In a case closely watched by many in the housing and civil rights communities, the U.S. Supreme Court yesterday validated a tool that the federal government and housing advocates have used for the past 40 years in an effort to combat housing discrimination. In a 5-4 decision that surprised many of us (including me) who follow the Fair Housing Act (FHA) and related issues, the Court concluded that “disparate impact” claims are cognizable under the FHA, even though the words “disparate impact” do not appear anywhere in the statute.
What made the ruling surprising is that this is the third time in five years that the Supreme Court had accepted a case to answer the question. The first two cases (one from Minnesota and one from New Jersey) both settled shortly before oral argument. It was perceived by many (including me) that those cases settled because neither the Administration nor civil rights groups wanted the current nine justices to opine on this issue of law. I suspected the Court would not try to answer the question three times in five years if it was going to keep the law as is. Nevertheless, the Supreme Court decision provides that federal fair housing law permits individuals to challenge lending rules, zoning laws and other housing practices that have a disparate (legalese for “harmful”) impact on protected classes (legalese for “minority groups”), even if there is no proof that the property owner or bank intended to discriminate.
Now, the ruling is a win for the Obama Administration and fair housing advocates who argued that the FHA encompasses challenges to race-neutral policies that have negative effects on minorities. Although the decision essentially validates current practice, it is a step back for banks, property owners, and insurance companies who believed such claims – which are based solely on statistical evidence – were not explicitly permitted under the FHA. In upholding the tactic, the justices let stand a legal strategy that has been used for decades to challenge discrimination in housing, zoning, occupancy standards, mortgage lending, and insurance underwriting. Importantly, as I believe every federal appeals court to consider disparate impact had upheld the practice, this ruling will not mean any change in current law, although the practice certainly has received more publicity in the media as the challenges have wound though the various courts.
In the case decided yesterday, the fair housing group argued that even if there were no motive to discriminate, the Texas policy still unfairly hurt African American residents. Specifically, it was contended that the effect of the policy was to perpetuate segregated neighborhoods and to deny African Americans a fair chance to relocate into areas with better schools and lower crime. Texas argued that it was simply unfair to have to justify or change policies that don’t intentionally discriminate and, in fact, would mandate that they start making race conscious decisions to avoid liability.
In his majority opinion, Justice Anthony Kennedy concluded that language in the FHA prohibiting discrimination “because of race” permits the disparate impact cases. He wrote that these challenges “may prevent segregated housing patterns that might otherwise result from covert and illicit stereotyping.” In his dissent, Justice Samuel Alito warned that the tactic can result in unwanted outcomes, noting a case from Minnesota in which a landlord used the law to sue city officials who forced him to combat rat infestation and unsanitary conditions in low income housing.
So, does this decide the issue once and for all? Perhaps. But, perhaps not.
Earlier this month the U.S. House of Representatives adopted an amendment to one of the fiscal year 2016 federal appropriations bills by a 232-196 vote. The amendment would prohibit the Department of Justice from using funds to prosecute and obtain settlements from lenders, landlords, and insurers in discrimination cases based on the disparate impact theory. Now, it is too soon to know if this amendment will survive the balance of the legislative process, but I will keep a watchful eye to see if “disparate impact” survives yet again.
So, what was my prediction as to the outcome of this case? I had it 5-4 the other way. Yet another reminder that it is close to impossible to predict with certainty what a court is going to do.
Just A Thought.