A closely divided Supreme Court on Thursday allowed housing bias lawsuits based on unintentional actions that happen to have a discriminatory effect on racial minorities.
In a defeat for the Texas Department of Housing and Community Affairs, and for conservatives more generally, the court by a 5-4 vote concluded that so-called “disparate impact” discrimination lawsuits are authorized under the federal Fair Housing Act.
“Recognition of disparate-impact claims is consistent with the FHA’s central purpose,” Justice Anthony Kennedy wrote, adding that “the FHA “provides a clear national policy against discrimination in housing.”
A “disparate impact” arises when a practice produces different effects across racial groups, even if the practice wasn’t racially motivated. For instance, if a mortgage lender establishes borrowing standards based on income and net worth, and some racial groups are less likely than others to qualify for loans under those standards, this could result in a disparate impact.
Underscoring the case’s significance, cities including Miami; Chapel Hill, N.C., and Columbia, S.C., had filed a brief supporting the disparate-impact lawsuits. Seventeen states including California, Washington and Missouri had likewise weighed in to support the lawsuits.
From the opposing side, groups including the Texas Apartment Association and the National Association of Home Builders had urged the court to limit legal exposure. They had hoped to win over Kennedy, who is often a key swing vote.
But joined by the court’s four liberal justices, Kennedy reasoned that allowing disparate-impact lawsuits can help in “uncovering discriminatory intent” as well as help “counteract unconscious prejudices and disguised animus.”
“Much progress remains to be made in our nation’s continuing struggle against racial isolation,” Kennedy wrote, adding that the decision Thursday “acknowledges the Fair Housing Act’s continuing role in moving the nation toward a more integrated society.”
The four conservative dissenters warned Thursday that the ruling “will have unfortunate consequences for local government, private enterprise, and those living in poverty.”
“Something has gone badly awry when a city can’t even make slumlords kill rats without fear of a lawsuit,” Justice Samuel Alito Jr. wrote in the dissent, joined by Chief Justice John Roberts Jr., Clarence Thomas and Antonin Scalia.
Amid the urban turmoil of the 1960s, with racial segregation still rampant, Congress passed the Fair Housing Act in 1968. The law makes it illegal, among other things, to discriminate in “residential real-estate related transactions” against any person on the basis of “race, color, religion, sex, familial status, or national origin.”
The Fair Housing Act does not explicitly identify disparate impact as a measurement of discrimination, forcing the high court to delve into the law’s meaning.
The Texas Department of Housing and Community Affairs administers the Low Income Housing Texas Credit program. The federal tax credits are provided to developers to encourage the production of affordable rental housing.
The Texas program was challenged by The Inclusive Communities Project Inc., a nonprofit that says it “seeks racial and socioeconomic integration in Dallas housing.”
The challengers noted that the Texas housing department assigned 92.9 percent of its tax-credit units in Dallas to minority census tracts. The challengers successfully argued this amounted to the same impact achieved by intentional discrimination, even if the housing officials didn’t intend to discriminate.
“This ruling recognizes the stark reality that housing discrimination, regardless of intent, persists for many Americans,” Dennis Parker, director of the American Civil Liberties Union’s Racial Justice Program, said in a statement.
Tim Irvine, executive director Texas Department of Housing and Community Affairs, said in a statement, “We are fully prepared to return to the trial court to make our case that there has, in fact, been no actionable disparate impact discrimination."
He called the Fair Housing Act an “important tool in rooting out pernicious forms of racial segregation and discrimination.”
Attorney General Loretta Lynch said the decision bolstered her department’s ability to use the Fair Housing Act, “including challenges based on unfair and unacceptable discriminatory effects.”
At the same time, Kennedy sought to narrow disparate-impact liability by stressing that “housing authorities and private developers (have) leeway to state and explain the valid interest served by their policies.” The justice further cautioned that a mere “statistical disparity” is not enough for a lawsuit if “the plaintiff cannot point to a defendant’s policy or policies causing that disparity.”
Conservative attorney Roger Clegg of the Center for Equal Opportunity called the decision disappointing.
“The only silver lining is that Justice Kennedy’s opinion itself recognizes this problem, and some of the language toward the end will be useful in stemming the worst abuses,” Clegg said.
The highly anticipated decision marked the third time the Supreme Court had faced a Fair Housing Act disparate-impact challenge in recent years. The two prior cases, arising out of Minnesota and New Jersey, were settled before the conservative-dominated court could weigh in.
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