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Disparate Impact

1/15/15
Economic Justice | Fair Housing and Lending
Washington, D.C. Advocacy | Fair Housing

The Supreme Court’s upcoming ruling on the Fair Housing Act will test our nation’s commitment to equal treatment under the law.  It will determine whether equal opportunity in housing continues to be one of our most cherished values.  As our nation becomes more diverse in every way, the Fair Housing Act helps to foster stronger and more inclusive communities, which are critical to our nation’s success and prosperity. 

Oral argument in this case occurs ironically two days after we celebrated the legacy of Dr. Martin Luther King – the Fair Housing Act was passed by Congress in 1968, approximately a week after his assassination and is one of King’s lasting achievements. Texas v. Inclusive Communities Project questions whether a key tool created by the FHA, known as the disparate impact standard, can remain in place.  At issue is whether Texas' use of low-income tax credits were deployed in ways that perpetuated rather than alleviated racial segregation in Dallas.  A local non-profit, the Inclusive Communities Project, brought suit under the disparate impact standard, claiming that Dallas’ allocation of the tax credits had an unjustifiable and highly disproportionate impact on African Americans.  The district court agreed with the plaintiffs and the U.S. Court of Appeals for the Fifth Circuit adopted the disparate impact standard – as eleven courts of appeals across the country have done over several decades.  However, Texas appealed to the Supreme Court, and for the third time in as many years, the Court granted a case involving this dimension of the FHA.

Disparate impact occurs when government or certain private actors unjustifiably pursue practices that have a disproportionately harmful effect on communities of color and other groups protected by the FHA. This standard is often used in challenging discrimination in mortgage lending, homeowners’ insurance, exclusionary zoning, redevelopment, and demolition of public housing.  Disparate impact helps to screen out covert racial discrimination as well as practices that may seem neutral on their face, but actually exacerbate segregation or the effects of prior racial discrimination.  Discriminatory outcomes could take the form of an apartment complex excluding applicants without full time jobs and making it more difficult for disables veterans and seniors to access housing, a bank charging exorbitant deposit fees for those seeking a mortgage loan, or an apartment building restricting occupancy to one person per bedroom.    

More than three million instances of housing discrimination occur each year, and the vast majority are unreported.  When Americans are denied equal access to housing, it reduces the availability of good jobs, quality education, safe streets, and a clean and healthy environment, all of which are central to the American Dream.

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