Supreme Court May Review Housing Discrimination Policy
Over the past four decades, courts have ruled that people making discrimination claims under the Fair Housing Act don’t have to prove intentional bias. Plaintiffs simply have to show that lenders, insurers, developers, or government agencies acted in ways that had a “disparate,” or unequal, impact on minority groups. “Intentional discrimination is often discreet,” says Joseph Rich, an attorney with the Lawyers’ Committee for Civil Rights Under Law. Requiring clear proof of intent to deny loans, sales, and services to minorities would often mean letting discrimination go unpunished, he says.
Now the Supreme Court is weighing whether to hear an appeal from Texas officials who argue that the standard is too loose an interpretation of the Fair Housing Act. The state is fighting a lawsuit filed by the Inclusive Communities Project, a group that advocates for affordable housing and integration.
Using the “disparate impact” standard, the group claims the Texas Department of Housing and Community Affairs pushed black residents eligible for housing assistance into poor Dallas neighborhoods by allocating a disproportionately high number of low-income tax credits to properties in those areas rather than to housing in wealthier, and typically whiter, neighborhoods. Texas, which says the program wasn’t intended to be biased, appealed to the Supreme Court after lower courts let the Inclusive Communities Project make a disparate impact argument in the case. A ruling in Texas’ favor could wipe out disparate impact arguments in cases involving other federal statutes.
The high court has agreed twice in the past three years to rule on the standard. In 2011 the justices accepted a case involving the St. Paul (Minn.) housing code. The court took up the St. Paul case even though the 11 federal appeals courts that have ruled on the issue were united in allowing disparate impact claims. (The high court typically doesn’t get involved when lower courts are in such broad agreement.) But it was never argued before the court because St. Paul’s Democratic-led government settled the lawsuit at the request of the Obama administration.
Last year the court accepted a case involving a New Jersey redevelopment project. Again, a settlement backed by civil rights advocates scuttled arguments, this time without administration involvement. “There’s no doubt that the people on the other side of the aisle do not want the Supreme Court to decide this issue,” says Roger Clegg, president of the Center for Equal Opportunity, a conservative think tank.
Fair-housing advocates say the court’s record under Chief Justice John Roberts suggests the majority is poised to wipe out the disparate impact standard. Since Roberts took his seat in 2005, the court’s five Republican-appointed justices have curbed affirmative action and struck down a key section of the Voting Rights Act.
The Inclusive Communities Project says it can make its case before the Supreme Court. “Are you f---ing nuts?” Michael Daniel, a lawyer for the group, replies when asked if he’d consider withdrawing the suit. “ICP is very committed to the lawsuit and has no intention of withdrawing the complaint.”
The Obama administration hasn’t publicly weighed in on the Texas case. The Department of Justice has settled a number of suits that relied on the disparate impact standard. In 2011, Bank of America agreed to pay $335 million to settle U.S. government claims that Countrywide Financial, which BofA acquired in 2008, had discriminated against black and Hispanic borrowers. The next year, Wells Fargo reached a $125 million settlement resolving allegations that it steered minority borrowers into expensive subprime loans.
The Texas appeal is being pressed by Attorney General Greg Abbott, a Republican running for governor. His website says he’s a “conservative to the core” who has filed 30 lawsuits against the Obama administration. Business groups led by the American Bankers Association are backing the state’s bid for Supreme Court review, calling the issue one of “vital importance to the residential mortgage industry.” Those groups say lenders are caught in a vise: Under new federal lending rules, they must look at borrowers’ income, assets, debt burden, and credit history, while the disparate impact standard means they also have to avoid turning away too many minority applicants.
“It’s very difficult for financial institutions to come up with lending criteria that make sense and prevent a future mortgage crisis—and that don’t have some unintended impacts,” says Todd Gaziano, a fellow at the conservative Pacific Legal Foundation and former member of the U.S. Commission on Civil Rights.