The U.S. Supreme Court determines that Disparate Impact Claims are Valid Under the Fair Housing Act

The Inclusive Communities Project, Inc., a Texas based non-profit organization, originally filed an action in the United States District Court, Northern District of Texas, under Sections 804(a) and 805(a) of the Fair Housing Act (“FHA”) alleging that the Texas Department of Housing and Community Affairs’ allocation of tax credits in black neighborhoods had a disparate impact which continued and reinforced segregated housing patterns in Texas. In other words, the policy failed to sufficiently encourage the building of low income housing in more affluent and predominately white neighborhoods. The Supreme Court held, like every circuit court in the country, that disparate impact claims are cognizable under the FHA. While the Court’s decision is a clear victory for fair housing rights advocates, the Court’s decision may also limit or restrict future FHA disparate impact claims.

Disparate impact or adverse impact claims are claims in which a plaintiff alleges that a facially neutral policy or practice disproportionately impacts a specific protected class. Disparate impact claims differ from disparate treatment claims which require a plaintiff to establish that the actor had a discriminatory intent or motive. There is no doubt that FHA disparate impact claims have been a significant and necessary tool to combat racial segregation in housing. Accordingly, the Court recognized that disparate impact claims furthers the purpose of the FHA.

The majority of the Court’s decision was based mainly upon three main arguments. First, disparate impact claims are cognizable under the parallel federal statute of Title VII of the Civil Rights Act of 1964 (“Title VII) and the Age Discrimination in Employment Act (“ADEA”). Second, Congress specifically failed to bar disparate impact claims under the FHA when the FHA was amended in 1988. Finally, the Court relied on prior precedent. Specifically, that all nine appellate courts in the United States have held, prior to the Supreme Court’s decision, that disparate impact claims are valid under the FHA.

However, while the Court specifically approved the use of disparate impact claims under the FHA, the Court limited its application to ensure that disparate impact liability was directed to the “removal of artificial, arbitrary, and unnecessary barriers.” The Court limited its application in two main ways. Specifically, the Court stated that Plaintiffs cannot rely on statistical disparate alone and must put forth evidence that the policy or practice actually caused a disparate impact. Further, a defendant subject to the FHA cannot be found liable for violating the FHA if they can bring sufficient evidence to prove that the policy or practice was necessary to achieve valid goals.

It will now be up to the lower courts to interpret and apply the Court’s limitations on FHA disparate impact claims. This is especially true considering that the Court’s decision appears to be in conflict with the Department of Housing and Development’s (HUD) regulations on disparate impact. Further, it is unclear if the Court’s limits placed upon disparate impact claims under the FHA will affect employment disparate impact claims under Title VII, the ADEA, or state equivalent statutes such as the Pennsylvania Human Relations Act (“PHRA”).

If you have any questions or would like more information on housing and employment related disparate impact claims, please contact Willig, Williams & Davidson’s Ryan Allen Hancock at 215-656-3679 or rhancock@wwdlaw.com.