Supreme Court Backs 'Disparate Impact' Claims

On June 25, the U.S. Supreme Court ruled that claims of racial discrimination in housing cases shouldn’t be limited by questions of intent. The court affirmed a Court of Appeals decision in a case in which a nonprofit group sued the Texas Department of Housing and Community Affairs for contributing to “segregated housing patterns” by allocating a disproportionate amount of the state’s Housing Credits to developments in predominantly black inner-city areas.

The 5-4 decision allows complaints to be brought under the Fair Housing Act based on “disparate impact,” when a policy that appears to be neutral, with no intent to discriminate, has an adverse effect or impact on a protected class. Justice Anthony Kennedy wrote the opinion, and was joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

In response to the ruling, HUD Secretary Julián Castro stated, “The Supreme Court has made it clear that HUD can continue to use this critical tool to eliminate the unfair barriers that have deferred and derailed too many dreams. Working with our partners on the ground, we will continue to do all we can to build a housing market that treats all Americans with basic dignity and respect.”

It’s important to note that while the majority opinion firmly upholds the concept of “disparate impact,” attempted to reign in a broad application of disparate impact liability, the safeguards outlined in the opinion if implemented by lower courts may make it more difficult to bring disparate impact cases.

“Robust causality requirement.” The opinion is clear that disparate impact claims cannot be based solely on statistical disparities. The opinion states, “A statistical disparity must fail if the plaintiff cannot point to defendant’s policy or policies causing that disparity.” The opinion also points out that causation is not easy to prove “because of the multiple factors that go into investment decisions about where to construct or renovate housing units.”

Adoption of policies that address legitimate goals. The opinion affirmed that government agencies and housing providers can defeat a disparate impact claim by demonstrating a legitimate, nondiscriminatory purpose. The opinion stated that the Fair Housing Act “does not put housing authorities in a double bind of liability, subject to suit whether they choose to rejuvenate a city core or to promote new low-income housing in suburban communities.”

Arbitrary, artificial, and unnecessary barriers. A prior Supreme Court decision in Griggs v. Duke Power Co. stated that “governmental or private policies are not contrary to the disparate-impact requirement unless they are ‘artificial, arbitrary, and unnecessary barriers.’” The majority opinion repeated this concept that had been included in disparate impact analysis in the courts for many years. To demonstrate disparate impact, a plaintiff should be required to affirmatively show not only that a practice has a discriminatory effect, but also that it raises “artificial, arbitrary, and unnecessary barriers.”

As a result of this decision and separate district court litigation, HUD is likely to revise its regulations—”Implementation of the Fair Housing Act’s Discriminatory Effects Standard”—to ensure that they comply with the safeguards put forth in the majority opinion.