U.S. Supreme Court Upholds Disparate Impact Claims Under the Fair Housing Act

Members | November 14, 2013

In a recent 5-4 decision, the U.S. Supreme Court held that disparate impact claims are cognizable under the Fair Housing Act (FHA). The Court, however, placed limitations on its application in practice that may give some comfort to wary providers.

In a recent 5-4 decision, the U.S. Supreme Court held that disparate impact claims are cognizable under the Fair Housing Act (FHA).  

The court, however, placed limitations on its application in practice that may give some comfort to wary providers.

Under a disparate impact theory, litigants can bring claims alleging discrimination based on evidence that a practice produces a disproportionate impact on a protected class without having to prove intentional discrimination.

Disparate Impact: A Question that Has (At Least) a Bit More Clarity

In the framework for analyzing these claims the court held that a statistical disparity is not enough. The court emphasized the plaintiff must establish a “robust causality” between the challenged practice and the alleged disparities before the burden shifts to the defendant.  

The court noted that defendants should not be responsible for disparities that its policies did not create.  

A defendant maintains a “business necessity” defense, whereby a policy is not discriminatory unless it is an “artificial, arbitrary, and unnecessary” barrier.  

Finally, the Court noted that if discrimination is found under a disparate impact theory, the remedial orders must concentrate on eliminating the offending practice or policy through "race-neutral means," suggesting that such cases not be subject to punitive penalties.  

The full impact of the case, Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc., will be felt once lower courts apply the framework the court outlined in the decision, which could take years to evolve. 

This case was remanded to the district court for further review according to the guidelines expressed by the court.

For additional information on disparate impact, see the U.S. Department of Housing and Urban Development (HUD) final rule published in 2013 that formalized a 3-part burden-shifting test for determining when policies or practices resulting in a discriminatory effect violate the Fair Housing Act.   

Disparate Impact: A Background 

Prior to Supreme Court action, disparate impact raised a number of questions that we thought might never be answered.

In November 2013, the U.S. Supreme Court agreed to take on a case to resolve a fundamental question about the Fair Housing Act that it has never answered: 

Can you be found guilty of racial discrimination if you have not engaged in racial discrimination?

This highly anticipated case was brought by the southern New Jersey town of Mt. Holly. And, a few month prior to that, the U.S. Department of Housing and Urban Development (HUD) had issued a final rule on disparate impact analysis that scrutinizes rules and practices that, while neutral on their face, have a harsher impact on members of a class of people protected under the Fair Housing Act.

Then, just a couple weeks before the U.S. Supreme Court was to hear arguments on this question (December 4), members of Congress announced plans to conduct a hearing on disparate impact theory (November 19), and news came (November 13) that plaintiffs had settled their case.

A number of housing groups argued that the Fair Housing Act did not contemplate disparate impact. With a history of cases being settled out of court, it certainly puts housing providers in a tight spot.  

Some contended this was no change from how fair housing requirements have been applied in the past. 

In the light of the recently remanded ruling, LeadingAge members would do well to continue to pay close attention to future treatment of the issue, to evaluate their policies for any unintentional impacts that may result from various policies or procedures and to ensure that business requirements behind the policies can be articulated.