SCOTUS Housing Court in Session

This piece originally appeared in The Brooklyn Quarterly.

LBJ signing the Fair Housing Act, one of the last bills of the Great Society. Image from The Root.

LBJ signing the Fair Housing Act of 1968, one of the last bills of the Great Society. Image from The Root.

As a national debate takes shape around how America has failed segregated inner-city communities like those in Baltimore, a quiet but historic debate is taking place in the Supreme Court over the constitutionality of the most powerful anti-segregation tool in history: the Fair Housing Act.

Since the Fair Housing Act’s (FHA) enactment in 1968, the federal government and lower courts have uniformly interpreted the Act to prohibit not only intentional acts of housing discrimination, but also well-intentioned policies that are discriminatory in practice. For over forty years, the Department of Housing and Urban Development (HUD), the Department of Justice, and eleven appellate courts have used this reasoning, now called “disparate impact,” in case law to identify and mitigate unintended discrimination. Without this legal apparatus, only the most overt acts of discrimination would ever reach a court.

For the first time in history, the Supreme Court is hearing a challenge to the conventional interpretation of the Act in Texas v. the Inclusive Communities Project (ICP). Brought by the nonprofit ICP, the suit alleged that the Texas Department of Housing and Community Affairs (DHCA) reinforced patterns of racial segregation by routinely placing federally financed affordable housing developments in black communities. As a result, minorities reliant on affordable housing were deprived access to integrated communities. Oral arguments took place in late January and a decision should come down from the Court very soon.

The Supreme Court accepted the case primarily to resolve one core issue: does the Fair Housing Act’s language support disparate impact claims? Furthermore, does disparate impact violate the constitutional guarantee to equal protection under the law?

What is Disparate Impact? 

Simply put, disparate impact cases identify policies with an unnecessary and disproportionate impact on groups historically subject to discrimination. After the Civil Rights Act of 1964 outlawed discrimination based on race, color, religion, sex, or national origin, more discrete tactics for maintaining the segregated status quo were commonly employed. Today, monitoring for discriminatory effects, rather than outright discriminatory motives, has proven necessary still.

In 2011, a disparate impact case found Countrywide Home Loans responsible for issuing higher interest rates to black and Latino borrowers than their equally qualified white counterparts. A case following Hurricane Katrina found the Louisiana Recovery Authority valued homes and recovery grant amounts in black neighborhoods lower than identical homes in white neighborhoods. The most controversial cases, however, grapple with removing barriers to integration; Texas v. ICP is one such case.

The Disparate Impact Debate

Lower courts have processed disparate impact cases with such consistent methodology that HUD issued an administrative rule in 2013 standardizing a procedure for all courts reviewing such cases. Representatives from insurers, lenders, and other business interest groups mobilized to criticize the procedure, expressing concerns that the only way to prevent lawsuits is to institutionalize an equivalent of race based business quotas.

But disparate impact case law is designed to identify neutral policies with the most neutral outcomes possible. HUD’s administrative procedure requires that plaintiffs first demonstrate genuine discriminatory impacts. Defendants may then prove their innocence if the practice was necessary to achieve a “substantial legitimate, nondiscriminatory interest” or if no better race-neutral alternative was available.

Disparate impact cases are not always a slam-dunk for plaintiffs. According to Tulane Law Professor Stacy Seicshnaydre’s 2013 analysis, “plaintiffs have obtained positive outcomes in only 20% of their FHA disparate impact claims considered on appeal.” Further, disparate impact fair housing cases with outcomes in the plaintiff’s favor have been upheld by appeals courts only 33.3% of the time, as opposed to 83.8% of the time for defendants.

Lawsuits are burdensome for all parties, but barring disparate impact cases altogether would be devastating for communities.

Texas v. the Inclusive Communities Project

In 2008, ICP experienced difficulties achieving its mission– to help minority families in the Housing Choice Voucher program (formerly known as Section 8) find housing in quality Dallas neighborhoods. As the state administrator of the federal Low Income Housing Tax Credit (LIHTC) program, Texas DHCA financed the bulk of new affordable housing. Like all states, Texas’ DHCA determines which real estate developers’ proposals qualify for tax credits.

ICP found that in the 20 years of its LIHTC program administration, Texas allocated 92.9% of credits to developments proposed in communities of color and denied applications to build in majority white communities. Texas argued that their tax credit awards were designed to help communities in need, certainly a noble cause. But the agency failed to prove that it lacked a less discriminatory alternative. After a district court ruled in favor of ICP, Texas appealed to the Supreme Court, questioning the validity of all disparate impact claims under the Fair Housing Act.

 Spotlight on Country’s Split on Integration

The Fair Housing Act designates HUD with the authority to interpret and enforce the Act. This task has proven difficult over the years, given the number of federal agencies involved in the business of housing.

The Low Income Housing Tax Credit program, central to Texas v. ICP, is regulated by the Treasury Department, not HUD. The Treasury’s LIHTC regulations advise state agencies to give preference to developments located in poor neighborhoods, in higher cost areas and to consider developmental and operational costs of proposed projects.

Despite prior efforts to unify all federal agencies on a common fair housing and integration agenda, the Treasury’s guidance still reinforces patterns of segregation today. As a result, states like Texas continue to choose the path of least resistance by allocating tax credits to developments in low cost, high-poverty areas. Though some have defended Texas given the Treasury’s conflicting guidance, lower courts have historically affirmed HUD’s interpretation of the Act and states’ duties to uphold the Fair Housing Act.

Under Obama, HUD has proactively taken steps to require local governments take steps to eliminate barriers to integration and equal opportunity (covered here in TBQ). Because of and despite the Supreme Court’s ruling, our country’s deep resistance to integration is now exposed in a ripe debate.

Last week, three anti-fair housing amendments were introduced in the House, bringing the debate to the chamber floorAmendment HR 2578 was passed by a roll call vote of 232-196 and would prohibit the Department of Justice from using funds appropriated to enforce disparate impact cases.

Regardless of how the Supreme Court rules, HUD will remain caught between mission and politics. As President Obama stated following riots in Baltimore, he is “under no illusion that out of this Congress we’re going to get massive investments in urban communities.” Building affordable housing in better neighborhoods is an essential fair housing tool for the foreseeable future.

We must require our 2016 presidential candidates to discuss how contemporary forms of discrimination and segregation should be addressed today. The Supreme Court aside, the debate will continue in chambers across the country.


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