The Supreme Court Will Rule on a Case That Could Rip America Apart

The Supreme Court Will Rule on a Case That Could Rip America Apart

REUTERS/Larry Downing

It’s a cruel irony that on the same week that we honor the life of Martin Luther King, Jr., the Supreme Court heard arguments on whether to weaken the Fair Housing Act (FHA) of 1968, an anti-discrimination law passed in the wake of his death. But it’s even crueler that the law’s most critical tool may fall because of the myopic interpretation of a handful of words.

At issue is the “disparate impact” standard, the idea that lenders or developers violate the FHA if their actions have a discriminatory effect on minorities, regardless of the actor’s intentions. So zoning laws that keep low-income housing out of certain neighborhoods, or disproportionate offering of subprime loans to minorities, meets the disparate impact standard if no non-discriminatory explanation can be given, even without a smoking gun statement of deliberate racism. 

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Disparate impact, part of several anti-discrimination statutes, is crucial because, as Sen. Elizabeth Warren (D-MA) points out, “Intentional discrimination cases are notoriously hard to prove because they require evidence of a person’s state of mind.” And it’s critical for housing policy because of the long and shameful legacy of racial discrimination, from redlining in the 1960s to the subprime predators of the 2000s.

This housing segregation and asymmetrical treatment prevents African-Americans from building wealth, whether because of failing schools or fewer job opportunities or higher-cost lending. White households today have a net worth 13 times higher than black households, according to the Pew Research Center. 

In the case before the Supreme Court, the Texas Department of Housing and Community Affairs allegedly allocated tax credits to developers that led them to build affordable housing almost exclusively in low-income neighborhoods, denying the opportunity for minorities to live in less distressed communities. The Inclusive Communities Project, a civil rights group based in Dallas, made a disparate impact claim. 

In response, Texas argued that the FHA does not have disparate impact authority, because the statute’s text doesn’t use the phrase “adversely affect” that appears in other civil rights statutes.

Really, that’s it.

Scott Keller, the Solicitor General of Texas, argued in the Supreme Court Wednesday that disparate impact laws must have “effects- or results-based” language. For example, it could say that lenders cannot “adversely affect” access to housing on the basis of race. In Keller’s theory, Congress intentionally omitted such phrasing from the FHA. “When a statute prohibits actions taken because of race and it lacks effects­-based language, the statute is limited to intentional discrimination,” Keller said Wednesday. “The Court needs to focus on the plain text.”

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In order to make this claim, Texas must ignore a host of evidence pointing the other way. First, disparate impact was not a concept in law in 1968, when the FHA was written; it came about in 1971, related to a different statute, in a case known as Griggs. So the idea that Congress purposefully left out language whose importance they had no way of recognizing is quite strange.

Second, the FHA doesn’t merely contain a prohibition “to refuse to sell or rent” to minorities, but also to “otherwise make unavailable” housing. The agency interpreting the statute, the Department of Housing and Urban Development, found that this phrase, substantially similar to “adversely affect,” connoted disparate impact.

HUD has interpreted the statute that way for 47 years, under administrations of both parties, and recently implemented regulations explicitly saying so. Appeals courts have ruled 11 times that the “disparate impact” standard is valid under the FHA. The law’s original co-sponsors wrote in an amicus brief that they meant to target discriminatory effects, not just intentional discrimination.

Finally, and most damning to the Texas case, in 1988 Congress amended the FHA by exempting certain types of activities from disparate impact claims. Why would Congress have to make such exemptions, if they didn’t believe disparate impact to be present in the statute? As no less than Justice Antonin Scalia said Wednesday, “if you read those two provisions together, it seems to be an acknowledgement that there is such a thing as disparate impact… why doesn’t that kill your case?

Despite the seeming weakness of the argument, civil rights advocates have been petrified of the Supreme Court getting its hands on the FHA for some time. Two prior housing discrimination cases from Minnesota and New Jersey were withdrawn shortly after the Court agreed to hear them, because of this fear that disparate impact would get struck down. And the Court taking these cases despite no disagreement in the lower courts about the issue signaled that they wanted to overturn the legal theory. 

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Indeed, on Wednesday, the Court’s conservatives appeared to be comfortable with striking out disparate impact, and maybe not just from housing. Chief Justice John Roberts in particular questioned whether the concept even makes sense, relating it to the specific Texas housing tax credits case. Roberts figured more new housing built in low-income communities would have positive effects, so any disparate impact wouldn’t harm the subjects. The Chief Justice appeared to want to use the particulars of this case as a pretext to throw out the whole idea, similar to his actions to scale back a host of civil rights laws, including last year’s ruling against key sections of the Voting Rights Act.

With the court deadlocked along party lines, Scalia becomes the wildcard. As a textualist, he sees the intent of the 1988 amendments, to exempt certain activities from disparate impact claims, as strongly suggestive that disparate impact was well-established within the FHA. “When all parts are read together, there is such a thing as ‘disparate impact,’” Scalia said Wednesday. “You don’t look at each little piece, you look at the whole law.”

But later in the arguments, Scalia questioned whether the concept of disparate impact would lead to racial quotas and race-conscious housing policies, which he finds suspect. It’s almost as if his reading of the text takes him to a place he’d rather not go. And he could find that, while Congress desired to create a “disparate impact” standard, the very concept violates the Constitution. 

If Scalia does go against his initial impulse and join the conservatives to eliminate disparate impact, he will have ripped the guts out of the FHA. It would be nearly impossible to subsequently win housing discrimination cases, unless some lender is so stupid as to write down, “I am biased against minorities and don’t want to sell them a house.”

Related: The Biggest Policy Mistake of the Great Recession 

If anything, the FHA should be expanded, or at least enforced more robustly. Lending discrimination cases arising from the housing bubble and the financial crisis haven’t yielded major results. The largest, a 2011 case against Countrywide Financial for giving subprime loans to minority borrowers and prime loans to white borrowers with similar credit, settled for $335 million, a relative pittance. Wells Fargo settled a case about steering minorities into subprime loans in 2012 for $175 million.

You can argue that these sums aren’t big enough to stop the hundreds of billions of dollars’ worth of abuse of minority communities. Moreover, the Justice Department never prosecuted any executive for what amounts to theft. Countrywide and Wells Fargo didn’t even have to admit wrongdoing for their crimes. To quote Senator Warren, “we need stronger fair housing laws, not weaker ones that allow lenders to return to the risky — but lucrative — practices that set the stage for the last crash.”

The lending industry strongly supports rolling back the protections provided by the disparate impact standard, which tells you all you need to know. We shall see if the Court allows a narrow interpretation of one sentence in a 1968 statute to be employed to rob minorities with impunity. 

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