The Supreme Court Hears Disparate Impact: Endorsement With Limits
On April 11th, 1968, Lyndon B. Johnson signed the Fair Housing Act (FHA) into law, calling it one of “the proudest moments” of his time in the White House. The FHA, which followed up the Civil Rights Act of 1964, outlawed housing discrimination based on race or certain other protected characteristics. Precisely what type of housing discrimination is prohibited, however, has been the subject of heated debate, most recently at the Supreme Court.
On June 25th, the sharply divided court ruled 5-4 that so-called “disparate-impact” claims are allowed under the FHA. In contrast to “disparate-treatment” liability, when a seller or renter treats people differently because of their race, disparate-impact liability hinges on whether some policy by that renter or seller has a “disproportionately adverse effect” (emphasis added) on someone because of that person’s race. That is, a landlord need not intend to turn people away because of their race to violate the FHA. If that landlord’s policy has the effect of turning people away based on their race, it would fall under disparate-impact liability. However, the Supreme Court, while permitting such claims on paper, established strict conditions for when and how they can be brought.
The Case
The case arose around low-income housing tax credits that the federal government provides for states to distribute to builders. The Texas Department of Housing and Community Affairs (TDHCA) awards these tax credits to developers who build housing in low-income swathes of Texas. In 2008, a non-profit organization that helps low-income groups find affordable housing—the Inclusive Communities Project (ICP)—sued the TDHCA, claiming that the department gave too many low-income housing credits in “predominantly black inner-city areas and too few in predominantly white suburban neighborhoods.” After rulings against it, the TDHCA appealed to the Supreme Court that the FHA does not allow disparate-impact claims.
Twice previously the Supreme Court had agreed to hear cases looking at whether disparate-impact claims were permitted by the FHA, but the parties settled before the court could hear oral arguments. This time, the court was able to take a hard look at disparate-impact claims, a tool that has been used widely in housing discrimination cases and upheld by nine appeals courts but which had never borne the scrutiny of the Supreme Court.
Much of the case centered on the wording of the statute in question, Section 804(a) of the FHA, which makes it “unlawful”:
“To refuse to sell or rent…or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.”
In his ruling, Justice Anthony Kennedy, joined by the four liberal justices on the Supreme Court, made a multi-faceted argument for why disparate-impact claims can be brought under the FHA. Two past Supreme Court cases involving employment discrimination, Griggs v. Duke Power Co. and Smith v. City of Jackson, which examined Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 (ADEA), respectively, formed much of the basis for Kennedy’s argument.
Kennedy wrote that, according to Griggs and Smith, “antidiscrimination laws must be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors,” which, he argued, is exactly what the FHA does. Kennedy asserted that the “otherwise make unavailable” phrasing “refers to the consequences of an action rather than the actor’s intent.” He drew a comparison to the case before the court and Griggs and Smith, saying that “Title VII’s and the ADEA’s ‘otherwise adversely affect’ language is equivalent in function and purpose to the FHA’s ‘otherwise make unavailable’ language.” Part of Kennedy’s argument for why the text of the FHA focuses on the effect is that the word otherwise indicates a “shift in emphasis from an actor’s intent to the consequences of his actions,” claiming it serves as a “catchall” at the end of the text.
In addition, Kennedy reasoned, Congress was aware that the nine appeals courts had all ruled that the disparate-impact claims were within the spectrum of the FHA when it amended liability exemptions in 1988, so Congress was implicitly agreeing to that interpretation of the FHA by not changing the statute. This, he contended, is because the amendments “assume the existence of disparate-impact claims,” claiming the amendments would be “superfluous” if Congress were not agreeing to disparate-impact liability.
A Ruling With Restrictions
The Supreme Court’s ruling endorsing disparate-impact claims, although on its face a win for supporters, drastically limits when disparate-impact can be brought in any state. Kennedy, a conservative who is often the swing vote in discrimination cases, wrote an opinion that is surely much less sympathetic to disparate-impact liability than one that the liberal justices might have written.
