July 16, 2012

Here we go again: Fair Housing Act and disparate impact

By Here we go again: Fair Housing Act and disparate impact

Pacific Legal Foundation attorneys filed an amicus brief in the U.S. Supreme Court asking it to review a case handed down by the Third Circuit called Township of Mount Holly v. Mt. Holly Gardens.  The case concerns whether the federal Fair Housing Act encompasses disparate impact claims.  The Center for Equal Opportunity joined PLF in its brief.

The Fair Housing Act makes it unlawful to refuse to sell or rent property because of race, color, religion, sex, familial status, or national origin.  The Act also applies to banks and lending institutions by prohibiting discrimination in the granting of home loans.  Though the Supreme Court has reviewed claims under the Fair Housing Act several times, it has never had the occasion to determine whether the Act allows for claims of discrimination under a disparate impact theory.

To bring a disparate impact claim, the plaintiffs need not allege, nor prove, that individuals were treated differently because of their race.  Instead, plaintiffs may merely show that a neutral practice has a disproportionate effect – that is, a disparate impact – on some racial group.  Proof of discriminatory motive is unnecessary.  For two decades the federal circuit courts of appeals have assumed that the Fair Housing Act allows disparate impact claims, but they apply different analyses and achieve inconsistent results.

In its brief, PLF points out that the statutory text of the Fair Housing Act establishes that it was intended to apply solely to disparate treatment, not to acts having a disparate impact on protected classes.  Moreover, subjecting government defendants to disparate impact claims leads them to engage in unconstitutional race-conscious decision making to avoid liability for such claims.  The Supreme Court recognized this conflict in Ricci v. DeStefano and Watson v. Ft. Worth Bank & Trust.  Allowing disparate impact claims to proceed under the Fair Housing Act would lead to adverse results that Congress never intended.  For instance, because the Act applies to financial institutions, banks, and mortgage companies, they would be pressured to provide loans to unqualified applicants in order to avoid disparate impact liability.  Similar actions may have played a key role in triggering the mortgage crisis of 2007-2008.

The Supreme Court has already indicated that it finds this issue to be of such great importance as to warrant review.  Last year, the Court granted certiorari in a case called Magner v. Gallagher, which presented the same issue as the Mount Holly case.  Although the Court took the case and scheduled it for oral argument, the City of St. Paul, Minnesota agreed to dismiss its petition after being pressured by the Obama administration and its political allies.   The Court should grant certiorari in the Mount Holly case to clarify that disparate impact claims are not cognizable under the Fair Housing Act.

 

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