U.S. Supreme Court Upholds 'Disparate Impact' Theory In Housing

In Texas Department of Housing and Community Affairs v. Inclusive Communities, 2015 U.S. LEXIS 4249 (S. Ct. June 25, 2015), the U.S. Supreme Court upheld the use of the "disparate impact" theory in proving housing discrimination under the federal Fair Housing Act. That theory had been recognized by the vast majority of the circuit courts, including the U.S. Court of Appeals for the Second Circuit starting with its decision in Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d Cir. 1988).

Even though the decision in Inclusive Communities did not directly change the law in the Second Circuit or the other circuits that had recognized the "disparate impact" theory, the Supreme Court decision is significant because it did lay down guidelines for what the court would deem to be a proper use of the "disparate impact" theory. The Supreme Court also expounded on the purpose and strength of the federal Fair Housing Act with language that will likely see its way into briefs and future lower court decisions, even in cases that do not involve the "disparate impact" theory.

The "disparate impact" theory allows a person to bring a housing discrimination action under the Fair Housing Act without proving intentional discrimination. To establish a case under the "disparate impact" theory, a person must demonstrate the occurrence of outwardly neutral practices and policies and that those practices have a significantly adverse or disproportionate impact on persons of a particular protected class because of their membership in that class. For example, as was found by the Eastern District of New York in MHANY Management v. Incorporated Village of Garden City, 985 F.Supp.2d 390 (E.D.N.Y. 2013), a municipality's change of zoning in a district to eliminate the potential for affordable rental multifamily units had a "disparate impact" on minorities.

As the Supreme Court noted in Inclusive Communities, a "disparate impact" claim cannot be sustained solely on a statistical disparity if a plaintiff cannot demonstrate that a particular policy caused that disparity. Moreover, as the Supreme Court suggested and as was held by the Second Circuit in Regional Economic Community Action Program v. City of Middletown, 294 F.3d 35 (2d Cir. 2002), the "disparate impact" theory can only be used to challenge general policies and practices and not individual decisions of municipalities.

Dispute Over State Policy

Inclusive Communities stems from a dispute over a policy of a Texas state agency that disproportionately awarded low-income housing tax credits to entities developing housing in predominantly black inner city areas instead of in suburban communities. The Inclusive Communities plaintiffs argued that that policy constituted discrimination...