U.S. Supreme Court Upholds Fair Housing Disparate Impact Principle (2023)

On June 25, the U.S. Supreme Court upheld of the disparate impact standard in housing discrimination in a 5-4 decision ruling on Texas Department of Housing and Community Affairs v The Inclusive Communities Project (see Memo, 1/12, 1/26). Justice Anthony Kennedy wrote the majority opinion.

The decision was a major victory for fair housing, housing, consumer, and civil rights organizations. NLIHC signed one of 22 amici curiae supporting the disparate impact standard (see Memo, 2/12). The decision was a defeat for the lending industry. In a statement from the American Bankers Association, Frank Keating, ABA president and chief executive said, "our members are strong advocates for fair lending and enforcement of the Fair Housing Act. Disparate Impact theory, however, is not the right tool to achieve fairness and prevent discrimination in lending, This approach can have unintended consequences, such as causing financial institutions to shrink their operations rather than risk litigation, hurting the very groups it is intended to help."

The Inclusive Communities Project (ICP) sued the Texas Department of Housing and Community Development over the siting of most Low Income Housing Tax Credit properties in predominately black communities in Texas. ICP is a Dallas-based nonprofit that assists low income people in finding affordable housing and that seeks racial and socioeconomic integration in Dallas housing. ICP won in District Court. Texas appealed to the U.S. Supreme Court.

At issue was whether the Fair Housing Act of 1968 bars both intentional discrimination and policies and practices that have a disparate impact, i.e., that do not have a stated intent to discriminate but that have the effect of discriminating against the Fair Housing Act’s protected classes of race, color, national origin, religion, sex, familial status, or disability. Section 804(a) of the Fair Housing Act makes it unlawful “[t]o refuse to sell or rent…, or otherwise make unavailable or deny, any dwelling to any person because of race, color, national origin, religion, sex, familial status, or handicap.”

Shortly after passage of the Fair Housing Act (Title VIII of the Civil Rights Act of 1968), all federal circuit courts that considered disparate impact unanimously upheld that violations of the Fair Housing Act can be established through a disparate impact standard of proof. By 1988 when the Fair Housing Act was amended to expand its scope, nine circuit courts of appeal had found the disparate impact standard necessary to enforce the law. Under the disparate impact standard, courts assess discriminatory effect and whether an action perpetuates segregation, whether the discrimination is justified, and whether less discriminatory alternatives exist for the challenged practice.

The Supreme Court decision discusses two other antidiscrimination statutes that preceded the Fair Housing Act. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination. It is unlawful for an employer “to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.” The 1971 Supreme Court case Griggs v. Duke Power Co. addressed disparate impact in employment, asserting that the disparate impact standard furthered the purpose of Title VII, and explaining “Congress proscribed not only overt discrimination but also practices that are fair in form, but discriminatory in operation.”

The other law is the Age Discrimination in Employment Act of 1967 (ADEA), which makes it unlawful to discriminate on the basis of age. That statute also uses the phrase, “or otherwise adversely affect.” The Supreme Court again upheld the concept of disparate impact in the 2005 case Smith v. City of Jackson. Referring to “or otherwise adversely affect” in both Title VII and ADEA, the Court observed that their texts “focus on the effects of the action on the employee rather than the motivation for the action of the employer and therefore compels recognition of disparate impact.”

Based on the precedent of these two cases, Justice Kennedy writes, “…antidiscrimination laws must be construed to encompass disparate impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose.”

The Court concludes that “or otherwise make unavailable” in the Fair Housing Act is “is equivalent in function and purpose” to “or otherwise adversely affect” in Title VII and ADEA. Justice Kennedy writes, “Congress’s use of the phrase ‘otherwise make unavailable’ refers to the conse­quences of an action rather than the actor’s intent.” The decision states that in all “three statutes the operative text looks to results,” and “this results-oriented language counsels in favor of recognizing disparate impact liability.”