In his opinion for the majority, Kennedy pointed out that disparate-impact liability only prohibits “artificial, arbitrary, and unnecessary barriers.” “Housing authorities and private developers,” he was quick to assure, must “be allowed to maintain a policy if they can prove it is necessary to achieve a valid interest.” Kennedy went further in holding that a disparate-impact claim must point to specific policies that cause a “statistical disparity,” so that groups are not “held liable for racial disparities they did not create.” That is, there must be a clear “causal connection” between a housing policy and the disparate impact for a lawsuit to succeed, a difficult standard to prove in court.
Kennedy, throughout his opinion, appeared very concerned that developers and states might react by attempting to make housing decisions based on race in order to avoid costly and prolonged court battles. This is clear when Kennedy maintained that court orders in these types of cases “should concentrate on the elimination of the offending practice” and not allow race quotas that are themselves unconstitutional and which might damage the FHA’s very goal.
A Fervent Dissent
In a vigorous dissent, Justice Samuel Alito fretted over the damage that the Supreme Court’s ruling could cause. Alito started his dissent, which the three other dissenting conservative justices joined, by proclaiming that nobody “wants to live in a rat’s nest.” He pointed to Gallagher v. Magner, a case where a lower court ruled that the FHA “could be used to attack St. Paul, Minnesota’s efforts to combat ‘rodent infestation’ and other violations of the city’s housing code.” These pest control efforts had a disparate impact on minorities, who were more likely to have to pay the rent increases that enforcement caused.
Dismissing Kennedy’s argument that the text of the FHA is results-oriented, Alito alleged that the important phrase in the text of the FHA is because of, which Alito says is easily understood as meaning something motivated by something else. Thus, in the FHA, “Congress accordingly outlawed the covered actions only when they are motivated by race or one of the other protected characteristics.” Since this hinges on intent (i.e., disparate treatment), disparate-impact claims should not be permissible under the FHA, according to the four dissenting justices. As an example, Alito wondered if raising the minimum wage (assuming it reduces the number of jobs available for “unskilled workers”) would be interpreted as making “jobs unavailable to African-Americans or Latinos ‘because of’ their race or ethnicity,” since minorities are more likely to be in that job-losing group.
Moreover, Alito rejected the majority’s argument that Congress implicitly ratified disparate-impact claims by adding the 1988 amendments to the FHA. He noted that the view of the solicitor general (the government’s lawyer before the Supreme Court), expressed in numerous briefs, was that “the FHA prohibits only intentional discrimination.” Alito contended that, as Kennedy’s implicit ratification argument is only supposed to apply when lawyers “justifiably regard the point as settled,” the argument cannot be used here.
In the end, Alito shares many of Kennedy’s concerns (and then some) about how disparate-impact claims might undermine the FHA, worrying that whatever way the TDHCA distributes housing credits it might be sued. Alito argued that the majority’s opinion is unclear about what are valid defenses to a disparate-impact suit, which might lead governmental agencies to inject race into their housing decisions in order to avoid costly litigation—the opposite of the FHA’s purpose.
What’s Next?
The dissent and Kennedy’s reservations show deep unease among justices, and future rulings are likely to limit when disparate-impact claims succeed. In this instance, there is a good chance that the ICP will lose when this case is reheard by the District Court, given that Kennedy wrote that the case “may be seen simply as an attempt to second-guess which of two reasonable approaches” the TDHCA should follow in distributing the tax credits. Already, a court in California applied the Supreme Court’s ruling to decide another FHA case in favor of the defendant, Wells Fargo.
Chief Justice John Roberts famously wrote in the affirmative action case Parents Involved in Community School v. Seattle School District No. 1 that the “way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” In the cases that the Supreme Court will consider in upcoming terms—including the major affirmative action case Fisher v. University of Texas that it will rehear next term—the justices are likely to continue restricting tools that take race into account in order to combat race discrimination, even if they permit such tools in theory.
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The full Supreme Court decision, including both dissents, is available here on the Supreme Court’s website: http://www.supremecourt.gov/opinions/14pdf/13-1371_8m58.pdf.