DOJ scales back disparate impact protections

The Trump administration rescinded critical federal “disparate impact” protections, withdrawing the established regulatory framework that allowed discrimination to be demonstrated through policies with unjustified discriminatory effects. The Department of Justice Department’s action changes its regulations under Title VI of the Civil Rights of 1964, dismantling the prior effects-based standard and replacing it with a substantially narrower test. The new interpretation elevates causation burdens, limits the circumstances under which statistical disparities may constitute evidence of discrimination, and requires claimants to satisfy thresholds that civil rights groups say are nearly impossible to meet without proving intent. Though the focus on Title VI does not gut disparate impact from all fair housing protections, it does impact entities that receive federal funding, impacting housing as well as other areas like education, policing, and environmental protection.

The National Fair Housing Alliance (NFHA) condemned the rollback, warning that eliminating the effects-based framework strips away one of the Fair Housing Act’s most important enforcement mechanisms. NFHA emphasized that disparate impact has been essential to correcting systemic barriers embedded in lending, insurance, zoning, and tenant-screening practices. By removing the established standard and adopting a test that significantly restricts actionable claims, NFHA argues the administration is creating substantial obstacles for identifying discriminatory outcomes and protecting communities that disproportionately bear the burden of inequitable housing policies.

The DOJ seemingly defended its position with the argument that the civil rights law encouraged enforcement of civil rights, negating the fact that discrimination can and does occur without inherent intentionality. “The prior ‘disparate impact’ regulations encouraged people to file lawsuits challenging racially neutral policies, without evidence of intentional discrimination,” said Assistant Attorney General Harmeet Dhillon of the Justice Department’s Civil Rights Division. “Our rejection of this theory will restore true equality under the law by requiring proof of actual discrimination, rather than enforcing race- or sex-based quotas or assumptions.”

NHC criticized the decision in a press release, stating that rescinding disparate impact guidance “creates harm, confusion, and legal risk” for the housing sector. NHC noted that the prior framework provided clear criteria for evaluating potential discriminatory effects, supporting compliance across lenders, insurers, developers, and local governments. By replacing that clarity with a more restrictive and less predictable standard, the change undermines fair housing enforcement at a moment when structural barriers and rising housing costs continue to disproportionately affect marginalized households. A group of over 200 former employees of the Civil Rights Division of the DOJ also released an open letter sharply refuting the decision, stating “America deserves better.” 

HUD withdraws contested homelessness policy changes

The U.S. Department of Housing and Urban Development (HUD) withdrew its November FY2025 Continuum of Care (CoC) Program Notice of Funding Opportunity (NOFO) that sparked significant bipartisan concerns across the housing community and prompted legal challenges. The changes would have constituted a significant shift in fund allocation, moving homelessness services focus away from permanent supportive housing toward transitional housing with work or service condition, reportedly risking displacing 170,000 individuals at risk of falling back into homelessness. According to HUD, the withdrawal will allow HUD to “make appropriate revisions to the NOFO, and the Department intends to do so. In the previous FY 24-25 NOFO, the Department reserved the right to make changes to the NOFO instead of processing renewals for a variety of reasons, including to accommodate a new CoC or Youth Homelessness Demonstration Program priority or new funding source. The Department still intends to exercise this discretion and make changes to the previously issued CoC NOFO to account for new priorities. HUD anticipates reissuing a modified NOFO well in advance of the deadline for obligation of available Fiscal Year 2025 fund.” The legal case brought against the Administration is continuing despite the withdrawal.

Multiple letters were sent regarding the NOFO, including one from the U.S. Conference of Mayors. The Conference sent a letter to Congressional leadership detailing their concerns with the proposed changes and asking for full CoC funding in 2026 in order to ensure there are no gaps in funding and offer more time to plan for coordinated changes.

“It is far too late in the year for HUD to initiate a new grant process for funds that will begin to expire in January 2026. Earlier this year, when grant agreements for the last round of funding were delayed, state and local governments had to absorb the gaps to ensure rents were paid to landlords and programs could continue to operate. It is simply not feasible for us to absorb these gaps again in 2026,” the letter reads. “We strongly urge you to take action to direct HUD to renew all existing Continuum of Care grants expiring during calendar year 2026 for one 12-month period. This will ensure there are no unnecessary gaps and delays in resources and provide communities more time to plan accordingly. Such action would have no budgetary impact.” 

