Limiting the Fair Housing Act’s Reach

October 16, 2013

Supreme Court BuildingOn December 4, 2013, the Supreme Court will hear oral arguments in a case posing the question of whether the Fair Housing Act (FHA) prohibits not only intentional discrimination in the housing or rental market on the basis of race, color, religion, sex, familial status, or national origin, but also bans practices that have a disparate impact on a protected class. An action that limits the availability of affordable housing can violate the FHA.

The Mount Holly case has the potential to short-circuit the efforts of the Department of Justice (DOJ) under the Obama administration, which created a fair lending unit to enforce federal fair lending laws. A May 24, 2012 Reuters article, described this unit as having “turned to a more aggressive interpretation of those laws” by pursuing disparate impact cases. In one such case brought against the failed mortgage lender Countrywide Financial Corp, the DOJ obtained a record $335 million settlement of its claims that Countrywide’s lending policies resulted in African American and Hispanic borrowers paying higher mortgage fees than white borrowers.

As stated by the Court of Appeals for the Third Circuit in the case below, disparate impact claims under the FHA do not require proof of discriminatory intent, but instead they permit federal law to reach conduct that “has the necessary and foreseeable consequence of perpetuating segregation.” Last term the Court had granted certiorari in a case from the Eighth Circuit that also asked whether disparate impact claims are cognizable under the FHA. The Eighth Circuit case had involved residential landlords’ claims that the aggressive manner in which the City of St. Paul, Minnesota, enforced its housing code against their properties had a disparate impact on racial minorities, who were a disproportionately high percentage of their tenants, because the financial burdens on the landlords indirectly burdened their protected-class tenants. That case, however, settled before it was set for oral argument.

The case below involves the implementation of a redevelopment plan by the Township of Mount Holly, New Jersey, to eliminate a 30–acre neighborhood’s existing homes and replace them with significantly more expensive housing units. The neighborhood was the only one in the township comprised predominantly of African–American and Hispanic residents, and almost all residents of the neighborhood earned less than 80 percent of the area’s median income, with most earning much less.

The Third Circuit concluded that the plantiffs in the Mount Holly case, who were an association of residents and individual residents of the neighborhood, made out a prima facie disparate impact claim under the FHA through statistics showing that African–Americans would be eight times more likely to be affected by the project than whites, and that Hispanics would be 11 times more likely to be affected.

The Township contends that the FHA does not contemplate disparate impact claims because, unlike Title VII, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA), the FHA does not include language addressing discriminatory effect.