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Disparate Impact on Course to Supreme Court Again

Disparate Impact

For the third time since 2012, the U.S. Supreme Court has been petitioned to hear a case that may decide the fate of disparate impact liability under the Fair Housing Act (FHA). The issue has created much uncertainty in the apartment and real estate industry since HUD released its final disparate impact rule in March 2013. Two previous cases were accepted by the Court but the parties settled prior to review, leaving the issue unresolved.

In the latest case, Inclusive Communities Project v. Texas Department of Housing, the allocation of tax credits is being challenged as an allegedly discriminatory practice under the FHA based on its disparate impact on minority residents. Specifically, the Inclusive Communities Project (ICP) argued that the Texas Department of Housing and Community Affairs (Texas) disproportionately approved tax credits in minority neighborhoods while disproportionately rejecting them in majority white neighborhoods, thus violating the FHA and reinforcing patterns of segregation.

In March, the Fifth Circuit Court of Appeals determined HUD’s rule was the correct legal standard for considering whether the Texas tax credit allocations disparately impacted minorities, and directed the lower court to reconsider the merits of the case applying HUD’s analytical standard. The lower court’s review is on hold, however, following a June 23 order by the appeals court to await the Supreme Court’s decision on the Texas petition for cert.

Uncertainty over apartment business practices such as criminal background screening, and Section 8 voucher program participation and policies, are potential areas of liability under the HUD disparate impact analysis. Although disparate impact claims are available under other anti-discrimination statutes, Congress did not provide for such claims in the FHA.

Both the Texas Apartment Association and the National Multifamily Housing Council have filed amicus (“friend-of-the-court”) briefs asking the Court to grant the petition for certiorari to address the issue. Should the Court grant certiorari, the National Apartment Association and other industry organizations will file a joint amicus brief on the merits of the case.

Provided by NMHC as part of the NAA/NMHC Joint Legislative Program