Disparate-impact claims are cognizable under the Fair Housing Act

On June 25, 2015, the Supreme Court in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. held that disparate-impact claims are cognizable under the Fair Housing Act (FHA). The Inclusive Communities Project, Inc. (ICP), brought suit against the Department of Housing and Community Affairs for disparate-impact claims under §§804(a) and 805(a) of the FHA. The Texas Department of Housing and Community Affairs are responsible for distributing the low-income tax credits provided by the Federal Government to developers within the state of Texas. The ICP alleged the department disproportionately granted too many credits for housing in predominately black inner cities and too few in predominately white suburban areas, resulting in continued segregation.

The District Court relied on two pieces of statistical evidence in concluding that the ICP had established a prima facie case for disparate impact. They then shifted the burden to the department to rebut ICP’s showing by offering legitimate interests in granting the credits as they did and to prove there were no other less discriminatory alternatives to advance those interests. The District court held the department failed to meet its burden, specifically in proving no less discriminatory alternates, and ruled in favor of the ICP.

During a pending appeal by the department, the Secretary of Housing and Urban Development (HUD) issued a regulation interpreting the FHA to encompass disparate-impact liability. The regulation established a burden-shifting framework for adjudication of disparate-impact claims which required, first, a plaintiff to make a prima facie showing of disparate impact. Once he had done so, the burden shifted to the defendant to prove that the challenged practice was necessary to achieve one or more substantial, legitimate, nondiscriminatory interests. Lastly, once a defendant had satisfied its burden, plaintiffs could prevail by showing that the proffered interests could be served by some other practice with a less discriminatory effect. Considering the FHA’s regulation, on appeal the Court of Appeals for the Fifth Circuit held that disparate-impact claims were cognizable under the FHA and reversed and remanded the decision of the District Court. The department filed a petition for a writ of certiorari to determine whether disparate-impact claims were cognizable under the FHA.

In analyzing the proper interpretation of the FHA, the Supreme Court looked to two other antidiscrimination statutes which preceded the FHA, §703(a) of title VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment Act of 1967. The court found that the text of both statutes included language which placed a focus on the effects of a particular action rather than the motivation which the court interpreted to encompass recognition of disparate-impact liability. The court focused on language in section 804(a) of the FHA which states “it shall be unlawful: to refuse to sell or rent . . . or otherwise make unavailable . . . a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” The court interpreted the language “otherwise make unavailable” to refer to the consequences of an action rather than the actor’s intent, similar to the other antidiscrimination statutes, and therefore include disparate-impact liability. The court further noted that later amendments to the FHA enacted in 1988, supported the existence of disparate-liability. At the time of the amendments, all nine Courts of Appeals had addressed the question and concluded that the FHA encompassed disparate-impact claims. The Supreme Court interpreted Congress’ decision not to alter the text of the statute, as an affirmation of the Courts of Appeals interpretation of the statute. Lastly, in further support of the court’s decision, the court noted that recognition of disparate-impact claims was consistent with the central purpose of the FHA and other antidiscrimination statutes, which was to eliminate discriminatory practices within a sector of the Nation’s economy.

While recognizing disparate-impact liability, the Supreme Court’s decision also lays out a few safeguards to protect defendants of disparate-impact claims. First, a causality requirement protects defendants from being held liable for racial disparities they did not create. This means disparate-impact claims which rely entirely on statistical disparities will fail if plaintiffs cannot point to a policy of the defendant which caused that disparity. Second, housing authorities and private developers are given leeway to state and explain the valid interest served by their policies to ensure disparate-impact liability is properly limited. Therefore, as long as the policies of housing authorities and private developers further the goals of the FHA, they should not have to worry about disparate-impact liability.

Frank J. Coughlin