When the Office of General Counsel sent the Keating Memo to HUD headquarters and regional counsel in 1991, Keating claimed that the two persons per bedroom standard was "rebuttable." The memo also said that HUD officials should not use this standard alone to decide whether a landlord's occupancy standards are discriminatory.
In their December 1998 announcement, HUD listed several other factors that investigators will use to detect whether an occupancy policy is reasonable. They include the size and design of rooms and units, the ages of a family's children, and the state and local ordinances dealing with occupancy in the locality where the complainant has filed a complaint.
Even in cases where a landlord's occupancy policy is reasonable under the Fair Housing Act, HUD will consider evidence that shows the landlord has made discriminatory statements, set different rules for children than adults at common facilities, or taken steps to keep families with children out of a certain property. HUD will also pursue claims against landlords who enforce a reasonable occupancy standard against families with children and not against groups of adults.
According to Fair Housing - Fair Lending, Congress spurred HUD to make the public adoption of the Keating Memo when it passed the Quality Housing and Work Responsibility Act of 1998. Section 589 of that Act states that HUD's policy on occupancy standards should be that of the Keating Memo.
The full text of HUD's December 1998 announcement is available in the Federal Register, Volume 63, page 70,255.