Supreme Court Issues Decision in Texas Department of Housing v. Inclusive Communities, Inc.

On Thursday, June 25, the Supreme Court of the United States issued its opinion in Texas Department of Housing v. Inclusive Communities, Inc., in which the Court held (5-to-4) that disparate-impact claims are cognizable under the Fair Housing Act (FHA).  A decision on this issue was a long time coming, as the Court in two previous terms granted certiorari for two cases involving disparate-impact claims and the FHA.  However, before either case (Magner v. Gallagher and Mount Holly v. Mount Holly Gardens Citizens in Action) was decided, the parties to those disputes settled, and so Texas Housing v. Inclusive Communities was the first time the Court was able to address the issue of disparate impact and the FHA.

It is established law that the FHA prohibits housing intentional discrimination by a landlord, developer, or government agency.  So called “disparate treatment” claims require that plaintiffs establish that defendants intentionally discriminated against members of a protected category, such as race.  However, the confusion, and claim in Texas Dept. of Housing v. Inclusive Communities, is centered on the unanswered question of whether the FHA also prohibited disparate impact.   A plaintiff bringing a disparate impact claim does not argue, or even allege, that the defendant intended to discriminate; instead, the plaintiff claims that that a defendant’s practices or policies have a discriminatory effect.[i]    A plaintiff can prevail under a disparate impact claim even if the defendant establishes that the policy was nondiscriminatory in its intent, unless it can establish that the policy is justified by necessity.[ii]

The Inclusive Communities Project, Inc. (Inclusive Communities) is a non-profit organization in Dallas, Texas that seeks, to among other goals, redress policies that perpetuate discrimination and segregation and expand affordable housing opportunities for low income families.  Inclusive Communities provides rental assistance vouchers to low-income African American families, which in turn use the vouchers to subsidize the their rental.  Private landlords who receive federal Low Income Housing Tax Credits, through state agencies such as the Texas Department of Housing and Community Affairs (TDHCA), are required to accept the vouchers.  The state agencies have discretion in allocating the tax vouchers, and so are able to impact the housing options available to voucher recipients.

Inclusive Communities filed suit against TDHCA, alleging that TDHCA allocated too many tax credits to landlords in primarily black, inner-city neighborhoods, and too few to primarily white, suburban neighborhoods, thus causing continued segregation in housing.  Claiming that TDHCA’s policies had a disparate-impact, Inclusive Communities argued that TDHCA’s practices had a “’disproportionately adverse effect on minorities’ and [were] otherwise unjustified by a legitimate rational.’”

The FHA makes it unlawful to “refuse to sell or rent . . . or otherwise make unavailable or deny, a dwelling to a person because of race, . . . or to discriminate against any person in” the course of real estate transactions.  Looking at language from other civil rights legislation, the Majority of the Court rejected TDHCA’s argument that the phrase “because of race” means that “race is a reason for the action,” thus permitting only disparate treatment claims.  Instead, the Court interpreted the phrase “or otherwise make unavailable” to mean “the consequences of [the actor’s] actions,” shifting “emphasis from an actor’s intent” to the actual affect of the conduct, and allowing disparate impact claims.

However, just because Inclusive Communities prevailed in its claim that disparate-impact claims are cognizable under the FHA does not mean that they will prevail on the overall case.  The Majority cautioned that for a plaintiff to win on a disparate-impact claim, it cannot rely on a statistically disparity alone.  Rather, Inclusive Communities must also establish that TDHCA’s tax credit policy is causing the statistical disparity.  The Court emphasized the importance of the causality requirement as a means to ensure that “defendants do not resort to the use of racial quotas.”

Civil rights groups have long argued that the FHA should and does recognize disparate impact claims.  Although overt racial discrimination has receded from the housing market, disparate impact claims have been viewed by these groups as “vital to dismantling policies and practices that sound like they have little to do with race at all,” but have the effect of perpetuating segregation by concentrating affordable housing in low-income neighborhoods. [iii]

Groups the other side of the debate have argued that disparate-impact claims “unfairly impugn the motives of banks, communities and developers who never intended to discriminate.”[iv]  Justice Alito’s dissent echoed these concerns, stating that the holding “puts housing authorities in a very difficult position because programs that are designed and implemented to help the poor can provide the grounds for a disparate-impact claim.”[v]  The American Bankers Association similarly expressed in a statement that “[t]his 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.” [vi]

[i] Amy Howe, Disparate-impact claims survive challenge: In Plain English, (June 25, 2015)

[ii] Roger Clegg, Symposium: The Fair Housing Act doesn’t recognize disparate-impact causes of action, (Jan. 7, 2015)

[iii] Emily Badger, Supreme Court upholds a key tool fighting discrimination in the housing market, (June 25, 2015)

[iv] Emily Badger, Supreme Court upholds a key tool fighting discrimination in the housing market, (June 25, 2015)

[v] Greg Stohr & David McLaughlin, Supreme Court Backs Housing Discrimination Lawsuits, (June 25, 2015)

[vi] Frank Keating, ABA Statement on Supreme Court Decision on Use of Disparate Impact Under the Fair Housing Act, (June 25, 2015)


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