HUD Ends Obama-Era Rule Letting Builders Be Sued Decades Later Over Design Flaws

The Department of Housing and Urban Development, working with the Department of Justice, has rescinded an Obama-era policy that let third parties file complaints over building design flaws at any time, even decades after construction was finished.

Under the previous approach, current property owners could be held liable for accessibility deviations made by original builders long before they took ownership. HUD says that exposure to open-ended liability discouraged investment and drove up housing costs.

According to internal agency data, property owners spent more than $112 million on accessibility retrofits over the past five years just to qualify for Federal Housing Administration refinancing. HUD says those costs cut into the supply of affordable housing.

One third-party housing inspection firm identified nearly $49 million in required accessibility fixes across close to 500 refinance deals since 2019, averaging more than $100,000 in deficiencies per property, according to data provided to HUD. A major affordable multifamily lender told the agency that uncertainty tied to the old guidance cost it more than $1 billion in lost HUD-insured loan volume over the last four years, with lenders reporting recurring deal dropouts and borrowers avoiding FHA financing altogether.

New deadlines for filing complaints

Under the revised framework, the clock on Fair Housing Act design and construction claims now starts on the date a building receives its certificate of occupancy. People or advocacy groups have one year to file administrative complaints with HUD. Private lawsuits in federal court must be filed within two years of a building’s completion.

Once those windows close, property owners are protected from retroactive, building-wide liability for original design flaws. Individual tenants still retain the right to request reasonable modifications for their own housing needs at any time under existing Fair Housing Act protections.

HUD’s new guidance states that the earlier rule “dramatically expanded the scope of the Fair Housing Act by declaring that deviations from HUD’s accessibility guidelines, at the point of initial construction, gave rise to strict liability against the builder in perpetuity.” The guidance calls that interpretation “egregiously wrong,” saying it “exceeded the Department’s statutory authority, failed to increase the supply of accessible housing for individuals with disabilities, and imposed an unwarranted and unduly prejudicial burden on American homebuilders.”

Legal basis for the change

HUD officials point to the 1988 update to the Fair Housing Act, in which Congress set a one-year deadline for filing administrative complaints. They argue the 2013 Obama-era policy ignored that deadline by allowing owners to be targeted decades after a project’s completion.

The change also brings federal enforcement in line with rulings from federal appeals courts, including a decision from the U.S. Court of Appeals for the Ninth Circuit, which found that a design violation ends when construction is complete and a certificate of occupancy is issued.

“For too long, unnecessary government policies have contributed to the skyrocketing cost of building, buying, and renting a home. Today’s action rescinds unnecessary and expensive liability created by legal theories that have no basis in law,” said HUD Secretary Scott Turner. “The Trump Administration is following the law as written by Congress and interpreted by the courts. We will continue to repeal and replace guidance that does not honor these lawful commitments while ensuring Americans can access affordable housing.”

Assistant Secretary for Fair Housing and Equal Opportunity Craig Trainor said Congress had already settled the question of timing. “Congress wrote a clear statute of limitations into the Fair Housing Act. That limitation is part of the law, not a suggestion for sly bureaucrats to disregard,” Trainor said. “We will not allow Obama-era guidance to rewrite the Fair Housing Act, expose American builders to indefinite legal liability, and make housing less affordable for hardworking American families.”