Today, the Department of Housing and Urban Development (HUD) published a rule reinstating its Discriminatory Effects Standard, which ensures that housing practices that appear neutral in their design do not create or perpetuate discrimination on the basis of race, ethnicity, religion and other groups protected under the Fair Housing Act.
During the Trump administration, HUD gutted this critical civil rights protection and made it nearly impossible to enforce fair housing violations that had discriminatory effects. While the Trump-era rule has been blocked by a court injunction and never took effect, HUD’s announcement today ensures that strong protections against discriminatory housing practices are codified, clear and remain the law of the land.
Jesse Van Tol, CEO of the National Community Reinvestment Coalition (NCRC), made the following statement:
“Fully implementing the Fair Housing Act’s Discriminatory Effects Standard is a cornerstone commitment to ending residential segregation and a key anti-redlining tool. When lenders use artificial intelligence to make housing decisions using data that are a proxy for race or ethnicity, and those decisions make it more difficult for people of color and other protected groups to buy or rent a home – that practice has a discriminatory effect. Similarly, when lenders implement a facially neutral policy that unintentionally restricts the eligibility of people of color and other protected classes to get credit, that policy has a discriminatory effect.
“With clear protections against discriminatory housing and mortgage practices in place, we now look to the Consumer Financial Protection Bureau (CFPB) to review lending practices for other products, such as consumer, auto and other loans and ensure that common industry practices do not have a similar discriminatory effect. Already, the bureau has begun reviewing fair lending protections and joined with other regulators to identify possible discriminatory effects in artificial intelligence and machine learning. We urge the bureau to build on today’s announcement and strengthen the Equal Credit Opportunity Act to prevent practices that have a disparate impact on people of color and other protected groups.
“I applaud Secretary Marcia Fudge for moving this critical rule forward and for making fair housing protections and enforcement a top priority. Our Innovation Council for Financial Inclusion, comprised of prominent financial technology companies, will be making a formal request to the CFPB for clarity on how it will apply disparate impact rules to any systems that use artificial intelligence (AI), machine learning (ML), algorithms, or alternative data to make lending decisions very soon.”