In a case that has been percolating for over 14 years, the federal Second Circuit Court of Appeals concluded last month that the Village of Garden City, New York engaged in racial discrimination in violation of the federal Fair Housing Act (FHA) as a result of unlawful zoning practices. The Second Circuit’s decision came in the same week that the Ninth Circuit found that the City of Yuma, Arizona had committed potential violations of the FHA in denying a rezoning for small-lot single-family housing, a case we reported on last week. Taken together, these two decisions provide important clarification of the U.S. Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. and suggest that local governments should be increasingly cautious about how their zoning decisions pertaining to certain types of housing development affect patterns of racial and ethnic segregation.

MHANY Management v. Village of Garden City has its roots in a 2002 decision by Nassau County, New York to consolidate its operations in Garden City and to sell off a 25-acre parcel for private development. Garden City is a predominantly white community on Long Island; excluding group quarters residents, the village’s population was just 2.6% non-white in 2000, and the community contained no affordable housing. At the request of the County, in 2002, Garden City began to consider alternative zoning designations for the property that would allow the development of, among other uses, affordable multi-family residential uses. In 2003, Garden City and its planning consultants proposed rezoning the property to the village’s R-M multi-family residential district. Through 2003 and 2004, the village conducted various studies and held hearings regarding the proposed rezoning. All throughout the process, Garden City residents vehemently opposed the rezoning.

By May 2004, after widespread community outrage regarding the proposed rezoning, the village dropped the proposal to rezone the property for affordable housing and began considering a rezoning to the R-T district, allowing only single-family townhouse units. The village rushed through the single-family rezoning, and the board of trustees approved that rezoning in June 2004. The rezoning to allow only townhouses was opposed by fair and affordable housing advocacy organizations, and the eventual plaintiffs—who were interested in purchasing the property for affordable housing construction—could not submit a workable bid on the property following the single-family rezoning decision.

The plaintiff groups filed suit in 2005 in the federal district court for the Eastern District of New York alleging violations of the FHA and 42 U.S.C. §§ 1981 and 1983, claiming that Garden City had intentionally discriminated against the plaintiffs on the basis of race and also alleging that Garden City’s actions created a disparate impact. Following a bench trial in 2013, the district court found Garden City liable on the claims of both intentional discrimination and disparate impact. Among other things, the court enjoined Garden City from further discrimination and appointed a third party compliance officer to oversee Garden City’s FHA compliance.

On appeal, the Second Circuit upheld the district court’s findings of discriminatory intent and disparate impact. With respect to the discriminatory intent claim, the appeals court agreed with the district court’s finding that racially-charged comments made by members of the public and the village board of trustees’ subsequent decision to reject the proposed multi-family rezoning created sufficient evidence of discriminatory intent and that the village’s decision did not have purely non-discriminatory motives. On the disparate impact claim, despite the fact that Garden City’s decision to shift from multi-family to single-family zoning was a one-time decision, the Second Circuit held that the series of events leading up to the decision constituted a pattern or practice sufficient to produce a disparate impact. Applying a burden shifting approach adopted by the U.S. Department of Housing and Urban Development and utilized in the Inclusive Communities Project litigation, the appeals court found that the village had rebutted the plaintiff’s prima facie case with a legitimate, bona fide governmental interest, but remanded the case to the district court for further proceedings on the question of whether the government could further its interests in a less discriminatory manner.

Along with the Ninth Circuit’s decision last week in Avenue 6E Investments, LLC v. City of Yuma, the Second Circuit’s decision suggests that fair housing law, particularly relating to disparate impact, is all but settled after Inclusive Communities Project. In the meantime, local governments will need to be vigilant in their processing of applications for the development of all forms of affordable housing, and will need to carefully consider the potential discriminatory effects of their zoning policies and other actions.