Ask The Lawyer By: Daniel A. Gwinn, Esq – Will Biden Amend it?


QUESTION: I applied for a mortgage for a condo, but I was turned down because of something to do with the type of construction. The mortgage service said this type of building is more likely to be destroyed in a fire. I don’t know anything about that, but I do know that a lot of Black people are buying condos in buildings like this. The mortgagor will be cutting a lot of people off, and preventing an older neighborhood to be revitalized. This seems like a kind of discrimination to me. What do you think?

ANSWER: The kind of discrimination you’re talking about is “disparate impact” discrimination, which occurs when a neutral rule has an outsize impact on a protected group. The theory was recognized by the Supreme Court in Griggs v Duke Power Company, 401 U.S 424 (1971). At issue in Griggs was a requirement that laborers obtain a high school diploma and pass an IQ test to receive a promotion. Black workers were almost ten times less likely that their white counterparts to meet the new requirements. The Court ruled that where the tests had a disparate impact on a protected group, business would have to demonstrate that the tests were “reasonably related” to the position for which they were required. The Court determined that the tests were discriminatory because they were unrelated to the ability to perform the work.

Until last year, the theory was an accepted part of the law relating to claims made under the Fair Housing Act (FHA), the 1968 statute that aimed to eliminate structural inequality and racism in all aspects of the housing market. Over the years, supposedly “neutral” policies have resulted in a huge disparity in home ownership among Black Americans and exacerbated a Black-white wealth gap of nearly 10 to 1. According to 2020 census information, the home ownership rate among Blacks is 46.4 percent, compared to 75.8 percent among non-Hispanic whites. And, homes in Black neighborhoods are undervalued by an average of $48,000.

But that may be about to change, thanks to a new rule from the department of Housing and Urban Development (HUD) that makes it more difficult for a plaintiff to bring an FHA claim.

Until HUD’s new rule became final in October last year, a plaintiff alleging disparate impact discrimination in an FHA case had only to show that a challenged practice caused a discriminatory effect. It was then up to the defendant business or lender to show that the practice was necessary to achieve “substantial, legitimate, nondiscriminatory” interests. If the defendant was able to meet this test, the plaintiff could show that the interests could be met in another way that did not have a discriminatory effect. Now, a plaintiff must show from the outset that the challenged policy or practice is “arbitrary, artificial and unnecessary to achieve a valid interest or legitimate objective.” This essentially requires the plaintiff – often someone without means – to discover information that is more easily available to the business whose policy or rule is being challenged.

The rule also requires the plaintiff to prove a “robust causal link” – a term that is not defined – between the challenged policy or practice and the adverse effect on the members of the protected class. Businesses will have an easier time of countering a plaintiff’s claim: Under the new rule, they can rebut a plaintiff’s prima facie case by showing that the challenged policy or practice “advances a valid interest (or interests) and is therefore not arbitrary, artificial, and unnecessary.”

When the rule was first announced, in September, the Massachusetts Fair Housing Center and Housing Works, sued to stop its implementation. The Massachusetts group noted that protections against disparate impact discrimination are even more important now, when decisions about who is offered a loan are often made by data inputs, or algorithms. “[I]f the inputs involve flawed or incomplete information that reflects historical inequality, the models can replicate and even amplify human biases affecting protected groups,” the group said in its lawsuit.

On October 25, 2020, the U.S. District Court for the District of Massachusetts issued a preliminary nationwide injunction, putting the rule on hold. The new pleading requirements were “onerous,” the court said, noting the rule made it easier for defendants to justify a policy with a discriminatory effect “while at the same time rendering it more difficult for plaintiffs to rebut that justification.” The changes the new rule made to existing regulations were “arbitrary and capricious,” the court stated. The implementation of the rule was stayed until a decision is made on the Fair Housing Center’s claims under the Administrative Procedures Act.

Since that decision, a new administration has taken charge in Washington. The Biden administration can amend the rule, but that will take time. Meanwhile, plaintiffs who wish to challenge the effect of allegedly neutral policies or regulations are left without clear guidance.

The lawyers at GWINN LEGAL PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at

Information provided on “Ask the Lawyer” is current as of the date of publication. Laws and their interpretation are subject to change. The material provided through “Ask the Lawyer” is informational only; it should not be considered legal advice. Submitting a question to “Ask the Lawyer” does not create an attorney-client relationship between the person submitting the question and GWINN LEGAL PLLC. To view previous columns, please visit our website.

By: Daniel A. Gwinn, Esq
.Attorney and Counselor at Law
901 Wilshire Drive, Suite 550
Troy, MI 48084
(248) 247-3300
(248) 247-3310 facsimile

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