By Jonathan H. Krol

On June 25, 2015, in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc., 135 S. Ct. 2507, 2015 WL 2473449 (2015), the United States Supreme Court issued a much-anticipated decision upholding disparate-impact claims under the Fair Housing Act (“FHA”).  The hotly contested case resulted in a 5-4 split, with Justice Kennedy delivering the opinion of the Court.

In 2013, the Department of Housing and Urban Development (“HUD”) issued a regulation to adopt disparate-impact claims under the FHA. Since the 1970s, courts have consistently recognized that policies and practices that unnecessarily limit housing opportunities or perpetuate segregation because of race, color, national origin, religion, sex, disability, or familial status violate the FHA.  However, the Supreme Court never validated these claims—until now. 

Often premised on statistical studies or empirical data, “disparate-impact” claims seek to demonstrate that a facially-neutral policy or regulation has a discriminatory effect on a protected class of individuals.  These claims are focused not on the intent of the actor, but on the consequences of the action.  In other words, disparate-impact claims seek to hold actors accountable for the results of their conduct, regardless of the actors’ good faith intensions.

The Inclusive Communities Project—a non-profit organization that assists low-income families in obtaining affordable housing—brought a housing discrimination action against a Texas housing agency alleging that its selection criteria for awarding low income housing tax credits result in segregated housing patterns and had a disparate impact on predominantly African American urban areas.  As Justice Kennedy put it, “The underlying dispute in this case concerns . . . whether the housing should be built in the inner city or in the suburbs.”  Id. at *3.

The Supreme Court found that disparate impact claims are available under the FHA because:  (1) similar statutes including Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 have been interpreted to protect against unlawful discrimination based on disparate impact; (2) in 1988, Congress amended the FHA in a manner that suggested the disparate-impact liability was generally permitted; and (3) disparate-impact claims are “consistent with the FHA’s central purpose.” 

The Court was careful to emphasize that disparate impact claims are subject to important limitations.  For example, liability should not be imposed “based solely on a showing of statistical disparity,” and such claims only mandate “the removal of artificial, arbitrary, and unnecessary barriers, not the displacement of valid governmental policies.”  Inclusive Communities Project, 135 S. Ct. at 2522 (internal quotation omitted).  To avoid improper extension of the disparate-impact doctrine, housing authorities and private developers must be given “leeway to state and explain the valid interest served by their policies."   Id.

So, while the Court recognized the availability of disparate-impact claims brought under the FHA, the Court took the opportunity to explain that, not unlike the business necessity standard under Title VII, legitimate policies can withstand scrutiny, even where statistical evidence suggests a disparate-impact, as long as the practice is “necessary to achieve a valid interest”.  Id. at 2523.

Lastly, the Court noted that remedial orders in disparate-impact cases “should concentrate on the elimination of the offending practice that arbitrarily operates invidiously to discriminate on the basis of race.”  Id. at 2524 (internal quotation omitted).  Overreaching by a court may result in unconstitutional penalties. 

Although disparate-impact claims have long been recognized in various contexts, the Supreme Court has now cemented their availability under the FHA.  Because the FHA applies to both governmental and private actors, this decision will apply across all sectors of the housing market. 

If you have any questions regarding the Inclusive Communities Project case, wish a copy of the opinion, or otherwise have a question regarding an issue of housing or real estate law, please feel free to call any one of our Real Estate Practice Group Members.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.


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