Supreme Court Upholds Disparate Impact Standard for Violations of the Fair Housing Act

WASHINGTON, D.C. – June 26, 2015 – (RealEstateRama) — In a 5-4 decision, the Supreme Court today issued its opinion ruling that disparate impact claims may be used to support plaintiffs’ claims of alleged Fair Housing Act (FHA) violations. Justice Kennedy wrote the Court’s opinion, joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan in the case of the Texas Department of Housing and Community Affairs (DHCA) v. Inclusive Communities Project, Inc. The decision remands the case to the Fifth Circuit Court of Appeals for further proceedings consistent with the Supreme Court’s opinion.

The plaintiff in the case, The Inclusive Communities Project, claimed that Texas DHCA had caused continued segregated housing patterns by allocating a disproportionate amount of the state’s Housing Credits to developments in predominantly black inner-city areas.

The opinion noted limits to disparate impact liability for affordable housing purposes, stating “Here, the underlying dispute involves a novel theory of liability that may, on remand, be seen simply as an attempt to second-guess which of two reasonable approaches a housing authority should follow in allocating tax credits for low-income housing. An important and appropriate means of ensuring that disparate impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest their policies serve… It would be paradoxical to construe the FHA to impose onerous costs on actors who encourage revitalizing dilapidated housing in the Nation’s cities merely because some other priority might seem preferable.”

The Court’s opinion is consistent with decisions made by eleven Courts of Appeals, which concluded that the FHA encompasses disparate impact claims. In a statement, HUD Secretary Castro said, “The Supreme Court has made it clear that HUD can continue to use this critical tool to eliminate the unfair barriers that have deferred and derailed too many dreams.”

NCSHA will continue to analyze the Court’s opinion and work with HUD and other interested stakeholders to assess the impact of the Court’s decision on a variety of affordable housing programs.