SCOTUS Okays Lawsuits For Accidental Housing Discrimination

Blake Neff Reporter
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The Supreme Court issued a decision Wednesday upholding an expansive vision of the Fair Housing Act (FHA) ruling that any housing policy that has a disproportionate impact on minorities can be targeted in a lawsuit. The ruling could have the side effect of forcing the state to locate more Section 8 housing in high-income suburbs.

FHA, passed in 1968, clearly prohibits overt discrimination in housing (such as refusing to sell to blacks), but Wednesday’s case, Texas Department of Housing and Community Affiars v. The Inclusive Communities Project, concerned the broader concept known as “disparate impact” that is not explicitly a part of the law.

Under disparate impact, a policy can be held as discriminatory if it disproportionately affects a particular group, even if that effect is unintentional. Once that disproportionate effect is shown, the burden shifts to the defendant to demonstrate its policy is necessary and not discriminatory.

Disparate impact claims have been a key part of the Obama administration’s strategy to fight residential segregation in the courts, and now that strategy has been affirmed by the Court in a 5-4 opinion authored by swing justice Anthony Kennedy.

In the Texas case, officials were accused of allocating tax credits in a manner that caused Section 8 housing to be concentrated in low-income areas with high rates of crime and drug use. The Inclusive Communities Project sued, claiming state policies were maintaining residential segregation between whites and minorities. The group argued that more Section 8 needs to be built in wealthier suburbs with higher white populations.

Kennedy, joined by Justices Stephen Breyer, Sonia Sotomayor, Elena Kagan, and Ruth Bader Ginsburg, said a broad interpretation of the Fair Housing Act was critical to achieving greater diversity in American communities.

“The Court acknowledges the Fair Housing Act’s continuing role in moving the nation toward a more integrated society,” he wrote in the opinion. Kennedy also ruled that Congress must have considered disparate impact to be a part of the law when it was passed, because various amendments it made in 1988 would only make sense if that was the case.

The ruling could have the side effect of making many rules designed to improve housing quality illegal. For instance, several years ago in the case of Magner v. Gallagher, St. Paul, Minnesota was found to have created a disparate impact through its aggressive enforcement of city codes designed to prevent rat infestations. Because these provisions increased rent, and higher rents disproportionately affected minorities, the city was sued. That case settled before reaching the Supreme Court, but Kennedy’s ruling suggests the plaintiffs should have won, a specter that was raised by Justice Samuel Alito in his dissent.

“Something has gone badly awry when a city can’t even make slumlords kill rats without fear of a lawsuit,” Alito wrote.

Alito also warned that the majority opinion will invite a torrent of costly litigation against cities that are simply trying to help the poor.

“[In this case,] one respondent has sued the Department for not allocating enough credits to higher income areas,” he wrote. “But another respondent argues that giving credits to wealthy neighborhoods violates “the moral imperative to improve the substandard and inadequate affordable housing in many of our inner cities’ … no matter what the Department decides, one of these respondents will be able to bring a disparate-impact case.”

Whether Alito’s dire prediction comes true will depend in large part on how the decision is interpreted by lower courts. Kennedy’s decision does not that mere statistics are not enough to prove a disparate impact claim, and that plaintiffs must also show that a policy is “arbitrary” and does not further an important interest of the renter or the government. Even the Texas case before the Court remains unresolved, as it was remanded back to a lower court to make a final decision.

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Blake Neff