The Supreme Court heard oral argument today in Texas Department of Housing and Community Affairs v. Inclusive Communities Project. Texas Department of Housing & Community Affairs ("TDHCA") has petitioned the highest court to determine if the Fair Housing Act ("FHA") recognizes disparate impact claims. The outcome of this case will have far-reaching implications on entities ranging from public housing authorities to residential real estate lenders.
Disparate impact claims permit a litigant to bring a lawsuit under the FHA based on statistical data. A plaintiff challenging a particular policy is not required to prove actual harm or discriminatory intent of the challenged policy to bring its claim. Rather, a litigant argues that a policy violates the FHA because it creates a statistically disproportionate effect on a specific protected class of people.
In TDHCA v. ICP, Inclusive Communities Project, Inc. ("ICP"), a non-profit corporation, sued TDHCA accusing it of disproportionately allocating Low Income Housing Tax Credits ("LIHTC") to redevelop properties in a minority-populated area. While ICP was unsuccessful in proving TDHCA's award of tax credits was intentionally discriminatory, the lower court concluded that ICP had established a prima facie disparate impact case by showing that TDHCA had disproportionately approved tax credits for developments in minority neighborhoods, and conversely, had disproportionately denied tax credits for developments in "predominantly-Caucasian" neighborhoods. The mere existence of this statistical disparity placed a burden on TDHCA to prove it had not discriminated. TDHCA has appealed this ruling claiming that the plain-text of the FHA only prohibits intentional discrimination.
Disparate impact claims have been criticized because the statistical data may be manipulated and subjected to gamesmanship to achieve the goals of the litigant asserting the claim. Often, policy makers are caught in a "Catch-22" where they are forced to negotiate the thin-line of exposing themselves to a potential disparate impact claim or alternatively intentionally violating the FHA by explicitly considering race when enacting a policy in an effort to avoid a disparate impact claim.
Supporters of disparate impact claims credit these claims as a critical mechanism in rooting out and combating covert forms of intentional discrimination. Disparate impact claims have been used as a vehicle to attack zoning decisions, code enforcement, affordable housing policies, and financial lending policies.
Either way the Court rules, the decision will impact the way that lenders, housing authorities, and policy makers conduct business. Check back soon for an update on how the Court rules on this important issue.
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