The U.S. Supreme Court has decided, 5 - 4, that the Fair Housing Act (FHA) permits the use of a major antidiscrimination tool, the legal theory of disparate impact. Texas Department of Housing and Community Affairs v. The Inclusive Community Project, Inc., Case No. 13-1371.

Unintentional Discrimination

A disparate impact claim is based on what is sometimes called unintentional discrimination. The fundamental allegation is that a policy or practice, which is nondiscriminatory on its face, is unlawful if it has a disparate impact on a legally protected group and does not serve a substantial legitimate nondiscriminatory interest, or that interest is otherwise attainable with lesser adverse impact.

The far more common discrimination theory is disparate treatment, which requires proof of intentional discrimination.

The Supreme Court first approved the disparate impact theory in 1971, in employment discrimination cases under Title VII of the 1964 Civil Rights Act. Every federal appellate court that has decided the issue since then has held that disparate impact claims also are permitted in housing discrimination cases under the FHA, a part of the 1968 Civil Rights Act.

Legal Challenge

But the petitioners in the case just decided directly challenged the use of disparate impact under the FHA. Disparate impact supporters were concerned that the conservative-leaning Supreme Court would dramatically narrow the scope of unlawful discrimination by barring disparate impact claims in housing discrimination, and perhaps even employment discrimination.

The main basis for challenging disparate impact was the argument that the antidiscrimination text of the FHA did not allow for disparate impact claims. But Justice Anthony Kennedy, writing for the Court majority, interpreted the FHA more broadly. He favorably compared the FHA text to both the 1964 Civil Rights Act and the Age Discrimination in Employment Act of 1967, both of which the Court had previously held permitted disparate impact claims.

The key in all three statutes, according to Kennedy, was their reference to “the consequence of actions” (the essence of a disparate impact claim) and not just to the “mindset of actors” or an “actor’s intent” (i.e. intentional discrimination). He also found that the 1988 Fair Housing Amendments Act trumped any contrary interpretation by specifically barring disparate impact claims in a few narrow circumstances, which served to legitimize it for others.

Required Elements

Justice Kennedy also reiterated multiple Supreme Court pronouncements from previous disparate impact cases concerning the inherent limitations on such claims. Each of the required critical elements has to be established: that there is an actual policy or practice; that there is a disparate impact on a protected group; that the policy or practice actually causes the disparate impact; that the policy or practice does not serve a valid interest; or that the valid interest is otherwise attainable with lesser adverse impact. Justice Kennedy maintained that these requirements would circumscribe the array of potential disparate impact claims.

Recommendations

This decision confirms that the disparate impact theory remains a viable fair housing tool. So businesses and other entities in the housing industry must redouble their efforts to ensure that any policies or practices which have a disparate impact on a protected group also serve a substantial legitimate nondiscriminatory interest, not otherwise attainable with lesser adverse impact.