Last week, the U.S. Supreme Court quietly issued an important ruling which promises to have a long-lasting and deep impact on the residential housing industry. In Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, the high court examined the scope of claims that may brought under the Fair Housing Act of 1968.
The ruling will apply to all persons and businesses engaged in the construction, development, sale, and renting of residential real estate, as well as the mortgage and financing sectors that provide the funding for the purchase of housing.
Without requiring that the Inclusive Communities Project (the plaintiff at the trial court level) prove discriminatory intent, the trial court found that the Texas Housing Department (TDH) had unlawfully discriminated in its provision of subsidized housing because it had “disparately impacted” minority housing applicants. The trial court found that TDH had approved fewer tax credits for housing project applicants in areas populated primarily by “Caucasians” than it approved for areas populated primarily by non-Caucasians. Inclusive Communities Project’s allegation was that housing project applicants, who were primarily of racial minority background, were discriminated against in being forced out of white suburban areas and into black inner city areas.
In a 5-4 decision in which Justice Anthony Kennedy wrote for the majority, the Court held that the Fair Housing Act, which was passed in order to prevent discrimination in the provision of housing, extends not only to intentional acts of discrimination, but also to claims in which a plaintiff asserts the existence of unintentional practices by a defendant that are alleged to have a discriminatory effect, or “disparate impact,” regardless of the intent of the defendant.
The ruling will bolster the ability of the Department of Justice and private litigants to take action against those perceived to engage in discriminatory practices. The Department of Justice and private plaintiffs will no longer be constrained by the former requirement that potential targets had a “discriminatory intent or motive.” Even a showing that a minority person or group is in some way differently affected by the choices of those in the housing industry, however innocently made or justifiable for economic or other reasons, may be called into question and may give rise to an actionable claim against the target.
Given the breadth of what might be considered “discrimination” or “disparate impact,” private companies in the housing industry will need to become aware of the changes in the law so as to comply with the new, broader requirements. Part of this process may include internal or external evaluation of the company’s practices as they impact persons in protected classes, as well as developing a thorough familiarity with the FHA in the context of the “disparate impact” area of law.
In particular, companies and individuals in the real estate industry will need to take careful precautions in order to make sure they are not unintentionally impacting various protected groups, such as racial minorities, or even perceived to have been impacting such groups, through what might otherwise be considered legitimate, innocent or everyday business decision-making.