The majority opinion also points to four actions that confirm Congress’s un­derstanding that disparate impact liability exists under the Fair Housing Act:

  • Congress passed the Fair Housing Act only four years after pass­ing Title VII and only four months after passing ADEA, all three with similar text and structure.
  • Congress passed the Fair Housing Act amendments of 1988 knowing that all nine Courts of Appeals that had addressed the question concluded the Fair Housing Act encompassed disparate impact claims.
  • The 1988 amendments included three exemptions to disparate impact that assume the existence of disparate impact claims under the Fair Housing Act as enacted in 1968.
  • Also in 1988, Congress rejected a proposed amendment that would have eliminated disparate impact liability for certain zoning decisions.

Another key aspect considered by the majority is that “recognition of disparate impact claims is consistent with the Fair Housing Act’s central purpose. The Fair Housing Act, like Title VII and the ADEA, was enacted to eradicate discriminatory practices within a sector of our Nation’s economy…These unlawful practices include zoning laws and other housing restrictions that function unfairly to exclude minorities from certain neighborhoods without any suffi­cient justification. Suits targeting such practices reside at the heartland of disparate impact liability.”

A benefit of disparate impact noted by the decision is that it “has allowed private developers to vindicate the Fair Housing Act’s objectives and to protect their prop­erty rights by stopping municipalities from enforcing arbitrary and, in practice, discriminatory ordinances barring the construction of certain types of housing units.”

A particularly striking sentence reads, “Recognition of disparate impact liability under the Fair Housing Act also plays a role in uncov­ering discriminatory intent: It permits plaintiffs to coun­teract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.”

The opinion does discuss limitations on disparate impact. Justice Kennedy writes, “disparate impact liability has always been properly limited in key respects that avoid the serious constitutional questions that might arise under the Fair Housing Act…for instance if such liability were imposed based solely a showing of statistical disparity.”

The Court states, “An important and appropriate means of ensuring that disparate-impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest served by their policies…Housing authorities and private developers [must] be allowed to maintain a policy if they can prove it is neces­sary to achieve a valid interest.” NLIHC notes that HUD’s disparate impact regulations allow just that (see Memo, 2/8/13).

The decision continues, “The Fair Housing Act…does not put housing authorities and private developers 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,” nor does it “…impugn hous­ing authorities’ race-neutral efforts to encourage revitali­zation of communities that have long suffered the harsh consequences of segregated housing patterns.”

Justice Kennedy declares, “A disparate impact claim that relies on a statistical disparity must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity.” He asserts that a causality requirement is essential to protect defend­ants from liability for racial disparities they did not create. The decision seeks to prevent the use of numerical quotas.

Seemingly setting a standard for lower courts, the decision states, “A plaintiff who fails to allege facts at the pleading stage or produce statistical evidence demonstrating a causal con­nection cannot make out a prima facie case of disparate impact.” Citing the Griggs decision the Court declares, “Governmental or private policies are not contrary to the disparate impact requirement unless they are artificial, arbitrary, and unnecessary barriers.”

Providing additional direction to lower courts, the opinion states, “…even when courts do find liability under a disparate impact theory, their remedial orders must be consistent with the Constitution.” Courts “should strive to design them [remedies] to eliminate racial disparities through race-neutral means.”

Concluding the majority opinion, Justice Kennedy writes:

“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 ‘[o]ur 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 Supreme Court decision is easy for non-lawyers to read and understand. There is a four-page summary followed by Justice Kennedy’s 22-page opinion. The remaining 47 pages are two dissenting opinions. The decision is at http://www.supremecourt.gov/opinions/14pdf/13-1371_m64o.pdf

Top Articles
Latest Posts
Article information

Author: Domingo Moore

Last Updated: 11/23/2022

Views: 6513

Rating: 4.2 / 5 (73 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Domingo Moore

Birthday: 1997-05-20

Address: 6485 Kohler Route, Antonioton, VT 77375-0299

Phone: +3213869077934

Job: Sales Analyst

Hobby: Kayaking, Roller skating, Cabaret, Rugby, Homebrewing, Creative writing, amateur radio

Introduction: My name is Domingo Moore, I am a attractive, gorgeous, funny, jolly, spotless, nice, fantastic person who loves writing and wants to share my knowledge and understanding with you.