Published on
February 11, 2026
HUD Proposes Repeal of Fair Housing Act Disparate Impact Rule
HUD proposes to rescind its FHA disparate impact regulations, leaving standards to the courts; comments due Feb 13, 2026.
The Department of Housing and Urban Development (HUD) has introduced a proposed rule that seeks to repeal its regulations on the Fair Housing Act’s (FHA) disparate impact standards. Announced on January 14, the proposal would remove HUD’s framework for assessing discriminatory effects under the FHA, leaving the interpretation and application of disparate impact claims solely to the courts. The public has until February 13, 2026, to submit comments on the proposal.
A Complex Legal History
HUD’s disparate impact regulations have undergone significant changes over the years. In 2013, HUD issued rules recognizing liability for discriminatory effects under the FHA and implementing a burden-shifting framework to evaluate such claims. A 2015 Supreme Court decision, Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., affirmed that disparate impact claims are valid under the FHA but stressed the need for robust causation and safeguards to prevent overreach.
In 2019, HUD revised the 2013 rule to better align with the Supreme Court’s guidance. However, during the Trump administration in 2020, an amended version of the rule was introduced but never took effect due to a federal court injunction. The Biden administration later reinstated the 2013 framework in 2023.
HUD now seeks to eliminate its codified disparate impact standards entirely, a move it attributes to evolving legal and policy considerations.
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Key Changes in the Proposal
The proposed rule outlines two major changes. First, HUD would amend the general scope provision in 24 C.F.R. § 100.5(b) to remove references to discriminatory-effect liability. Second, it would eliminate Subpart G of Part 100, which currently defines key concepts like "discriminatory effect" and "legally sufficient justification" while also specifying the burden of proof in disparate impact cases.
If finalized, this change would remove HUD’s regulatory test for disparate impact claims under the FHA. However, HUD clarifies that the proposal does not invalidate disparate impact claims as a legal concept. Instead, the agency suggests that courts, not HUD, should determine how these claims are handled.
Rationale for the Change
HUD cites several reasons for its decision to step back from regulating disparate impact liability. One key factor is Executive Order 14281, "Restoring Equality of Opportunity and Meritocracy", issued on April 23, 2025. The order emphasizes that equality of opportunity, not outcomes, is the cornerstone of fairness under the law. It directs federal agencies to minimize the use of disparate impact liability, arguing that it creates a "near insurmountable presumption of discrimination" based solely on group outcome disparities.
Additionally, HUD highlights the Supreme Court’s recent decision in Loper Bright, which rejected judicial deference to agency interpretations of ambiguous statutes. According to HUD, this decision undermines the stability that its regulations once provided, as courts are no longer obligated to defer to HUD’s framework.
Broader deregulatory efforts under Executive Orders 14192 and 14219 also influenced HUD’s decision. These orders mandate federal agencies to identify and repeal regulations that are outdated, overly burdensome, or unnecessary. HUD concludes that its disparate impact regulations are no longer essential and may even be vulnerable to legal challenges.
Shortened Comment Period
For this rulemaking, HUD has opted for a 30-day public comment period, shorter than its usual 60-day timeframe. The agency defends this decision by stating that the proposal does not create new obligations or rights but rather removes an existing regulatory framework. HUD also notes that it has already received extensive public input during previous rulemakings on this topic, with over 50,000 comments submitted across three prior proposals.
HUD justifies the expedited timeline by emphasizing its desire to act quickly in removing the regulations and its belief that stakeholders are familiar with the issue and can provide feedback within the shorter period.
Potential Impact
If the proposal is finalized, HUD’s withdrawal from regulating disparate impact claims could lead to significant changes in how these cases are litigated. Without a standardized federal framework, courts in different jurisdictions would independently interpret the FHA, potentially resulting in more variability in how disparate impact claims are handled. This shift may also increase the importance of state-level fair housing laws, many of which incorporate disparate impact theories.
At the same time, HUD’s proposal does not eliminate the risk of disparate impact claims entirely. Advocacy groups and state agencies can continue to bring such lawsuits under the FHA and related state laws. As HUD cautions, the proposed rule reflects current federal policy but could be reversed by a future administration.
"While many industry participants may welcome HUD’s current move, we believe it would be risky to treat it as a signal to dismantle existing disparate impact risk controls", the agency warns.
The public has until February 13, 2026, to weigh in on this significant proposal, which could reshape the landscape of fair housing enforcement for years to come.
