In a 5-4 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the U.S. Supreme Court upheld the use of disparate impact analysis in Fair Housing Act claims.  In the June decision, a majority of the justices found that disparate impact liability was consistent with the intent of the FHA and was supported by prior Supreme Court decisions upholding disparate impact in the context of employment discrimination.  More on the facts and issues in Inclusive Communities can be found on our January blog post on the case.

The Court’s decision means that private parties and state and local governments can continue to be held liable for laws, rules, policies, and programs that do not discriminate on their face or have a discriminatory purpose, but which in effect create disparities between groups of people protected by the FHA (such as between races, ethnicities, or on the basis of disability status).  The majority opinion clarified, however, that claims of disparate impact may be defeated by showing that the policy in question is necessary to achieve a valid, non-discriminatory governmental purpose, and the opinion further indicated that statistical showings of disparity must be accompanied by a demonstration that the neutral policy in question caused the alleged disparity.

The decision is likely to have its most significant effect on lenders and insurers, whose facially neutral practices have been prosecuted by the Obama Administration on a disparate impact theory of liability when such neutral practices restrict the ability of minority groups to obtain loans or insurance coverage.  Moreover, local governments will continue to have potential disparate impact liability, particularly as the federal Department of Housing and Urban Development finalizes a proposed rule that will allow increased scrutiny of zoning and other local regulatory practices as a condition of local governments’ receipt of funds through HUD grant programs such as the Community Development Block Grant program.  As a result of the decision, fair housing advocates and providers of housing will continue to have a potent weapon for challenging government policies that limit their ability to provide housing for protected groups.

The American Planning Association’s Planning and Law Division will be hosting a nationally-broadcast webinar on the Inclusive Communities decision, tentatively scheduled for August 4, 2015 at 1:00  p.m. ET/11:00 a.m. MT.  See the Division’s website for more details.