Recently, the U.S. Department of Housing and Urban Development (HUD) issued two memoranda that clarify HUD’s role in enforcing the Fair Housing Act (FHA), explain how future enforcement efforts will proceed, and officially rescind several guidance documents related to disparate impact and redlining, among other topics.

The September 16 memorandum appears to be in direct response to President Trump’s Executive Order 14281, Restoring Equality of Opportunity and Meritocracy, (discussed here), which aims to eliminate the use of disparate impact liability across federal agencies. Historically, HUD has utilized disparate impact theory to address practices that, while not overtly discriminatory, result in unequal outcomes for protected groups. Redlining, a practice where financial institutions allegedly denied access to financial products and services to entire neighborhoods, often those with high populations of racial minorities, has also been a significant focus for HUD, particularly under the Biden administration. However, HUD’s September 16 memorandum indicates a shift away from this approach, consistent with Executive Order 14281’s aim to promote a merit-based, colorblind society.

In the context of rescinding guidance issued by HUD’s Office of Fair Housing and Equal Opportunity (FHEO), the September 17 memorandum references two other executive orders — Executive Order 14192, Unleashing Prosperity Through Deregulation, and Executive Order 14219, Ensuring Lawful Governance and Implementing the President’s Department of Government Efficiency Deregulatory Initiative. The September 16 memorandum also references Executive Order 14219. In accordance with these executive orders, HUD states that it has undertaken a comprehensive review of regulatory guidance and determined that it is necessary to rescind select FHEO guidance in order to “reduce unnecessary compliance burdens, enhance the effectiveness of guidance documents, and promote principles underlying the rule of law.” The withdrawal is not necessarily final because FHEO is continuing to review all guidance to determine whether it should be retained, or revised and reissued. However, the withdrawn guidance will not be enforced or otherwise relied upon by HUD while FHEO’s review remains ongoing.

Key Changes

  • Focus on Intentional Discrimination: According to the memorandum dated September 16, HUD will now prioritize resources for cases with clear evidence of intentional discrimination. The memo criticizes previous enforcement strategies as “ideological” and inconsistent with federal law, suggesting that they have made housing more expensive and less fair. Going forward, enforcement actions must “hew closely to the text of the operative statutes” and FHEO staff will prioritize cases involving “facially discriminatory conduct.”
  • Withdrawal of Guidance Documents: Both the September 16 and September 17 memoranda announced the withdrawal of numerous FHEO guidance documents, some of which appear to be significant. Among other things, the list of guidance includes “Proving Disparate Impact in Fair Housing Cases After Inclusive Communities” (Aug. 1, 2016), “Referrals of Pattern or Practice Fair Housing Cases to the Department of Justice” (Dec. 12, 2011), and the “FHEO Statement on the Fair Housing Act and Special Purpose Credit Programs” (Dec. 7, 2021). As noted above, these withdrawals are part of a broader regulatory reform effort under Executive Orders 14192 and 14219, aimed at reducing compliance burdens.
  • Elimination of Group-Oriented Guidance: The September 16 memorandum highlights a departure from prior HUD guidance that sought to “divide Americans into protected minority and unprotected majority groups.” Instead, HUD emphasizes the FHA’s protection of all individuals, regardless of group membership.

Our Take

HUD’s shift in focus from neighborhood-based discrimination to individual treatment likely eliminates the chances of the agency pursuing new redlining cases under the current administration. Likewise, FHA claims based on disparate impact are seemingly off the table for the remainder of the administration. However, if there is a change to a Democratic administration in the future, one would assume that redlining and disparate impact investigation and enforcement actions would be back on the front burner.

We would also note that one of the withdrawn guidance documents endorsed special purpose credit programs under the FHA, despite the absence of any statutory basis for such programs in the statute itself. In our view, this raises the risks associated with race-based mortgage special purpose credit programs, and we believe that mortgage lenders have abandoned, or are abandoning, such programs.