Court Confirms Disparate Impact Claims Allowed Under Fair Housing Act

In Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, 576 U. S. ____ (2015), the U.S. Supreme Court recently ruled that disparate-impact claims are cognizable under the Fair Housing Act (FHA). The 5-4 decision ends the debate regarding whether plaintiffs must expressly show that housing authorities and private developers were motivated by an intent to discriminate in order to bring a claim under the Fair Housing Act.

The Inclusive Communities Project, Inc. (ICP), a Texas-based nonprofit corporation that assists low-income families in obtaining affordable housing, brought a disparate-impact claim under the Fair Housing Act against the Texas Department of Housing and Community Affairs (Department). The suit alleged that the agency had caused continued segregated housing patterns by allocating too many low-income housing tax credits to housing in predominantly black inner-city areas and too few in predominantly white suburban neighborhoods.

 The District Court concluded that the ICP had established a prima facie showing of disparate impact based on the statistical allocation of tax credits and that the Department failed to meet its burden to show that there were no less discriminatory alternatives. While the Department’s appeal was pending, the Secretary of Housing and Urban Development (HUD) issued a regulation interpreting the Fair Housing Act to encompass disparate-impact liability and establishing a burden-shifting framework for adjudicating such claims. The Fifth Circuit held that disparate-impact claims are cognizable under the Fair Housing Act, but reversed and remanded on the merits. It held that, in light of the new HUD regulation, the District Court had improperly required the Department to prove less discriminatory alternatives.

The majority confirmed the validity of disparate-impact claims. Justice Anthony M. Kennedy authored the majority opinion, joined by Justices Stephen G. Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor.

 In reaching its decision, the majority noted the long line of lower court rulings that have upheld the “disparate impact” theory. The Court further emphasized that Congress amended the FHA in 1988 without restricting disparate impact claims, suggesting that lawmakers supported the validity of such claims. Justice Kennedy explained:

The 1988 amendments signal that Congress ratified such liability. Congress knew that all nine Courts of Appeals to have addressed the question had concluded the FHA encompassed disparate-impact claims, and three exemptions from liability in the 1988 amendments would have been superfluous had Congress assumed that disparate-impact liability did not exist under the FHA.

 The majority also found that disparate-impact claims are consistent with the central purpose of the Fair Housing Act, which like the Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, is to root out discrimination from a key sector of the economy. “Recognition of disparate-impact liability under the Fair Housing Act plays an important role in uncovering discriminatory intent: it permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment,” Justice Kennedy wrote.

In closing his opinion, Justice Kennedy did acknowledge that disparate impact claims have their limits. For instance, he noted that “a disparate-impact claim relying on a statistical disparity must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity.”

Justice Samuel Alito, Jr. filed a dissenting opinion, in which Chief Justice John Roberts and Justices Antonin Scalia and Clarence Thomas joined. He argued that the majority “makes a serious mistake” in recognizing a cause of action that Congress never intended.