Housing provisions left out of NDAA; House leaders introduce new bipartisan housing package



Following weeks of negotiations, policymakers and stakeholders alike were disappointed following the exclusion of the ROAD to Housing Act (ROAD) in the must-pass National Defense Authorization Act (NDAA). The Senate, led by Senate Banking Committee Chairman Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.), worked alongside the White House to include ROAD, or a House-negotiated version of the bill, in the final NDAA. The ROAD to Housing Act advanced earlier this year with broad bipartisan support, passing unanimously out of the Senate Banking Committee in July, and later passing the full Senate as part of its version of the NDAA. Speaker of the House Mike Johnson (R-La.) and House Financial Services Committee Chairman French Hill (R-Ark.), however, could not reach an agreement with Senate leaders, resulting in the final NDAA passing without a housing package.

The House Financial Services Committee has been pursuing its own housing legislation in recent weeks. It held a hearing on a suite of housing bills earlier this month and introduced the bipartisan Housing for the 21st Century Act. The bill was formally introduced on December 11 by Chairman Hill and Ranking Member Waters (D-Calif.), along with Housing & Insurance Subcommittee Chairman Mike Flood (R-Neb.) and Ranking Member Emanuel Cleaver (D-Mo.). The legislation is designed to expand housing production and improve affordability by modernizing outdated programs, removing regulatory barriers, strengthening support for manufactured and factory-built housing, and increasing financing options such as small-dollar mortgages. It also enhances transparency, consumer protections, and federal oversight to ensure programs support stable, affordable housing for households across income levels. The Committee has scheduled a December 17 markup for the bill.

“It is critical that we deliver real solutions that empower Americans and strengthen communities,” committee Chairman Hill said in a statement. “This month, the Financial Services Committee will advance solutions to tackle housing cost and access challenges for American families, homeowners and renters. Next year, we look forward to working with our Senate colleagues to send a bill to the president’s desk that reflects the views of both chambers and leads to more affordable choices for America’s homeowners and renters.”

“The cost of living remains the most urgent challenge facing Americans in every region of the country, and tackling that crisis begins with bipartisan, comprehensive housing reform,” said Ranking Member Cleaver. “Over the past year, Ranking Member Waters, Chairman Flood, Chairman Hill, and I have worked with Committee members on legislation that cuts unnecessary red tape, accelerates the development of affordable housing, and reduces costs for hardworking families. I’m proud of the bipartisan package we are introducing today and look forward to working with the House and Senate to advance critical housing legislation to the president’s desk.”

NHC President and CEO David M. Dworkin released a statement in support of this legislation. “By modernizing outdated housing programs, reducing unnecessary barriers to development, and increasing flexibility for local communities, the Housing for the 21st Century Act helps create the conditions needed to build and preserve more affordable homes across America,” Dworkin said. “Addressing the shortage of affordable housing will require sustained bipartisan action. NHC looks forward to working with Congress to advance bipartisan housing legislation and help ensure it moves forward with the broadest possible support.”

The introduction of this legislation and the planned markup help continue momentum for a bipartisan housing package as the House and Senate are expected to continue to negotiate between their two bills.

Fannie Mae expands MH, ADU flexibilities

Fannie Mae made substantial updates to its Selling Guide, significantly expanding eligibility for accessory dwelling units (ADUs) and manufactured home improvements as part of a broader strategy to increase affordable housing supply. The changes allow a wider range of ADU construction and rehabilitation activities, including attached or detached units, conversions of existing space, and ADUs on single-unit properties where permitted. Fannie Mae also now allows an ADU on single-unit manufactured homes, including single- and multi-section units, and permits multiple ADUs on certain MH Advantage® homes.

Fannie Mae also strengthened renovation pathways for manufactured housing by eliminating the prior $50,000 or 50% as-completed value cap and replacing it with a single cap based solely on 50% of the as-completed value, allowing more substantial updates to aging homes and aligning policy more closely with site-built housing. The release also introduces HomeStyle Refresh, an updated version of Fannie Mae’s energy-efficiency program, which enables borrowers to finance resiliency improvements without an energy report and provides higher allowable loan-to-value ratios for those upgrades. The changes come into effect March 31. 

Housing Trust Fund awards released

HUD released its FY2025 Housing Trust Fund (HTF) allocation amounts. The total allocation stands at $223 million, with state allocations ranging from $23.5 million to the small-state minimum of $3 million. Puerto Rico will also receive $688,000. HUD administers the HTF as established by the Federal Housing Enterprises Financial Security and Soundness Act of 1992 and amended by the Housing and Economic Recovery Act of 2008.