Proposes to Eliminate Disparate Impact Regulation: Robust Effect or Just Business?

On January 14, 2026, the Department of Housing and Urban Development (HUD) published a proposed rule to remove its disparate impact regulations under the Fair Housing Act.  The proposed rule would eliminate the regulatory framework at 24 C.F.R. § 100.500 that, in one form or another, has governed discriminatory effects claims since 2013, leaving interpretation of disparate impact liability to the courts.  This follows President Trump’s Executive Order 14281 (titled “Restoring Equality of Opportunity and Meritocracy”), issued in April 2025, which made it the policy of the Trump administration to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible” and directed federal agencies to repeal disparate impact regulations where appropriate.  This rule could not eliminate the Fair Housing Act though, and the Supreme Court has recognized that disparate impact liability exists under that statute.  Read below for how this proposal might impact your organization.

What the Proposed Rule Would Do

The proposed rule would revise 24 CFR 100.5(b) to remove references to the disparate impact regulation, and remove and reserve 24 CFR part 100, subpart G, which currently contains the disparate impact regulation.  Specifically, section 100.500 currently contains the disparate impact regulation promulgated by HUD during the Biden administration, which sets forth the burden-shifting framework for analyzing disparate impact claims: a plaintiff must first establish that a challenged practice caused or predictably will cause a discriminatory effect; the defendant can then show the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest; and finally the plaintiff can show that the defendant’s interest could be served by another practice with a less discriminatory effect.  If finalized, HUD’s regulations would no longer provide this regulatory framework, leaving courts to analyze disparate impact claims under the Fair Housing Act on their own.

HUD’s Rationale

HUD cites several justifications for the proposed rule.  HUD points to the April 2025 Executive Order 14281, which established that “it is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible” and directed agencies to review existing regulations for repeal of disparate impact liability.  HUD also points to the Supreme Court’s June 2024 decision in Loper Bright Enterprises v. Raimondo, which eliminated Chevron deference and held that courts must independently interpret statutes without deferring to agency interpretations (which I wrote about here).  HUD asserts that its regulations no longer provide the clarity they once claimed because courts must interpret the statutes on their own, and can reject HUD’s interpretation entirely.  HUD also states it is “appropriate for courts, not a Federal agency, to make determinations related to the interpretation of disparate impact liability under the Fair Housing Act.”

Why a 30-Day Comment Period?

HUD’s normal policy is to provide at least 60 days for comment.  HUD shortened the period here because the rule is a general policy statement that doesn’t change requirements, and because HUD has already reviewed over 55,000 public comments on this topic through prior rulemakings in 2011, 2019, and 2021.  HUD determined “it is in the public interest to remove HUD’s disparate impact regulations as expeditiously as possible.”

What This Means for the Housing Industry 

The Fair Housing Act is unchanged, and the Supreme Court has held disparate impact claims are cognizable in the 2015 case Inclusive Communities.  HUD’s proposal notes this pivotal Supreme Court case, stating that “the Court discussed the standards for, and constitutional questions and necessary limitations regarding, disparate impact claims.”  Therefore, claims under the Fair Housing Act are still possible.  In addition, state regulators, state attorneys general (including former CFPB Director Rohit Chopra’s new Democratic AG working group), and private plaintiffs can all bring disparate impact cases under state laws that support that theory.  For these reasons, risk of disparate impact liability under the Fair Housing Act and other laws still exists.

It bears mentioning though that the Inclusive Communities case set forth important guard rails on disparate impact liability under the Fair Housing Act, such as requiring a plaintiff to show a “robust causality” between the neutral policy and the effects at issue to establish a prima facie case of discrimination.  The first Trump administration issued a final rule in 2020 to amend HUD’s disparate impact regulation to incorporate the Inclusive Communities guard rails, but it was held up in court and then rescinded by the Biden-era HUD, which reinstated the former and now current disparate impact rule.  But HUD’s proposed rule is likely correct that, after Loper Bright, this ping-pong game of rulemakings will likely not have much of an effect on Fair Housing Act liability, because the courts must analyze the statute without deferring to the agency’s rulemaking.  The courts will instead have to grapple with Inclusive Communities and other cases in their circuits.  Indeed, at least to me, the burden-shifting framework for a particular type of legal claim would appear to be the purview of the courts in the first place, not a regulatory agency.  Regardless, one can expect the next Democrat administration to hit us back to the other side of the table in this ping pong match.

The bottom line is that administrations change and other laws, regulators, and plaintiffs are still out there.  Until the disparate impact liability theory of discrimination is ruled to be unconstitutional by the Supreme Court, companies should consider continuing to monitor for disparate impact liability.

Next Steps

Consider submitting comments by the deadline, February 13, 2026.  We will keep you updated as this rulemaking progresses.  If you have any questions, would like assistance submitting a comment letter, or would like to discuss any of the issues in this blog post, please email me at rich@garrishorn.com.