The U.S. Supreme Court has ruled that a local housing policy that has a “disparate impact” on minorities is actionable under the federal Fair Housing Act (“FHA”), even if the impact was unintentional. In Texas Department of Housing v. the Inclusive Communities Project, the Court decided that discrimination may be actionable in cases where there is no overt bias, but where statistics prove that a practice or policy caused a disparate impact on minorities. However, if the defendant proves that the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest, and the plaintiff is unable to show that there is another, less discriminatory means to achieving such interests, a plaintiff may not prevail under the FHA. Through this decision, the Court has upheld HUD’S February 2013 final rule allowing a plaintiff to establish disparate impact liability under the FHA.


Interestingly, many who have hailed the Supreme Court’s decision, including the Obama administration, had previously tried to prevent the issue from reaching the Court. In 2011, the Justice Department’s top civil rights official brokered a deal for St. Paul, Minnesota, to drop a Supreme Court appeal because the Obama administration feared it would result in an unfavorable ruling. When a similar case from Township of Mount Holly, New Jersey, came before the Court in 2013, it too was dropped out of concern that conservative Supreme Court justices might strike down “disparate impact” claims entirely.


The Texas Department of Housing decision has limited impact in California, where the state’s Employment and Housing Act (“FEHA”) already recognizes claims of housing discrimination based on disparate impact. Moreover, federal courts have long held that facially neutral laws and regulations having a disparate impact on protected classes violates the FHA. You can read the entire Supreme Court decision here.


Stay tuned for a more detailed analysis from Goldfarb & Lipman.