The National Association of Homebuilders (NAHB) recently filed an amicus brief with the U.S. Court of Appeals for the District of Columbia for a case in which the insurance industry is challenging the U.S. Department of Housing and Urban Development’s (HUD) Disparate Impact Rule. In 2013, HUD published a rule formalizing a “burden-shifting” test for determining whether a housing practice being challenged in court has an unjustified discriminatory effect. Under the test, the plaintiff must first prove a challenged practice caused or predictably will cause a discriminatory effect. If the plaintiff meets its burden of proof, then the defendant must prove the challenged practice is necessary to achieve one or more “substantial, legitimate, nondiscriminatory interests.” If the defendant meets this burden, then the plaintiff may still prevail by proving that the “substantial, legitimate, nondiscriminatory interests” supporting the challenged practice could be served by another practice that has a less discriminatory effect.

National Association of Mutual Insurance Companies v. Department of Housing and Urban Development seeks to overturn a ruling through which a D.C. federal judge upheld HUD’s rule. NAHB’s amicus brief challenges HUD’s authority to issue the rule, suggesting that judicial procedures and evidentiary standards are usually created by courts. The current version of the rule basically recodifies the 2013 version, NAHB officials say.

Furthermore, NAHB argues that HUD exceeded its authority because Congress did not provide it with a clear statement allowing it to develop rules for the judiciary. Because the Constitution allows the executive branch to choose judges, if it can also set the rules for how those judges must try cases, too much power is concentrated in one branch of government, NAHB officials suggest.

One of the reasons HUD provided for developing the rule was that the federal Courts of Appeals were not in agreement on procedures/standards to be used when trying disparate impact cases. NAHB officials say when Courts of Appeals disagree, it is the Supreme Court that resolves the split, not federal agencies.

Briefing in this case should be complete by the end of July, and oral argument is expected before the end of the year.

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