Disparate Impact upheld by Supreme Court


June 26, 2015

"Bolstered by this important ruling, the Department of Justice will continue to vigorously enforce the Fair Housing Act with every tool at its disposal -- including challenges based on unfair and unacceptable discriminatory effects," -- Attorney General Loretta Lynch 

After two high profile cases that were headed to the Supreme Court were settled, only one major case remained for the Justices in the highest court in the land to decide if disparate impact the case of the Texas Department of Housing and Community Affairs v. The Inclusive Communities Project remained as the only test for the court to decide. 

In the case, which began back in 2008 and has been working its way through the courts since, the non-profit Inclusive Communities Project sued the state agency that is charged with the allocation of tax credits to developers of low-income housing projects saying that the credits were disproportionately allocated to properties in minority populated areas. Lower courts agreed and other courts have allowed similar claims to move forward.

Why this Matters

When considering disparate impact under Fair Housing laws plaintiffs can sue organizations under the Fair Housing Act of 1968 by alleging that their housing practices disproportionately impact minorities, even in the absence of proof of intentional discrimination.  Suits using statistics or other evidence that a policy directly caused a disparate impact may continue to move forward, and remedial orders in disparate impact cases that impose racial targets or quotas could be unconstitutional.   The court held that “disparate impact doesn't mandate that affordable housing be located in neighborhoods with any particular characteristic”.

Organizations in the industry including the Mortgage Bankers Association and American Bankers Association opposed the use of the doctrine of "disparate impact" saying it hamstrings lenders and financial companies that have race-neutral policies, but which have results that don't fit demographic distributions.

So the outcome of the case is this: When deciding on who receives assistance the outcome of the assistance is as much a factor as the assistance itself.

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