In a closely followed housing discrimination case, Texas Department of Housing and Community Affairs et al. v. Inclusive Communities Project, Inc. et al., (U.S. June 25, 2015), the United States Supreme Court (highest court in the land) held that FHA (Fair Housing Act) claims based on disparate impact are cognizable (susceptible to the jurisdiction of the court).


Here, Plaintiffs brought a civil lawsuit for injunctive relief claiming Defendants violated the FHA by distributing an unequal amount of federal low-income housing tax credits to predominately black inner city districts, instead of in primarily white suburban areas. Plaintiffs alleged that Defendants’ criteria for determining tax credits promoted segregated housing patters. This resulted in a disparate impact on minorities. Disparate impact claims challenge the practices of all housing providers under FHA regulations – not through the showing of a clear intent to discriminate, but rather that the practice has a disproportionately adverse effect on minorities.

Plaintiffs presented a sufficient amount of verifiable evidence to prove the existence of disparate impact. Although Defendants’ reasons for its program were deemed legitimate, the District Court (lowest level federal court- otherwise known as “trial court”) required Defendants to show there was no other less discriminatory alternative to advancing Defendants’ legitimate interests.

Procedural History

The District Court ordered Defendants to add a new basis for the allocation of tax credits. The Fifth Circuit Court of Appeals (the middle level court) held disparate impact claims are cognizable under the FHA, but remanded and reversed (sent the case back to the District Court) because the District Court improperly placed the burden to show no less discriminatory alternative on Defendants.

United States Supreme Court

In support of its holding, the Supreme Court cited to two other anti-discrimination statutes (laws): Title VII of the Civil Rights Act of 1964 and the Age and Discrimination in Employment Act of 1967. Both sections contain language similar to that language found in the FHA, which focuses on the actor’s actions, not the actor’s intent. The Supreme Court indicated prior court decisions “instruct that anti-discrimination laws must be construed to encompass disparate impact claims where the text refers to the consequences of actions, and not just the mindset of actors where that interpretation is consistent with statutory purpose.”

While the Supreme Court chose to recognize disparate impact claims, it limited the scope of potential liability to ensure that housing providers could preserve a practice and procedure that serves a legitimate business interest. Therefore a defendant must prove the identified practice is necessary to achieve at least one substantial, legitimate, non-discriminatory interest after a plaintiff shows a disparate impact. The plaintiff then has the opportunity to prove the existence of another practice with a less discriminatory effect that would serve defendant’s same legitimate business interest. Further, at all times, plaintiff must show a causal connection between defendant’s conduct or policies and disparate impact.


Prior to this decision, violations were almost always only actionable if the plaintiff could sufficiently prove defendant’s intent to discriminate. As you can imagine, this was a high, difficult and costly standard to meet. However, now – and especially with the plethora of internet data and information available to everyday consumers, plaintiffs may find an easier path to success in the FHA arena by using hard empirical evidence and statistics to prove the existence of disparate impact.

For housing providers it is prudent to exercise due diligence to identify potential consequences, intended or unintended, with implemented policies. The idea is to use money wisely on sound housing practices to avoid costly penalties and litigation.

Michael J. Libutti is a Broker and Attorney at Class Realty Group’s San Diego office. Reach him by email at mlibutti@classrealtygroup.com or by phone at 858-220-4295.

By |2017-05-08T20:04:17+00:00February 25th, 2017|Learn the Law with Libutti|0 Comments

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Kevin is the Digital Marketing Coordinator at Class Realty Group.