Last week, the Supreme Court issued its highly anticipated ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Inclusive Communities). For the first time, the Court interpreted the Fair Housing Act (FHA) to permit “disparate impact” claims, in which a plaintiff or group of plaintiffs alleges that a policy or practice, though racially neutral on its face, has the effect of creating disparities between racial groups. While the decision interprets the FHA, the Court relied heavily on analogous provisions in federal employment statutes – namely, Title VII of the Civil Rights Act of 1964 (Title VII) and the Age Discrimination in Employment Act (ADEA) – in reaching its conclusion. In doing so, the Court made clear that disparate impact claims are here to stay for the foreseeable future.
In Inclusive Communities, a Texas-based non-profit organization sued the Texas Department of Housing and Community Affairs, alleging that the Department’s policy perpetuated racial segregation in housing by granting too many tax credits in predominantly black inner-city areas and too few in white suburban communities. Though the selection criteria were technically race-neutral, Inclusive Communities presented data that the Department’s policies entrenched such segregation by discouraging the construction of affordable housing in suburban areas. For example, over 92% of tax credit units in Dallas were located in U.S. Census tracts with minority populations of more than 50%.
The Supreme Court held that the FHA permits plaintiffs to bring a claim based on disparate impact discrimination. The Court relied on its earlier interpretations of Title VII and the ADEA, stating that they provided “essential background and instruction” in the instant case. Under the Court’s interpretations of employment antidiscrimination laws, “practices fair in form, but discriminatory in operation” are proscribed. Therefore, these statutes encompass disparate-impact claims when “their text refers to the consequences of actions and not just the mindset of the actors,” and when such an interpretation is consistent with the statutory purpose. Since the language of the FHA was, like Title VII and the ADEA, “results-oriented,” the Court concluded that the disparate impact theory was viable under the FHA.
The Court further relied on the fact that when Congress amended the FHA in 1988, nine circuit courts of appeal had held that the FHA authorized disparate impact claims. Despite being aware of this precedent, Congress declined the opportunity to amend the FHA to reject the disparate impact theory. Its failure to do so, the Court found, suggested that it intended to allow such claims.
Employers should be aware of Inclusive Communities because its affirmation of a disparate impact theory under the FHA is also a reaffirmation of the theory under employment discrimination laws. Although some believed that the Court’s 2009 opinion in Ricci v. DeStefano signaled the possibility that the Court was questioning the constitutionality of disparate impact claims, particularly against public sector employers – and Justice Thomas advocated in his separate dissent in this case for the elimination of disparate impact claims altogether – theInclusive Communities decision makes clear that there are not currently enough Justices on the Court to support such a reversal in existing law. The decision is also noteworthy for school districts and other government entities in Illinois because Illinois courts generally follow federal law in interpreting the Illinois Civil Rights Act, which prohibits all forms of disparate impact discrimination by government actors in Illinois.