Last week, overshadowed by the more publicized Obamacare and gay marriage cases, the Supreme Court handed down a disappointing 5-4 decision in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc. The court held that the Fair Housing Act, Title VIII of the Civil Rights Act of 1968, encompasses claims for disparate impact.
The FHA prohibits discrimination in all aspects of housing and residential real estate-related transactions. Disparate impact is the unfair legal doctrine that someone is liable for discrimination even when they had no intent to discriminate or cause harm. All that plaintiffs must do is show that one of the defendant's lawful practices adversely impacts one racial group more than another. Discriminatory motive is irrelevant. So the court's ruling means that property owners, lenders, insurers and local governments can and will be sued — and held liable — when their legitimate neutral practices and policies unintentionally have a disproportionate adverse impact on some protected class.
The theory, which the Supreme Court now officially sanctions for enforcing the FHA, raises serious equal protection concerns by leading to race-conscious decision making and even outright discrimination. To avoid being sued under a theory of disparate impact, public and private entities must ensure that the results of any decision have a predetermined racial outcome. If projections show a possible disproportionate effect, local governments and businesses are pressured to rig the outcome in ways that violate the Fourteenth Amendment's guarantee of equality under the law.
For instance, in Ricci v Destefano, the New Haven (Conn.) Fire Department intentionally discriminated against firemen of one race to avoid implementing policies that had an unintended disparate impact against firemen of another race. In another example, after being sued by the EEOC under a theory of disparate impact, the city of Austin, Texas, agreed to settle the dispute by implementing racial hiring quotas for its fire department.
The application of disparate impact theory also leads to absurd results. Justice Alito noted in his dissent that in one recent FHA case, Gallagher v. Magner, the Eighth Circuit Court of Appeals allowed a claim to proceed even though the result would have been to keep minorities living in rat-infested housing, rife with other dangerous safety violations. In another case from the Second Circuit, Mt. Holly Gardens Citizens in Action v. Township of Mount Holly, a lawsuit was filed to stop a local government from revitalizing blighted areas where minorities resided in squalid living conditions.
The Texas case continues the trend. The federal government provides low-income housing tax credits that are distributed through state agencies. Federal law favors the distribution of these credits for the development of housing units in low-income areas. When Texas followed the law by allocating the credits to help revitalize low-income housing areas, it was sued by an organization that wanted the credits used elsewhere.
All of these results hardly further the stated objectives of the Fair Housing Act, which is to "provide, within constitutional limitations, for fair housing throughout the United States." Indeed, when a city's good-faith attempt to remedy deplorable housing conditions is "discriminatory," then something is amiss. What is amiss is disparate impact theory.
Fortunately, all is not lost. The court notes that disparate impact should be limited to "avoid the serious constitutional questions that might arise." Justice Anthony Kennedy, writing for the majority, reiterates certain safeguards. First, when housing authorities and private developers are sued under a disparate impact claim, they should be allowed "leeway to state and explain the valid interest served by their policies." In other words, defendants do not violate the FHA by implementing policies and practices that further the objectives of the FHA, even if policies and practices disproportionately affect a protected class.
Second, Justice Kennedy stresses proof of causation. Plaintiffs suing under a disparate impact theory must identify the specific practice or policy implemented by the defendant that causes a discriminatory effect. If disparate impact claims are difficult to prove, public and private entities will feel less pressure to make decisions based on racial outcomes. Finally, Justice Kennedy writes that lower courts should not order remedies requiring racial targets or quotas.
Only time will tell if the lower courts will follow Justice Kennedy's safeguards.
Ralph Kasarda is a staff attorney with the Pacific Legal Foundation. He filed a brief in the Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc. case. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.