Supreme Court may weaken housing bias cases

21 Jan 2015 | Author: | No comments yet »

Argument preview: That housing bias issue is back.

WASHINGTON (AP) — The Supreme Court could knock out a decades-old strategy for fighting housing discrimination, a move that would make it tougher for people to win lawsuits claiming housing policies are biased. In this case, the Texas Department of Housing argues that the text and history of the law confirm that it does not allow disparate impact claims, but instead authorizes only claims based on intentionally discriminatory conduct. When the justices take the bench on Wednesday, they will consider whether housing or lending practices that have a negative impact on minorities and other protected groups can be considered illegal, even if there is no proof of intent to discriminate. The question of whether states discriminate by awarding most subsidies for low-income real-estate to projects in mostly-minority areas is the underpinning of a case now before the U.S. Civil rights groups have tried desperately to keep the issue away from the high court, fearing that conservative justices are all too eager to quash the use of so-called “disparate impact” lawsuits.

The question before the court is whether the Fair Housing Act of 1968, intended to fight pervasive residential segregation, bans practices that unintentionally discriminate against minorities. Two similar cases out of Minnesota and New Jersey reached the court in recent years, but those were strategically settled in 2012 and 2013 just weeks before oral argument — in one case at the behest of the Obama administration. Robbie Whelan/The Wall Street Journal DALLAS—Demetria Johnson, a 32-year-old beautician, used to sleep on a couch at her cousin’s apartment in Pleasant Grove, a low-income neighborhood in south Dallas. Under the FHA, it is illegal to “refuse to sell or rent… to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” Civil rights advocates believe this language is broad enough to include disparate-impact claims, and the courts have historically agreed.

Skojec: If ICP prevails, it will mean that advocacy groups will bring cases similar to what ICP brought against Texas against other states’ agencies, and all states will have to change their Qualified Allocation Plans and tax credit allocation processes. On a wait list for her own place at the time, the single mother of four worried about her luck of the draw. “My next house doesn’t have to be the biggest house or the nicest house,” she said. “I just want somewhere nice and clean and peaceful.” But for years, real-estate developers have built the vast majority of this city’s government-subsidized, low-income housing in poor, minority communities where land is relatively inexpensive and local opposition is limited. Housing authorities will find it substantially harder to develop and renovate affordable housing, just as the housing authorities in Texas have since ICP prevailed and Texas changed its plan. The ICP case in Texas is currently stayed, but the trial judge would have to immediately make new findings and reach a decision using the HUD Rule as the standard. It involves an appeal from officials accused of awarding federal housing tax credits in a way that steered low-income housing into mostly poor, black neighborhoods in Dallas and generally kept the units out of wealthier white enclaves.

There are many other cases based on disparate impact pending against developers, agencies, lenders, and insurance companies that would all begin to move forward more rapidly. The group alleged that agency policies were keeping Dallas neighborhoods segregated and denying blacks a chance to move into safer neighborhoods with better schools.

The court’s taking up the issue repeatedly, Gupta says, signals that “at least some of the justices are very interested in changing the law in this area.” Joe Rich, an attorney with The Lawyers’ Committee for Civil Rights Under Law, agrees that the latest case “is of concern, because there is an interest in something that seemed to be settled.” He is more upbeat about the possible outcome, however. “I think if they give it a fair look, and look at the law and the unanimity that surrounded it, there’s a decent chance they’ll uphold it.” The Texas case involves a fair-housing advocacy group that alleged state officials were perpetuating racial segregation in the Dallas region by making federal low-income housing vouchers available primarily in minority neighborhoods. With much less fear of costly litigation and claims, housing development, including for affordable housing, would expand significantly as developers, state agencies, housing authorities, and lenders focus more on growth wherever projects can be built. Texas has won support from business groups, including the Mortgage Bankers Association, the American Financial Services Association and others arguing that federal housing law should punish only intentional acts of discrimination. But fair housing advocates say eliminating such claims means courts will recognize only the crudest forms of intentional discrimination and not more subtle forms of bias that persist today.

While Justice Anthony Kennedy is generally regarded as the key swing vote on the current court, Scalia has been a proponent of deferring to government agencies when the text of a law is ambiguous. Typically, the Court would want to decide an issue that is in conflict between the circuits, especially here, where HUD has already tried to resolve the conflicts with a rule.

A ruling in favor of the state could have broad implications, potentially spilling over into civil-rights enforcement in employment, education and other areas, such as banking and insurance practices. For example, Countrywide, SunTrust and Wells Fargo have all reached settlements with the Justice Department in the last two years related to allegations that they charged higher fees and interest rates to minority borrowers.

