Disparate Impact Survives—Court Outlines Limitations on Liability

On June 25, 2015, the US Supreme Court issued a decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, holding that disparate-impact claims are cognizable under the Fair Housing Act (FHA).1 The Court's recognition of disparate-impact claims is in line with the 11 circuit courts that have considered the issue. While recognizing disparate-impact claims, the Court's opinion notes that "disparate-impact liability has always been properly limited in key respects" and discusses limitations that provide key defenses for those facing potential disparate-impact liability.

Background

The petitioner, the Texas Department of Housing and Community Affairs (the Department), was sued by The Inclusive Communities Project (Inclusive Communities), a nonprofit organization that assists lower income families, which are disproportionately minority, with finding affordable rental housing. Inclusive Communities alleged that the Department disproportionately allocated tax credits to developments in predominantly minority areas, as opposed to those with majority Caucasian residents. Because the landlords would then be required to accept housing vouchers for properties built with tax credits, and vouchers were used predominantly by minority members, the practice had the effect of concentrating minority residents in those communities. Inclusive Communities alleged that this practice was a form of disparate-impact discrimination prohibited by the FHA.

The district court ruled for Inclusive Communities and, in so doing, held that disparate-impact claims were cognizable under the FHA. The Department appealed. While the appeal was pending, the US Department of Housing and Urban Development (HUD) issued a regulation interpreting the FHA to permit disparate-impact claims. On appeal, the Fifth Circuit held that disparate impact was cognizable under the FHA, adopting HUD's test, but on the merits reversed and remanded the case. Before the district court could consider the matter on remand, the Department petitioned the US Supreme Court on the question of disparate-impact liability under the FHA. The Court granted certiorari on the question of first impression of whether disparate-impact claims are cognizable under the statutory text of the FHA.

The FHA prohibits individuals and entities from, among other things, refusing "to sell or rent . . . [or] to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race."2 Relying on the Court's prior interpretations of Title VII of the Civil Rights Act of 1964...