Judge tosses HUD discrimination rule

A D.C. judge has tossed out a contentious administration rule aimed at building housing discrimination cases, calling it an “artful misrepresentation of Congress’s intent.”

Judge Richard Leon of the D.C. Circuit Court ruled Monday that the Department of Housing and Urban Development’s “disparate impact” rules were not justified by existing law, and ordered the rules vacated.

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The ruling marks the latest in an ongoing debate about the controversial regulatory principle, which is used to build discrimination cases based on statistical models, rather than overt examples of unequal treatment. The Obama administration has relied on that philosophy in several agencies, using it to build discrimination cases that have led to settlements running in the hundreds of millions of dollars.

Civil rights groups have hailed the initiative, saying it will help expose and punish institutional discrimination that may not be easily observed.

But many industry groups have cried foul at its use, arguing that the law does not permit the government to charge discrimination when there are no clear examples of it, but rather just data that shows some groups may be treated differently.

The judge dismissed the government’s argument that existing laws permitted the government to apply the method to fair housing laws by calling it “wishful thinking on steroids.”

Rather, Leon wrote in his decision that the language of the Fair Housing Act, which provides the legal basis for challenges in housing discrimination, only permits claims based on intentional discrimination.

“This is yet another example of an Administrative Agency trying desperately to write into law that which Congress never intended to sanction,” he wrote, calling the HUD rule an “artful misrepresentation of Congress’s intent.”

HUD finalized rules in February of 2013 that made disparate impact an official policy tool, and the Consumer Financial Protection Bureau has also explored its used to build unfair lending cases.

The case heard by Leon was brought by a number of insurance industry groups, and Republicans hailed the ruling after it was handed down.

“I’m pleased with today’s ruling in the D.C. District Court and I applaud Judge Leon for recognizing that Congressional intent trumps the faulty housing policy desires of the Obama administration,” said Rep. Randy Neugebauer (R-Texas), who chairs the House banking subcommittee devoted to housing and insurance. “It is my hope that the Supreme Court looks to this case and quickly addresses disparate impact.”

The Supreme Court has come close to ruling on the disparate impact in previous cases, but a case due to receive a hearing in 2013 was settled before the high court could weigh in.

Leon joined the U.S. District Court in 2002, after being nominated by President George W. Bush.