SCOTUS Rules Disparate-Impact Fair Housing Claims are Possible But Limited

If you were surprised by the Supreme Court’s ruling in the Affordable Care Act Case, you may have even been more surprised by the Court’s ruling in the Fair Housing Act case.

In Texas Department of Housing and Community Affairs v. inclusive Communities Project the Supreme Court held 5-4 that disparate-impact claims may be brought under the Fair Housing Act (FHA). All Federal Circuit Courts of Appeals had decided this issue ruling that such claims were possible, though they disagreed about the level of proof required. The Supreme Court was expected to come to the opposite conclusion (or else why would they have taken this case?). Having taken up this question twice before, only to have the cases settle, the Court has finally resolved it.

Here, the Inclusive Communities Project (ICP) sued the Texas Department of Housing and Community Affairs claiming that its selection criteria for federal low-income tax credits in Dallas had a disparate impact on minorities in violation of the FHA. Specifically, ICP claimed the Department was giving too many tax credits to low-income housing in predominately black inner-city areas compared to predominately white suburban neighborhoods. While 92% of low-income housing tax credits in Dallas were located in census tracts with less than 50% white residents, federal law favors distribution of such tax credits in low-income areas.

The Court held that disparate impact claims are cognizable under the FHA. In prior cases the Court held that disparate impacts claims are possible under Title VII (prohibiting race, etc. discrimination in employment) and the Age Discrimination in Employment Act relying on the statutes’  “otherwise adversely affect” language. The FHA uses similar language—“otherwise make unavailable”—in prohibiting race, etc. discrimination in housing. And Congress seems to have acknowledged that disparate impact claims are possible under the FHA. Congress amended the FHA in 1988 to include “three exemptions from liability that assume the existence of disparate-impact claims.” (By 1988 nine Courts of Appeals had held ruled in favor of such claims.) Finally, the Court reasoned that recognizing disparate-impact claims is “consistent with the FHA’s central purpose”–to eradicate housing discrimination.

Justice Kennedy opined that when the lower court takes this case up again it “may be seen simply as an attempt to second-guess which of two reasonable approaches a housing authority should follow in the sound exercise of its discretion in allocating tax credits for low income housing.” To make sure disparate-impact lawsuits aren’t successful in this instance he suggests the following.  First, governments and developers should be able to maintain a housing policy that they can prove is necessary to achieve a valid interest. Second, disparate-impact claims that, like this one, rely on a statistical disparity will fail if the plaintiff can’t prove that the defendant’s policy caused the disparity. And remedies must be consistent with the constitution and not include quotas.

While state and local governments are more likely to be sued under the FHA, they do occasionally sue others for violating it. Justice Kennedy pointed out at the end of his majority opinion that the City of San Francisco filed an amicus brief supporting disparate-impact liability under the FHA despite being a “potential defendant.” In a disparate-impact case a plaintiff is claiming that a particular practice isn’t intentionally discriminatory but instead has a disproportionately adverse impact on a particular group.