Yesterday, the Supreme Court rejected a misreading of a statute meant to gut its efficacy and upheld a signature law that protects Americans from unequal treatment.
I’m not talking about King v. Burwell, the case affirming that Obamacare subsidies are available to all eligible Americans, no matter if they use a state of federal exchange to get their health insurance.
In a similarly monumental ruling, the Court decided 5-4 that the Fair Housing Act (FHA) of 1968 includes a “disparate impact” standard — meaning that litigants can sue if they find that minorities are treated adversely by a particular housing policy, regardless of stated intent. Housing advocates have long worried that the lawsuit, Texas Department of Housing and Community Affairs v. Inclusive Communities Project, might gut the FHA, in the same manner that the Court weakened the Voting Rights Act in the last term. “It does look like we’ve dodged a bullet,” said Andrew Scherer, Policy Director at the Impact Center for Public Interest Law at New York Law School.
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As I wrote in January, the Texas Department of Housing and Community Affairs (TDHCA) 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, brought a disparate impact claim.
TDHCA argued that the lack of the phrase “adversely effect” in the Fair Housing Act text meant that it did not allow claims against the discriminatory effects of policies, only against overtly discriminatory intent. In this sense, the case resembled the Obamacare lawsuit, looking at the text and asking whether it supports certain actions.
Without allowing for claims alleging discriminatory effects, the only way to violate the Fair Housing Act would be for a landlord or developer to state specifically that they refused to rent or sell a residence to an individual based out of racial animus. Since this mostly only happens in movies, a bad ruling would have effectively invalidated the FHA. Intent is “an almost impossible burden to meet in discrimination cases,” Scherer said. “All but the most extreme, avowedly and openly biased know enough not to openly express discriminatory intent even where it exists.”
The financial industry sought the elimination of the disparate impact standard, which would have shielded misconduct in taking advantage of low-information consumers, particularly in communities of color. Trade groups like the American Bankers Association supported TDHCA in the case.
The history of racism in America closely parallels discrimination in housing, from redlining that restricted African-Americans from certain neighborhoods to subprime lending that targeted them. Invalidating fair-housing laws would have taken a tool away from prosecutors and emboldened more predatory lending policies.
But Justice Anthony Kennedy, writing for the 5-4 majority, ruled that the Fair Housing Act text makes it illegal not only to refuse to sell or rent a dwelling on the basis of race, but to “otherwise make unavailable.” This shifted the emphasis, Kennedy wrote, from intent to consequences, much like language in the Civil Rights Act and other statutes that have recognized disparate impact.
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Kennedy also picked up on the fact that Congress made amendments to the FHA in 1988, creating exceptions where disparate impact does not apply. Since it would be illogical for Congress to create exceptions to a legal standard which doesn’t exist in the statute, this gave more reinforcement to the legislative intent of the FHA. Cleverly, Kennedy cites prior writings from his fellow Justice, Antonin Scalia, in support of this. Though Scalia brought up the 1988 amendments at hearings and asked lawyers for TDHCA “why doesn’t that kill your case,” he dissented from Kennedy’s opinion.
Despite the clear finding, Kennedy cautioned that “disparate impact liability must be limited” to avoid race-conscious policies like quotas, and to give developers and local governments leeway to make business choices they feel serve a valid public interest. Statistics showing a racial disparity, in other words, may not be enough to show liability.
In fact, the Inclusive Communities Project may still lose the underlying case. In sending it back to an appeals court for a rehearing, Kennedy seemed to lean in that direction. “It seems difficult to say as a general matter that a decision to build low-income housing in a blighted inner-city neighborhood instead of a suburb is discriminatory, or vice-versa,” Kennedy wrote. He adds that, without a causal connection between TDHCA’s policy and disparate impact, the lower court should dismiss the case.
Fair housing claims are already limited by these guidelines, so the case really adopted the status quo. But the alternative would have been disastrous, especially if the restrictions on disparate impact would have leaked into other anti-discrimination statutes. Housing groups were so concerned by the potential of a bad ruling that they withdrew two prior housing discrimination cases from Minnesota and New Jersey. But Kennedy, the swing vote, saved the statute.
And that statute remains necessary. Several groups have cited racial discrimination in current housing policies, from banks creating more blight in neighborhoods of color, to denial of access to credit to African-Americans. Harvard University’s “State of the Nation’s Housing 2015” finds a denial rate on mortgage applications for African-Americans at 20 percent, twice that for white borrowers. And indeed, the creeping segregation in housing in American society reflects a problem that was the impetus for the Fair Housing Act itself.
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It’s possible that some of these allegations reflect discriminatory policies, like the Fair Housing Justice Center argued earlier this year in a case against regional lender M&T Bank. The Obama Justice Department’s civil rights division has been diligent in bringing lending discrimination claims; just last month they successfully prosecuted Provident Funding Associates for charging higher broker fees to loans for African-Americans and Hispanics. Now there’s nothing standing in the way for the Justice Department to go further.
At least the fate of anti-discrimination policy was not placed in the hands of Justices like Clarence Thomas, who actually argued in his dissent that racial imbalances are sometimes positive for minorities because the NBA features a lot of black players, and incredibly, because Jews once owned a lot of businesses in Poland (somehow that turned around after around 1935).
Instead, with Kennedy’s decision, future governments and legal advocates maintain the option to root out illegal activity that prevents minorities from getting ahead.
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