Banking and Finance Law Daily Wrap Up, EQUAL CREDIT OPPORTUNITY—State AG coalition calls for preserving housing “discriminatory effects” protections, (Feb 12, 2026)

By George M. Gullo, J.D.

The attorneys general contend the existing rule, first issued in 2013 and reinstated in 2023, aligns with Supreme Court precedent and provides necessary clarity nationwide.

A coalition of 24 state attorneys general urges the Department of Housing and Urban Development (HUD) to withdraw its proposed repeal of the Fair Housing Act’s (FHA) “discriminatory effects” regulation, arguing the change would unlawfully erase a settled basis for liability and undermine fair housing enforcement. The comment letter—submitted to HUD’s Office of Fair Housing and Equal Opportunity—explains that the proposal would delete 24 C.F.R. § 100.500 and related text, effectively “eliminat[ing] all mention of liability under the FHA for discrimination that results from the effects of an action, rather than from an actor’s intent.” The attorneys general contend the existing rule, first issued in 2013 and reinstated in 2023, aligns with Supreme Court precedent and provides necessary clarity nationwide (see Banking and Finance Daily , (Jan. 13, 2026)). They “strongly urge HUD and the [Office of Fair Housing and Equal Opportunity] to forego the Proposed Rule and retain the Existing Rule.”

The attorneys general position is succinct: “Discriminatory effects liability has allowed HUD, its cooperating state agencies, and individuals facing unfair barriers to housing to increase opportunities for all Americans by reducing unjustified exclusionary practices.” Because the proposed rule would erase clear, court aligned standards; disregard reliance interests; burden state systems; weaken deterrence; and conflict with HUD’s affirmative obligations, the attorneys general “strongly urge HUD to forego its proposed changes and retain the Existing Rule.” To alert the public, the Illinois Attorney General’s office publicly announced this multistate effort the same day the comment was filed.

Legal framework. The proposal, as summarized in the comment, would (1) remove language in 24 C.F.R. § 100.5(b) recognizing that unlawful discrimination “may be established by a practice’s discriminatory effect, even if not motivated by discriminatory intent,” and (2) delete § 100.500, which codifies that “liability may be established under the Fair Housing Act based on a practice’s discriminatory effect … even if the practice was not motivated by a discriminatory intent,” including the burden shifting standard. “Simply put,” the attorneys general write, “the FHA prohibits discrimination based on effects, and HUD’s Proposed Rule will not and cannot change that.” They add that disparate impact and segregative effects theories “will remain valid regardless of how HUD proceeds,” and that HUD’s about face is “unlawful,” including for failure to provide a reasoned explanation under the Administrative Procedure Act (APA).

The comment places the rule within the nation’s history of housing discrimination and segregation, emphasizing that past and present practices—many facially neutral—produce unjustified barriers to fair housing. Against that backdrop, the Supreme Court’s decision in Texas Department of Housing & Community Affairs v. Inclusive Communities Project (576 U.S. 519) “validated disparate impact liability under the FHA,” confirming it is “consistent with the FHA’s central purpose.” The attorneys general underscore the opinion’s recognition that disparate impact claims “permit plaintiffs to counteract unconscious prejudices and disguised animus” and can “prevent segregated housing patterns that might otherwise result from covert and illicit stereotyping.”

Existing rule. According to the attorneys general, HUD’s suggestion that the current regulation is out of step with the “legal landscape” lacks support. The 2013 framework mirrors Inclusive Communities and has been repeatedly relied upon by courts and agencies. The comment quotes HUD itself (in prior litigation) acknowledging that “nothing in Inclusive Communities casts any doubt on the validity of the Rule.” The proposal’s speculative concerns about judicial review do not justify rescission because the Supreme Court has already confirmed FHA disparate impact liability and its basic analytical framework.

Reliance interests. The comment also details significant reliance interests: the rule “provides clarity on the law, which helps decrease discriminatory practices, lessens the burdens of litigation, and promotes consistency across jurisdictions.” Eliminating it would “misleadingly represent the law,” risk signaling that intent is always required, and deprive landlords, developers, municipalities, and other stakeholders of clear guidance on elements, defenses, and burdens. As the comment puts it, the 2013 framework “provided a workable and balanced framework” consistent with statute and precedent and has “engendered serious reliance interests” that HUD fails to acknowledge.

Consequences for states. The attorneys general warn that repeal would impose concrete costs on state fair housing systems. Confusion about federal standards would “reduce compliance” and increase noncompliance with both federal and “substantially equivalent” state laws, driving up complaints to state Fair Housing Assistance Program agencies while resources are constrained. It would also swell demand for technical assistance from housing providers and the public, diverting staff from investigations and community education—functions essential to “achieving the FHA’s goal of promoting fair housing and integrated and balanced living patterns nationwide.”

Deterrence and enforcement. Beyond administrative strains, the comment explains that rescission would erode deterrence by signaling a federal retreat from discriminatory effects enforcement. The attorneys general caution that “bad actors” could be incentivized to adopt facially neutral tactics with discriminatory outcomes, worsening segregation and associated harms. The submission criticizes HUD’s recent pattern of rollbacks and guidance shifts as compounding this signal, with foreseeable increases in discrimination and segregation that states will bear in public health and fiscal impacts.

HUD’s obligation. The comment argues the proposal would “interfere with HUD’s statutory obligation to affirmatively further fair housing,” a mandate that is “distinct from the FHA’s prohibition of discrimination” and requires proactive steps to dismantle barriers and address segregation’s legacy. Because discriminatory effects liability is an “important means of fighting these patterns” and has a “continuing role in moving the Nation toward a more integrated society,” erasing it from HUD’s regulations would impede, not further, that duty.

The attorneys general also fault HUD’s process, in particular the shortened comment period and cost analysis. They argue that offering only a 30-day comment window contravenes HUD’s own policy requiring “not less than sixty days” and is unsupported by the APA’s narrow “good cause” exception. The proposal’s claim that repeal imposes “no regulatory costs” is, in the comment’s words, “extraordinary” and unsupported by reasoned analysis, particularly given the extensive reliance and implementation realities described in the comment. Under the APA, HUD must “examine the relevant data and articulate a satisfactory explanation” when it asserts zero cost; the proposal, the attorneys general say, does neither.

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