With rulings on Affordable Care and gay marriage attracting most of the attention, a ruling on Fair Lending almost got lost in the shuffle. On June 25 the Supreme Court of the United States (SCOTUS) rendered a decision in the case of Texas Department of Housing and Community Affairs et al. vs. Inclusive Communities Project, Inc. The case involved the disparate impact theory of discrimination under the Fair Housing Act. The issue to be decided was whether the Fair Housing Act provides authority for the theory of disparate impact liability. Several cases have explored the issue over the past few years, but none of those cases resulted in a final judgement by the SCOTUS. The Court upheld the Fifth Circuit Court of Appeals’ decision that disparate impact claims are cognizable under the Fair Housing Act.
Pertinent sections of the ruling follow:
Under the Secretary of Housing and Urban Development’s (HUD) regulation interpreting the FHA, a plaintiff first must make a prima facie showing of disparate impact. That is, the plaintiff “has the burden of proving that a challenged practice caused or predictably will cause a discriminatory effect.” If a statistical discrepancy is caused by factors other than the defendant’s policy, a plaintiff cannot establish a prima facie case, and there is no liability. After a plaintiff does establish a prima facie showing of disparate impact, the burden shifts to the defendant to “prove that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.” Once a defendant has satisfied its burden at step two, a plaintiff may “prevail upon proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.”
The Court of Appeals for the Fifth Circuit held, consistent with its precedent, that disparate-impact claims are cognizable under the FHA. On the merits, however, the Court of Appeals reversed and remanded. Relying on HUD’s regulation, the Court of Appeals held that it was improper for the District Court to have placed the burden on the Department to prove there were no less discriminatory alternatives for allocating low-income housing tax credits. In a concurring opinion, Judge Jones stated that on remand the District Court should reexamine whether the ICP had made out a prima facie case of disparate impact. She suggested the District Court incorrectly relied on bare statistical evidence without engaging in any analysis about causation. She further observed that, if the federal law providing for the distribution of low-income housing tax credits ties the Department’s hands to such an extent that it lacks a meaningful choice, then there is no disparate-impact liability.
The Department filed a petition for a writ of certiorari on the question whether disparate-impact claims are cognizable under the FHA.
In light of the longstanding judicial interpretation of the FHA to encompass disparate-impact claims and congressional reaffirmation of that result, residents and policymakers have come to rely on the availability of disparate-impact claims. Indeed, many of our Nation’s largest cities—entities that are potential defendants in disparate impact suits—have submitted an amicus brief in this case supporting disparate-impact liability under the FHA. The existence of disparate-impact liability in the substantial majority of the Courts of Appeals for the last several decades “has not given rise to . . . dire consequences.”
Much progress remains to be made in our Nation’s continuing struggle against racial isolation. In striving to achieve our “historic commitment to creating an integrated society,” we must remain wary of policies that reduce homeowners to nothing more than their race. But since the passage of the Fair Housing Act in 1968 and against the backdrop of disparate-impact liability in nearly every jurisdiction, many cities have become more diverse. The FHA must play an important part in avoiding the Kerner Commission’s grim prophecy that “our Nation is moving toward two societies, one black, one white—separate and un-equal.” The Court acknowledges the Fair Housing Act’s continuing role in moving the Nation toward a more integrated society.
The judgment of the Court of Appeals for the Fifth Circuit is affirmed, and the case is remanded for further proceedings consistent with this opinion.
Disparate impact appears to be here to stay.
