Texas Department of Housing and Community Affairs v. The Inclusive Communities Project: Housing advocates’ desperate fight to keep disparate impact alive

On January 21, 2015, the United States Supreme Court heard arguments in a case that, according to fair housing and civil rights advocates, could strip victims of “subversive” racial discrimination of access to the courts under the Fair Housing Act. The case, Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, brings before the Roberts Court the question whether the Fair Housing Act only prohibits intentional discrimination. If the Supreme Court finds that “disparate impact” cases are not within the purview of the Fair Housing Act, plaintiffs claiming discrimination in housing cases will have to meet a higher standard to reach the courts. Specifically, Fair Housing Act plaintiffs will have to prove “intentional discrimination” or face dismissal of their cases. This article will examine the parties’ arguments in Texas Department of Housing and Community Affairs and the possible effects on the Fair Housing Act litigation landscape in the event the Supreme Court finds that disparate impact claims are out of the Act’s parameters.

The Supreme Court lost two opportunities to decide whether the Fair Housing Act allows for disparate impact claims when Magner v. Gallagher and Township of Mount Holly v. Mt. Holly Gardens Citizens in Action both settled before oral arguments. However, the Supreme Court got a third chance to decide the issue when it heard arguments in Texas Department of Housing and Community Affairs at the beginning of this year. Texas Department of Housing and Community Affairs started in 2008 when Respondent, Inclusive Communities, sued the Texas Department of Housing and Community Affairs, Petitioners, alleging that Petitioners were awarding affordable housing subsidies more frequently to individuals in minority neighborhoods than in predominantly white neighborhoods. Respondent asserted Petitioners had approved credits for 49.7% of the units in minority neighborhoods, in comparison to 34.7% of the units in neighborhoods that were 90% or more white. Petition for a Writ of Certiorari at 8, Texas Department of Housing and Community Affairs, 135 S. Ct. 46 (2014). The United States District Court for the Northern District of Texas found that Respondent had made the prima facie case of discrimination necessary to bring forth a disparate impact claim. The United States Court of Appeals for the Fifth Circuit affirmed the district court and mandated that Petitioners allocate the credits more evenly. The State of Texas appealed to the Supreme Court, seeking to have the Fifth Circuit’s decision overturned, and, on October 2, 2014, the Supreme Court granted the writ of certiorari.

On January 21, 2015, the Supreme Court heard oral arguments on whether disparate impact claims are cognizable under the Fair Housing Act. Petitioners argued that the Fair Housing Act does not allow for causes of action relying on a disparate impact theory because the Act does not contain the necessary statutory language for disparate impact claims. Petition for a Writ of Certiorari at 18-21, Texas Department of Housing and Community Affairs, 135 S. Ct. at 46. In support, Petitioners pointed to the Supreme Court decision in Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (U.S. 1988). Petition for a Writ of Certiorari at 19, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. According to Petitioners, in Watson the Supreme Court indicated for the first time the language necessary to create disparate impact claims when the Court stated: “In both circumstances, the employer’s practices may be said to ‘adversely affect [an individual’s] status as an employee, because of such individual’s race, color, religion, sex, or national origin.’ . . . We conclude, accordingly, that subjective or discretionary employment practices may be analyzed under the disparate impact approach in appropriate cases.” Watson, 487 U.S. 991.

In response, Respondent argued that the phrase in the Fair Housing Act “or otherwise make unavailable or deny,” tracks the language of Title VII quoted in Watson and empirically shows Congress’ intent to allow for disparate impact claims under the Fair Housing Act. Respondent’s Brief in Opposition of Petition for a Writ of Certiorari at 14, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. Congress’ failure to change the language when it amended the Act in 1988 further indicates Congress’ intent to allow for disparate impact claims. Respondent’s Brief in Opposition of Petition for a Writ of Certiorari at 16, Texas Department of Housing and Community Affairs, 135 S. Ct. 46.

