In June 2015, the United States Supreme Court held that disparate impact claims are cognizable under the Fair Housing Act (FHA), 42 U.S.C. § 4601, et seq.
Texas Dept. of Housing and Community Affairs et al. v. Inclusive Communities Project, Inc, et al., No. 13-1371 (U.S. 2015), involved the distribution of low-income tax credits to developers through designated state agencies, including the Texas Department of Housing and Community Affairs. The Inclusive Communities Project, Inc. (the “Project”) brought a disparate impact claim under the FHA, using statistical evidence.
The Project succeeded below. While the appeal was pending, the Secretary of Housing and Urban Development (HUD) issued a regulation, which interpreted the FHA to permit disparate impact liability.
In holding that disparate impact claims are cognizable under the FHA, the Supreme Court noted that cases interpreting Title VII and the ADEA provided essential background and instruction, and applied the reasoning in Griggs v. Duke Power Co., 401 U.S. 424 (1971) and Smith v. City of Jackson, 544 U.S. 228 (2005) to the FHA.
However, the Supreme Court emphasized the importance of safeguards to prevent displacement of valid governmental or private practices. These safeguards include: giving housing authorities and private developers leeway to state and explain the valid interest served by their policies; recognition that statistical disparities without a policy or policies causing the disparity are not enough for disparate impact liability; careful examination of whether plaintiff has made out a prima facie case of disparate impact; and a causal connection between the defendant’s policy and the disparate impact.
A disparate impact claim can be a powerful tool. Practitioners should be aware of the burden shifting framework applicable to these claims. Similar to cases under Title VII, the plaintiff must make a prima facie showing of disparate impact (e.g. a statistical irregularity caused by the defendant’s policy). If a prima facie showing is made, then the burden shifts to the defendant to prove the challenged practice is necessary to achieve at least one substantial, legitimate, non-discriminatory interest. Once a defendant meets its burden, a plaintiff may still prevail if they show another practice with a less discriminatory effect will satisfy the defendant’s substantial, legitimate, nondiscriminatory interest.