On June 25, 2015, the Supreme Court settled a long-brewing debate and issued a landmark 5-4 decision upholding the use of disparate impact claims in discrimination cases brought under the Fair Housing Act (FHA). See Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., 576 U.S. __ (2015) (Inclusive Communities). Disparate impact claims impose liability for using a facially neutral policy that nevertheless disproportionately affects a protected class. Eleven federal courts of appeals previously held that disparate impact claims are cognizable under the FHA, but commentators have repeatedly raised the question of whether the language of the FHA supported that conclusion. The Supreme Court has not previously ruled on this issue.
In its ruling, the Supreme Court compared the language of the FHA with two other anti-discrimination statutes—Title VII of the Civil Rights Act of 1964 (Title VII) and the Age Discrimination in Employment Act of 1967 (ADEA)—both of which the Court had previously held allowed disparate impact claims. The Court focused on the phrase “otherwise make unavailable” that appears in the FHA, and found it to be equivalent in meaning and effect to language in the ADEA and Title VII that the Court has construed as including disparate impact liability. In addition to the statutory language, the Court based its holding on the history of legislative amendments to the FHA, rules issued by the Department of Housing and Urban Development under the FHA, and the statutory purposes of the FHA.
The Court’s decision affirms the viability of disparate impact claims under the FHA, but also imposes important guardrails on future application. The Court was careful to note that disparate impact claims must be “properly limited” such that they do not thwart legitimate business practices and efforts to achieve fair and equal housing goals.
It remains unclear how this decision may impact the viability of disparate-impact claims under the Equal Credit Opportunity Act (ECOA). Federal agencies like the Consumer Financial Protection Bureau have heavily relied on disparate impact theory to assert discrimination claims under the ECOA, most notably in the mortgage and auto lending space. ECOA, however, does not contain the FHA’s “otherwise make unavailable” language that anchored the Court’s holding in Inclusive Communities. As a result, the availability of a disparate impact claim may be susceptible to a challenge on that basis, and defendants may continue to press that defense in ECOA litigation.