Make the Fair Housing Act fair: Remove disparate impact
On October 2, 2014, the United States Supreme Court granted review in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. When it did, the Court made it clear that it only wants to resolve one issue: Whether disparate impact claims are cognizable under the Fair Housing Act. This week PLF attorneys filed a brief in the Court explaining that the answer to that question should be a resounding “no.” Many distinguished organizations joined PLF in its brief: The Center for Equal Opportunity, Competitive Enterprise Institute, Cato Institute, Individual Rights Foundation, Reason Foundation, Project 21, and Atlantic Legal Foundation.
Even though the parties are still in the process of filing their written briefs, the Court has already set oral argument for January 21, 2015. The Court has good reason to be anxious about resolving the issue presented. In 2011, the Court requested briefing on the exact same disparate impact issue in a case called Magner v Gallagher. But the parties in that case reached a settlement under suspicious circumstances just before oral argument, and the petition to the Court was withdrawn. So the Court again requested oral argument in the next Fair Housing Act case it had the opportunity to review, Mount Holly, v. Mt. Holly Gardens. But the parties in that case also settled just before oral argument.
For disparate impact claims, plaintiffs need not prove, nor even allege, that individuals were treated differently because of their race. Instead, plaintiffs may merely show that neutral practices that were not intended to discriminate have a disproportionate effect—a disparate impact—on some racial group. Some favor the use of disparate impact doctrine because proving intentional discrimination is often difficult. They contend that the theory is an important tool for combating covert discrimination and arbitrary practices with discriminatory effects. But when a disparate impact claim is successful, courts may impose liability on individuals, employers, property owners, insurers, and others, even though they did not engage in discrimination.
Only intentional discrimination violates the Fourteenth Amendment, but the threat of disparate impact liability encourages private and public decision makers to act on the basis of race. Justice Scalia observed in his concurrence in Ricci v Destefano, that a disparate impact provision not only permits but affirmatively requires race-conscious decision making when a disparate impact violation would otherwise result. “But if the Federal Government is prohibited from discriminating on the basis of race, then surely it is also prohibited from enacting laws mandating that third parties—e.g., . . . whether private, State, or municipal—discriminate on the basis of race.” The danger is that “disparate impact provisions place a racial thumb on the scales, often requiring” state or municipal governments “to evaluate the racial outcomes of their policies, and to make decisions based on (because of) those racial outcomes.”
So the countdown is on. Will the Court finally be able to resolve whether the Fair Housing Act encompasses claims for disparate impact? Or will this latest case be pulled out from under the justices’ feet as with Magner and Mt. Holly? Let’s hope for the former, because the Fair Housing Act prohibits discrimination in all aspects of residential real estate-related transactions, including but not limited to: making loans to buy, build, repair, or improve a dwelling; purchasing real estate loans; selling, brokering, appraising residential real estate; insuring property, and selling or renting a dwelling. Thus, extending liability based on disparate impact to sellers and businesses engaged in real estate-related transactions will affect all facets of the nation’s housing market, which is an integral part of our national economy.