The U.S. Supreme Court ruled on Thursday by a 5-4 vote in the case of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. that disparate impact claims can legally be brought about under the Fair Housing Act of 1968.
Justice Anthony Kennedy, who often has the swing vote in Supreme Court cases that are divided between the Court’s four liberal and four conservative justices, wrote the court’s opinion on behalf of the majority. Justices Ginsburg, Breyer, Sotomayor, and Kagan joined in the majority opinion of the court. Justices Alito, Roberts, Scalia, and Thomas filed dissenting opinions. To read the complete opinion of the Court, click here.
While the Court ruled that disparate impact claims are cognizable under the Fair Housing Act, that ruling came with a caveat.
“So the Court holds that there is a disparate impact claim under the FHA as a matter of statutory interpretation, but the Court cautions that remedial orders in disparate impact cases that impose racial targets or quotas could be unconstitutional,” Attorney Kevin Russell said on the SCOTUS blog. “. . .The Court emphasizes, however, that disparate impact liability should be impose cautiously. To avoid constitutional problems, statistical disparity is not enough.”
HUD Secretary Julián Castro praised the Supreme Court’s decision via Twitter on Thursday morning, tweeting that “Today’s SCOTUS opinion upholding disparate impact analysis under Fair Housing Act is a strong victory for equal opportunity in our country.” Castro issued an official statement on Thursday saying, “Today is another important step in the long march toward fulfilling one of our nation’s founding ideals: equal opportunity for all Americans. 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.”
The Office of the White House Press Secretary issued the following statement: “Too many Americans are victims of more subtle forms of discrimination, such as predatory lending, exclusionary zoning, and development policies that limit affordable housing. This decision reflects the reality that discrimination often operates not just out in the open, but in more hidden forms. And, it preserves a longstanding and important method for challenging and eliminating those practices and continuing the work to end discrimination in housing.”
Congresswoman Maxine Waters (D-California), Ranking Member on the House Financial Services Committee, stated on the SCOTUS ruling: “I’m pleased that in their decision, the justices recognized the importance of disparate impact liability in uncovering discriminatory intent, and noted that appropriate safeguards in the use of disparate impact already exist, such as requiring plaintiffs to demonstrate causality between the defendant’s practices and its adverse effects. The disparate impact standard is absolutely essential to providing for fair housing throughout our nation. Its decades-long use to weed out discriminatory practices that create barriers to housing is critically important for minority individuals and communities. But our work is not finished. In Congress, we must continue to fight strongly to protect disparate impact, as Republicans have consistently sought to undermine law enforcement’s ability to combat discrimination in our housing and lending markets.”
Senator Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, said: “Today’s decision is a major victory for civil rights and equal opportunity in America. As recent events have shown, our country continues to struggle with a legacy of racial injustice and inequality. The court’s ruling preserves one of the most important tools we have to fight discrimination and ensure that all Americans have fair access to housing and economic opportunity. We need to continue efforts to combat discriminatory practices, not just in housing but in all consumer financial markets.”
Not all lawmakers were thrilled with the Supreme Court’s ruling, however.
“America is based on equal opportunity, not equal results,” said Jeb Hensarling (R-Texas), Chairman of the House Committee on Financial Services. “The dubious legal theory of disparate impact and the Supreme Court’s ruling pervert this founding principle. Discrimination in housing and lending on the basis of race, sex, or other prohibited factors is morally repugnant and against the law. Our government must continue to combat discrimination in housing and lending and punish those responsible. Inventing discrimination through a disparate impact theory, however, is not a helpful tool in fighting actual discrimination.
“The Supreme Court’s extension of disparate impact theory to the Fair Housing Act will hurt precisely those minority groups that our federal civil rights statutes set out to protect. In fact, disparate impact will have predictable, negative consequences for all Americans who will experience a less competitive and more expensive market for housing and credit—all without providing any meaningful support for the fight against actual discrimination.”
The disparate impact issue has become a heated one in housing in the last few years, especially since the Obama Administration passed a rule allowing disparate impact claims – which are allegations made based on neutral practices that may have a discriminatory effect – under the Fair Housing Act in February 2013.
The Texas Department of Housing and Community Affairs v. Inclusive Communities Project Case centers on allegations that low-income tax credits were awarded to real estate developers who own property in low-income minority dominated neighborhoods and denied to developers who own property in predominantly white neighborhoods. A district court originally ruled that the manner in which the Texas Department of Housing allocated the tax credits, though neutral, had a disparate impact on the basis of race. In March 2014, the Fifth Circuit Court of Appeals upheld the district court’s ruling. The Supreme Court heard arguments for the case back in January.
“The judgment of the Court of Appeals for the Fifth Circuit is affirmed, and the case is remanded for further proceedings consistent with this opinion,” Kennedy wrote in Thursday’s opinion.
U.S. District Judge Richard Leon struck down the rule in November 2014, saying that only claims of intentional discrimination could be made under the Fair Housing Act. At the time of his ruling, Leon said the belief of those in the Administration who interpret the Fair Housing Act to allow disparate impact claims “appears to be nothing more than wishful thinking on steroids.”
The issue as to whether disparate impact claims are allowed under the Fair Housing Act was previously slated to go before the U.S. Supreme Court twice, but both cases settled before it reached that point.
In early June, the House of Representatives passed the Fiscal Year 2016 Commerce, Justice, and Science Appropriations Act, which included an amendment added by Scott Garrett (R-New Jersey) that prohibited the Department of Justice from funding disparate impact claims.