The U.S. Supreme Court held the Texas Department of Housing and Community Affairs liable for improperly allocating low-income housing tax credits to communities already heavily populated by minorities, citing unintentional discrimination through disparate impact.
The 5-4 decision made on June 25 upholds the disparate impact, a legal theory that holds persons accountable under the Fair Housing Act — whether or not they intended to discriminate.
This ruling sets a precedent for the act to protect against not only intentional discrimination but also practices that may have an unjust impact on the lives of minorities.
“Today is another important step in the long march toward fulfilling one of our nation’s founding ideals: equal opportunity for all Americans,” said U.S. Department of Housing and Urban Development (HUD) Secretary Julián Castro, in a statement.
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“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. Working with our partners on the ground, we will continue to do all we can to build a housing market that treats all Americans with basic dignity and respect.”
The four-day bench trial initially dismissed the equal protection and Section 1982 claims that the Inclusive Communities Project (ICP) made against the Texas housing agency based on the lack of intentional discrimination.
Courts assess any potential discriminatory effect on a community based on whether an action perpetuates segregation.
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The district court ordered the Texas housing agency to comply with the policies set forth by the Fair Housing Act. Although the act was passed in 1968, it wasn’t until 1988 that the disparate impact standard was included as a part of the scope, with nine circuit courts of appeal finding it to be necessary.
Developers, lenders and insurers were hoping for a ruling in favor of Texas because of the challenge it brings to overseeing future housing and business practices to ensure they are properly avoiding discriminatory potential.
Advocate groups are, however, confident that disparate impact has been used for the past 25 years to give everyone accessibility to secure housing, regardless of race, gender, disability level or other protected-class status.
“The nation’s homebuilders stand ready to develop and build safe and decent housing in all communities across the country,” National Association of Home Builders Chairman Tom Woods said in a statement.
“However, as the court stated, the Fair Housing Act cannot put ‘private developers in a double bind of liability, subject to suit whether they choose to rejuvenate a city core or to promote new low-income housing in suburban communities.’
“Although today’s U.S. Supreme Court decision has far-reaching consequences for homebuilders and homebuyers alike, we look forward to working with HUD and Congress to create clear rules that ensure builders can readily comply with the Fair Housing Act while assisting localities that need affordable housing.”
This case is the third one of its kind in the last three years in which the Supreme Court heard an argument about whether disparate impact is within the jurisdiction of the court under the Fair Housing Act.
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