Overview
On July 10, 2024, Cohen Milstein, the National Fair Housing Alliance, and the Lawyers’ Committee for Civil Rights Under Law, on behalf of other interested parties as Amicus Curiae, submitted an amicus brief to the United States Court of Appeals for the District of Columbia Circuit in support of appellees in National Association of Mutual Insurance Companies v. United States Department of Housing and Urban Development, Case No. 23-5275.
Identity of Amici Curie
Amici are the National Fair Housing Alliance, the Lawyers’ Committee for Civil Rights Under Law, AARP, the National Consumer Law Center, the Poverty & Race Research Action Council, the National Low Income Housing Coalition, the National Housing Law Project, and the NAACP Legal Defense and Educational Fund. Each is a non-profit organization that has long sought to eliminate housing segregation and promote equal housing opportunity for all.
Introduction
As the Supreme Court has made clear, a plaintiff can succeed on a Fair Housing Act (“FHA”) claim using evidence of the unjustified discriminatory effects of a facially neutral housing policy or practice. Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 576 U.S. 519, 542 (2015) (“Inclusive Communities”). Appellant National Association of Mutual Insurance Companies (hereinafter, “NAMIC” or “Appellant”) remains unwilling to accept this reality, at least with respect to the business of homeowner’s insurance.
Summary of Argument
This appeal concerns the U.S. Department of Housing and Urban Development’s 2023 rule (“HUD Rule”) regarding disparate impact liability under the FHA. The HUD Rule reinstates a 2013 rule that codified a three-part burden-shifting framework for assessing disparate impact claims. Under that framework, to establish disparate impact liability, a plaintiff (or complainant in an administrative proceeding) must first show that “a challenged practice caused or predictably will cause a discriminatory effect.” 24 C.F.R § 100.500(c)(1). If that burden is satisfied, the defendant (or respondent in an administrative proceeding) must prove that “the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.” Id. at §100.500(c)(2). And if the defendant bears its burden, the plaintiff can still prevail if it shows that the defendant’s interests “could be served by another practice that has a less discriminatory effect.” Id. at §100.500(c)(3).
For over a decade, NAMIC has waged war on various versions of HUD’s disparate impact rule. It now challenges the HUD Rule as inconsistent with the Supreme Court’s decision in Inclusive Communities, D. Ct. Dkt. 146 at 150-151, even though that decision confirmed the availability of disparate impact liability under the FHA and took no issue with HUD’s proposed burden-shifting framework. Contrary to NAMIC’s assertion that the FHA is designed solely to ensure race-blindness in housing, see Appell. Br. 32-33, the purpose of the FHA is to ensure equal opportunities for housing. This legislation was and remains necessary to counteract pervasive discrimination and impermissible disparities in housing. The district court rightly rejected NAMIC’s argument. See D. Ct. Dkt. 155 (“Op.”).
On appeal, NAMIC insists once again that the HUD Rule cannot be reconciled with Inclusive Communities. Amici agree with the arguments presented by Appellee in support of the HUD Rule, see HUD Br., Document No. 2063070, but write separately to emphasize three reasons that Inclusive Communities does not preclude the application of the HUD Rule to homeowner’s insurance.
First, contrary to Appellant’s characterization, insurance underwriting and ratemaking are not solely the result of objective, scientific risk-grouping and risk-rating practices; these processes weigh many factors that have nothing to do with risk and can cause unjustified disparities by race or other protected characteristics. While Appellant insists that insurers should enjoy a blanket exemption from FHA disparate impact liability because of their purportedly distinct focus on risk assessment, courts have soundly rejected this argument.
Second, monitoring related to and compliance with the HUD Rule do not somehow force insurers to engage in discrimination prohibited by the Constitution or Inclusive Communities. Instead, consistent with Inclusive Communities, the HUD Rule requires the elimination of unjustified practices that cause racial disparities. Despite Appellant’s misleading arguments to the contrary, Inclusive Communities contains safeguards that are designed to ensure that disparate impact liability does not create constitutional issues. As the district court found, the HUD Rule incorporates these safeguards. Op. at 22-23. To comply with the HUD Rule, insurers need not adopt racial quotas or charge different rates to insureds of different races. They need only change any unjustified policies that cause racial disparities. Following the HUD Rule may cause insurers to take race-neutral actions aimed at reducing unjustified racial disparities, but those actions raise no constitutional issues.
Third, Appellant and several of its amici conjure up supposed tensions between the HUD Rule and the limiting principles on disparate impact liability set forth in Inclusive Communities. But as the district court correctly observed, the HUD Rule does not induce greater consideration of race and other protected characteristics than the FHA, as interpreted in Inclusive Communities, already did. Read together, the HUD Rule, the FHA, and Inclusive Communities appropriately distinguish between unnecessary, discriminatory barriers to housing and valid policies and practices that advance legitimate business interests.