In 2015, The Supreme Court handed down a 5-4 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project that seemed to finally confirm the Court’s recognition of a private right to bring “disparate impact” claims of discrimination in housing cases. The case was brought by the non-profit Inclusive Communities Project against the Texas Department of Housing and Community Affairs for “caus[ing] continued segregated housing patterns by its disproportionate allocation of the tax credits, granting too many credits for housing in predominantly black inner-city areas and too few in pre-dominantly white suburban neighborhoods.” While the Texas department argued that the tax credits were simply awarded to developments in neighborhoods labeled “high opportunity,” Inclusive Communities claimed that instead they merely exacerbated existing racial and socio-economic isolation and they had empirics to prove it.

In turn, the Court held that the non-profit could properly prove their case simply by showing evidence (empirical and otherwise) that the allocation of tax credit had discriminatory effects even if this was not the intent of the policy.  Such a “disparate impact” standard, reasoned Justice Kennedy in writing for the majority, was proper under the Fair Housing Act (FHA) (Title VII of the Civil Rights Act of 1968) as a means to combat “racial isolation” underpinned by “unlawful practices” such as exclusionary zoning laws and other housing restrictions.

Only three years later, this past summer, the Trump Administration’s Department of Housing and Urban Development (HUD), under the leadership of Ben Carson, issued a memo that calls for “reconsideration” of the agency’s implementation of disparate impact as the operative standard in discriminatory housing cases. This proclamation — along with the nomination of Brett Kavanaugh, shortly thereafter — has threatened the Court’s narrow adoption of the disparate impact standard, with Kennedy’s key swing vote no longer present.

In fact, the sentiments behind the memo are bolstered by a strong conservative coalition that believes the Inclusive Communities case is founded on a fundamental misreading and distortion of the law. While the case was heralded as a victory for civil rights groups, the dissent, penned by Alito argued that the majority had wholly perverted the objective of the FHA, which was only aimed at intentional discrimination. The majority, he argued, had misconstrued the relevant language of 42 U.S.C. §804 of the Act in that it only prohibited denying a person access to housing “because of race, color, religion, sex, familial status, or national origin.” (emphasis in original). In particular, Alito said that this language evinced a clear mandate to only bar conduct aimed directly at “a protected characteristic.”  In turn, such language discredited the argument, put forth by the majority: that Congress had “implicitly authorized” the use of the disparate impact standard by expanding the list of protected characteristics under the FHA with the Fair Housing Amendments Act of 1988. Alito also highlighted that the majority wholly ignored Alexander v. Sandoval in which the Court had explicitly rejected private claims of disparate impact under a predecessor to the Fair Housing Act, Title VI of the Civil Rights Act of 1964.

Riding on this judicial history, civil rights and housing activists fear that the Supreme Court, with the current administration at its back, has the potential to effectively end one of the few legal tools available to achieve housing integration. Sadly, such fears are not new.  Commentary in the aftermath saw the 2015 Inclusive Communities decision as a natural culmination of the fact that “all federal appellate courts had [already] recognized FHA claims for disparate impact.” Such a history glosses over the fact that the disparate impact claim was far from solidified as a legal remedy for protected classes harmed by systematic housing discrimination. Though the various ill-effects of housing discrimination were very well documented in the years leading up to the decision, it was not until 2013 that HUD first passed a regulation that clearly defined steps that municipal governments had to take to ensure they were in compliance with the FHA’s non-discriminatory housing policies so as to receive funding. Unsure of the future of disparate impact as legal tool, some awaiting the outcome of Inclusive Communities did not see the case as a vehicle for fully cementing the standard but a potential death knell for it. In fact, some law review articles expressed outright shock at its outcome.

As an article published by our Journal in 2014 pointed out, after the Sandoval, “disparate impact’s grounding seems shaky.” In light of this precarious precedent, the article turned to HUD and other agencies to “clarify, formalize, and ultimately stabilize disparate impact law.” While such faith may have been well-founded in the Obama era, it poorly reflects the political landscape today. In fact, just this past August a federal judge dismissed a lawsuit brought against HUD and Secretary Ben Carson over its delays and changes to the Obama-era funding requirements regarding “segregated housing patterns.”

While the last few months have proven strangely quiet on this issue, a top real estate law firm recently pointed out that the Consumer Financial Protection Bureau (CFPB) has hinted in its 2018 Rulemaking Agenda that it may revisit the disparate impact doctrine as it applies to lending under the Equal Credit Opportunity Act (ECOA). In particular, the preamble to this agenda states in its subsection on future planning:

“The Bureau is considering future activity with regard to specific areas of consumer financial law of significant public interest.  For example, the Bureau announced in May 2018 that it is reexamining the requirements of the Equal Credit Opportunity Act (ECOA) concerning the disparate impact doctrine in light of recent Supreme Court case law and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.”

Though speculating, the article points out that such a “reexamining” could define the elements of a disparate impact claim to relegate them to “well-settled situations,” add additional required proofs beyond statistical analysis for such claims or even remove such a theory of liability under the ECOA altogether. What route this agency and the Court take in the coming months and years, however, is highly uncertain. That being said, what is certain is that the disparate impact standard, as a tool for achieving housing desegregation, is once again on “shaky” ground.