The U.S. Supreme Court on Jan. 21 heard oral arguments in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project. This case, which deals with tax credits for low-income housing, will address the validity of disparate impact claims under the Federal Fair Housing Act.
Disparate impact discrimination occurs when a neutral, non-discriminatory policy has a disproportionate, adverse impact on members of a protected class. The classic example in such a neutral policy in the housing context is denial of tenancy based on criminal arrest records, which has a disproportionate impact on African-Americans. In the Texas case, the plaintiffs claim that the state of Texas’s allocation of a disproportionate number of federal low-income housing tax credits to minority neighborhoods perpetuates residential segregation in the Dallas area.
Two prior U.S. Supreme Court cases on the same issue were settled before the Court had an opportunity to rule. Many observers felt that the Court took these cases because it was prepared to rule that, unlike other federal laws which speak of discriminatory effect, the Fair Housing Act only prohibits intentional discrimination.
The elimination of claims for disparate impact at the federal level would have a great impact on the insurance, banking and housing industries nationwide. However, it would make little, if any difference in California, because there is an expressed prohibition against disparate impact discrimination in the California Fair Employment and Housing Act which provides an independent basis for liability. A ruling is expected this summer.