During oral arguments, the Court’s liberal judges considered the intent behind the Fair Housing Act. In particular, Justice Ginsburg questioned whether the Court should disregard Congress’ intent of reversing discrimination. Transcript of Oral Argument at 6, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. Justices Kagan and Sotomayor noted that Congress had amended the Fair Housing Act in 1988 to provide three exceptions to disparate impact and the fact that Congress had only created the exceptions and not changed the rest of the Act was an indication that Congress did not intent to take away liability under disparate impact claims. Transcript of Oral Argument at 11-13, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. Justice Breyer noted that disparate impact had been the law for at least 35 years and asked why the Court should reverse a well established law that seems to have been helpful to many while not causing any disasters. Transcript of Oral Argument at 17-18, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. Chief Justice Roberts, on the other hand, questioned whether there is “a way to avoid a disparate-impact consequence without taking race into account in carrying out the governmental activity.” Transcript of Oral Argument at 30, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. The Chief Justice also expressed a general concern about disparate impact in that “it’s very difficult to decide what impact is -- is good and bad.” Transcript of Oral Argument at 39, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. Justice Scalia, the critical vote, questioned both sides. Justice Scalia first pointed to support for Respondent’s position that the Fair Housing Act provides for disparate impact claims:

“It has to construe the plain text of the law, and the law consists not just of what Congress did in 1968, but also what it did in ‘88. And you look at the whole law and you say, what makes sense? And if you read those those two provisions together, it seems to be an acknowledgment that there is such a thing as disparate impact. However, it will not apply in these areas that the 1988 amendment says. We don’t just look at each little piece when it was serially enacted and say what did Congress think in ’68? What did it think in ’72? We look at the law. And the law includes the ’68 act and the ’88 amendments. And I find it hard to read those two together in any other way than there is such a thing as disparate impact.”

Transcript of Oral Argument at 16, Texas Department of Housing and Community Affairs, 135 S. Ct. 46. However, Justice Scalia also questioned whether disparate impact could potentially lead to racial quotas and housing policies based around race. Transcript of Oral Argument at 48 Texas Department of Housing and Community Affairs, 135 S. Ct. 46. Thus, while Justice Scalia is known to look to the text of an act, in this particular case the Supreme Court Justice may well cast a vote to strike disparate impact claims from the Fair Housing Act.

Disallowing disparate impact claims may have far reaching consequences. As several courts have noted, open discrimination has become less common and disparate impact claims are crucial to ensuring that discrimination in housing is addressed in the courts. Metropolitan Hous. Dev. Corp. v. Village of Arlington Heights, 558 F.2d 1283, 1290 (7th Cir. 1977); Smith v. Anchor Bldg. Corp., 536 F.2d 231, 233 (8th Cir. Mo. 1976); City of Joliet v. Mid-City Nat’l Bank of Chi., 2014 U.S. Dist. LEXIS 130800, 80 (N.D. Ill. Sept. 17, 2014); Arthur v. Toledo, 782 F.2d 565, 574 (6th Cir. Ohio 1986). If disparate impact claims are barred under the Fair Housing Act, a plaintiff will have to prove that the defendant had discriminatory intent in order to support a Fair Housing Act claim. This high burden could allow governmental, financial, and corporate policies that further entrench segregation in housing to go unchecked even as minority communities suffer substantial financial and social losses. Likewise, other groups like mothers with children and those who are disabled could be susceptible to various risks as housing providers develop ways to exclude them from living accommodations. In Illinois, however, plaintiffs could obtain disparate impact relief under the Illinois Human Rights Act and various county and municipal laws. Of note, the Illinois Supreme Court has established a method for identifying discrimination in a case where no direct evidence is present. See Castillo v. Dep’t of Human Rights, 2014 IL App (1st) 130373-U, P29 (Ill. App. Ct. 1st Dist. 2014). While states courts are not necessarily bound by federal precedent, Illinois has found Supreme Court cases to be very persuasive and may opt to follow the Supreme Court’s lead in this instance.

Limiting the Fair Housing Act to intentional discrimination will favor landlords, banks, and other housing providers. Thus, a finding in Texas Department of Housing and Community Affairs that disparate impact was not intended by the Fair Housing Act will be a blow to fair housing advocates. If the Supreme Court does make such a finding, Congress can negate the Court’s limitations on the Fair Housing Act by amending the Act by a majority vote in the House and Senate. Should Congress fail to re-establish disparate impact, in Illinois, the Court’s decision may merely lead to heavier reliance on state and local courts and administrative agencies. However, states with less expansive Fair Housing legislation than Illinois would face new and possibly insurmountable challenges. As the Seventh Circuit noted in Arlington Heights: “[a]strict focus on intent permits racial discrimination to go unpunished.” ■