Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., decided by the Supreme Court last Thursday, held that lawsuits can challenge housing policies or practices based on their disparate impact. Subject to restrictions discussed below, the Court found that housing discrimination claims can be based on the discriminatory effect of a law or practice without needing to show intent to discriminate. While the Supreme Court had not yet weighed in on this question, the Court’s decision matches the nine federal courts of appeals that have considered the question, which may limit the decision’s consequences. The 5-4 decision included a majority opinion by Justice Kennedy and dissents by Justices Thomas and Alito.
This was the third time in the last few years that the court granted cert in a Fair Housing Act disparate impact case. The rationale applies both to employment and housing. The Supreme Court has effectively ordered courts to scrutinize complaints to see if they properly allege causation. The opinion does not address whether, even if the authority exists for HUD to issue a regulation or whether HUD overreached and abused its discretion.
The Fair Housing Act (FHA) prohibits housing discrimination, including actions that “otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, handicap, familial status, or national origin.” 42 U.S.C. § 3605(a). Laws permit disparate-impact claims when the text refers to the consequences of actions and not just to the mindset of actors and where a disparate-impact interpretation would be consistent with the law’s purpose. The Court found persuasive that Congress retained the description of housing discrimination in amending the FHA in 1988, despite knowing that all nine Courts of Appeals that had considered the question then had found that the wording permitted disparate-impact claims. Finally, the Court found that recognition of disparate-impact claims was consistent with the FHA’s purpose to “eradicate discriminatory practices within a sector of our Nation’s economy.” Slip Op. at 17.
Justice Alito, in dissent, argued that the FHA does not authorize disparate-impact liability. His analysis focused on the text of the statute and particularly the phrase “because of” as limiting claims to intentional discrimination. In his dissent, Justice Thomas revisited Griggs, criticizing it as an inappropriate interpretation of Title VII. Critiquing previous cases for allowing disparate-impact claims, Justice Thomas referred to disparate-impact liability as “a rule without a reason, or at least without a legitimate one.” Slip Op. at 10 (Thomas, J. dissenting).
The Supreme Court’s decision does not resolve this case. It will return to the lower court for review. The Texas development tax credit scoring system challenged in the case may survive this review, particularly since the Court described the case as presenting “a novel theory of liability.” Slip Op. at 18.