August 31, 2016

Court Dismisses Disparate Impact Claim Against Texas Housing Agency

Holland & Knight Regulatory Litigation Blog
Lynn E. Calkins | Christine N. Walz

Last year, in Texas Dep't of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., the U.S. Supreme Court held that individuals and groups can challenge housing policies or practices that have a disproportionate adverse effect on protected classes (i.e., a disparate impact). However, it did not rule on whether the specific housing practice in that case actually violated the Fair Housing Act. Instead, it asked the lower court to make that determination. 

At issue in the case was the allocation of certain tax credits for low-income housing developments.  More specifically, the plaintiff had alleged that the policy or practice of permitting the Texas Department of Housing and Community Affairs to use its discretion in allocating these tax credits perpetuated racial segregation, in violation of the FHA.

On August 26, 2016, a Northern District of Texas court ultimately dismissed the claims raised in that case, finding that plaintiff had failed to point to a specific, facially neutral policy that caused a racially disparate impact.  

The court also held that plaintiff was required to prove that the alleged policy or practice caused a statistical disparity, noting that this "robust causality requirement …protects defendants from being held liable for racial disparities they did not create." Applying this requirement, the court found that the plaintiff had failed to demonstrate that the defendant's discretionary decisions—rather than local zoning rules, community preferences or developers' choices—caused a statistical disparity.

This decision shows that courts may be willing to take a hard look at disparate impact claims, especially where the policy or practice being challenged is not clearly articulated.  However, businesses and local municipalities making housing determinations, including developers, apartment managers and financial institutions, must still be prepared to defend any policy or practice that causes a disparate impact on a protected class of individuals by showing that the policy or practice "is necessary to achieve a valid interest."

The Inclusive Communities Project, Inc. v. The Texas Department of Housing and Community Affairs (N.D. Tex. Civil Action No. 3:08-CV-0546-D)

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