In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, the Supreme Court held that the disparate impact theory applies to housing discrimination claims. This was a significant victory because the Court had not previously applied the disparate impact theory to housing discrimination cases.
The case commenced when the Inclusive Communities Project alleged the Texas Department of Housing and Community Affairs contributed to continued segregated housing patterns by disproportionately allocating the tax credits, granting too many credits for housing in predominantly inner-city areas and too few in white suburban neighborhoods.
Under the disparate impact theory, practices or policies that are facially neutral but exclude a disproportionate percentage of minorities violate anti-discrimination laws if they are not shown to be "job related." A showing of discriminatory intent is not required. If a plaintiff shows that a policy or practice has a disparate impact, the defendant must prove that the challenged practice is necessary to achieve legitimate, nondiscriminatory interests. Once a defendant has satisfied its rebuttal burden, a plaintiff can still prevail by proving that the interests supporting the challenged practice could be served by another, equally effective, practice that has a less discriminatory effect.
The disparate impact theory has a long history. In 1971 in one the Supreme Court's earliest employment discrimination decisions, Griggs v. Duke Power Company, the Court considered the validity of employment practices that excluded a disproportionate percentage of minority applicants. The employer in Griggs had restricted black employees to lower paying jobs. After the employment discrimination law became effective in 1965, access to the higher paying positions were conditioned on a high school diploma and a passing score on two standardized tests. These new requirements excluded a disproportionate percentage of black applicants.
The Supreme Court held that "practices, procedures, or tests neutral on their face, and even neutral in terms of intent cannot be maintained if they operate to 'freeze' the status quo of prior discriminatory employment practices. The employment discrimination law required the removal of "artificial, arbitrary and unnecessary barriers to employment which operate invidiously to discriminate on the basis of race of other impermissible classifications." The absence of discriminatory intent does not redeem practices that operate as "built in headwinds" for minority groups and are unrelated to measuring job capacity. Griggs' disparate analysis was applied in a long line of subsequent cases and enacted into law in the Civil Rights Act of 1991.
This important principle was endorsed in Texas Department of Housing and Community Affairs. The Court ruled that recognition of disparate impact claims is consistent with the Fair Housing Act's central purpose. The law was enacted to eradicate discriminatory practices in the nation's housing markets. In the Fair Housing Act Congress proclaimed that, "It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States."
This was an important victory for Fair Housing. But, after endorsing the disparate impact theory, the Court imposed a heavy burden of proof. The Court emphasized that housing authorities and private developers must be given an opportunity to explain the valid interest served by their policies. The Court hypothesized, as an example, "If a real-estate appraiser took into account a neighborhood's schools, one could not say the appraiser acted because of race." (A 2007 study conducted by the National Housing Alliance found that the quality of a neighborhood's school district was used as a proxy for the racial composition of a neighborhood. Agents would tell white testers to avoid majority black neighborhoods on the claim that "the schools are bad," even when those schools had high achievement records. The same agents would then market those schools to the non-white testers.)
This flawed example was intended to show that a defendant would be liable only if the practices causing the adverse impact are not consistent with a legitimate business interest. A plaintiff who fails to allege facts or produce statistical evidence demonstrating a causal connection to the disparity would not have produced sufficient evidence to proceed to trial. A claim lacking these elements will be dismissed.
Despite the procedural obstacles, Texas Department of Housing and Community Affairs is an important breakthrough. Justice Kennedy's opinion concluded with a reference to a 1968 report issued by the National Advisory Commission on Civil Disorders (known as the Kerner Commission.) He wrote:
"Much progress remains to be made in our Nation's continuing struggle against racial isolation... The FHA must play an important part in avoiding the Kerner Commission's grim prophecy that "[o]ur Nation is moving toward two societies, one black, one white--separate and un-equal."... The Court acknowledges the Fair Housing Act's continuing role in moving the Nation toward a more integrated society."
As years of studies have consistently shown, residential segregation remains at astonishingly high levels in the United States. Inner city neighborhoods across the nation share the same attributes; high unemployment, insufficient access to health care, an inadequate supply of affordable housing and long waiting lists for subsidized units. Schools are neglected and underfunded, and dropout rates are high. Ghettoization and racial isolation remain the most formidable obstacles to achieving racial equality in America. The disparate impact analysis provides a means for moving toward the goal of eliminating housing discrimination.