In its ruling, the court might throw into question the constitutionality of disparate-impact claims more broadly, from bank lending practices to employment discrimination. A ruling that quashes disparate impact could create an opening for the courts to revisit disparate impact’s use in cases against lenders and in employment and education law as well.

Solicitor General Don Verrilli will be using that regulation to help bolster the case for extending the law to disparate-impact claims. (Such an argument may be somewhat more difficult to make, because a federal trial judge in Washington, D.C., has recently struck down the HUD regulation, ruling that the 1968 law only applies to intentional housing bias. Skojec: In some disparate impact cases, the theory has worked effectively to lessen racial discrimination and the perpetuation of illegal segregation. The new case arises under a federal program that provides tax subsidies in the form of credits to developers who build housing projects for low-income occupants.

That case involved a North Carolina power plant that had explicitly barred blacks from better jobs until racial discrimination was outlawed by the Civil Rights Act. The company then imposed new requirements—a high school diploma and IQ test scores—for the better jobs, which, in a state that had shortchanged black schools for generations, effectively disqualified many African-Americans. To qualify for a tax benefit, a project must either have twenty percent or more of the units under rent control and occupied by individuals with incomes of one-half or less of the median gross income in the local area, or have forty percent or more of the units under rent control and occupied by individuals with incomes sixty percent or less of the area’s median gross income. The court ruled that the company’s new requirements were discriminatory. “Good intent or absence of discriminatory intent does not redeem…mechanisms that operate as ‘built-in headwinds’ for minority groups,” Chief Justice Warren Burger wrote.

Under state law, it must allocate the tax subsidies based upon a point system, using eleven criteria for ranking a project, ranging from income levels of the tenants and the level of community support. In Dallas, a group known as The Inclusive Communities Project works to place Section 8 subsidized tenants in Dallas’s more affluent and predominantly white neighborhoods, mainly in the suburbs, with the specific aim of racially integrating them. It ordered the agency to come forward with a legitimate rationale for its placement decisions, and to come up with an alternative approach that would serve its policy interests without a discriminatory impact. The court then took another disparate-impact appeal, only to see it vanish in 2013 when officials in Mount Holly, N.J., settled with low-income residents challenging a redevelopment project. Court of Appeals for the Fifth Circuit, but that court was bound by existing precedent recognizing “disparate impact” claims under the 1968 housing law.

The housing in question was built using money raised through the federal Low Income Housing Tax Credit program, a Reagan-era measure that allows private corporations to shield their earnings from taxes by investing in affordable housing developments. If a challenger claiming a violation makes the case that there was a discriminatory effect of a rental or sale policy, the agency or landlord must prove that the practice was necessary to achieve a substantial, legitimate, and non-discriminatory interest. By using the language of discrimination — bias “because of” a personal characteristic — the Act “cannot support an additional prohibition on actions that discrimination because of any factor” that happens to correlate with the protected characteristics, the agency contended.

But in its brief, the government argued that because “individual motives are difficult to prove directly…Congress has frequently permitted proof of only discriminatory impact as a means of overcoming discriminatory practices.” “I wake up in the morning, I go to work, I sue Barack Obama and then I go home,” Mr. As a final thrust, it argued that, if HUD is allowed to outlaw “disparate impact” under the Act, then any federal law that barred discrimination “because of race” could be similarly expanded. Decades of federal court rulings embracing the “disparate impact” remedy had confirmed that this was Congress’s aim, the Project asserted. “The congressional directive to remedy the effects of past governmental segregation was based on the congressional findings that the prevailing structure of the housing market in this country remained distorted by those effects and enduring discrimination without regard to motivation or bias,” according to the Project.

Neighbors to the development protested it at meetings of Frisco’s city council while it was still in the planning phase in 2010, arguing that it would drive down property values and increase crime. He and his wife moved into North Court Villas last year, he says, since they wanted to live closer to their church, and because schools are better than in McKinney, a suburb to the east where they used to live. “It felt pretty bad to serve this community—do things for the people who live here with our church, and live in another community, because we weren’t able to afford to live here,” he says. Unsurprisingly, it seeks deference to HUD’s expertise, suggesting that the department’s reading of the Act’s language is certainly a permissible one, and is, indeed, the only reading that gives effect to what Congress did in the 1988 amendments.

The Texas agency drew the support of conservative legal advocacy organizations, business groups (including the American Insurance Association, which won its case in Judge Leon’s court in November), the American Bankers Association, and various housing and lending associations or trade groups. On the side of the Project were an array of civil rights organizations, scholars of housing law, a number of cities, seventeen states, and several groups of law students focusing on equal rights law. If, as is now expected, this case does go to a decision on the merits, without a prior settlement, a final decision is expected to emerge in late spring or early summer. Recommended Citation: Lyle Denniston, Argument preview: That housing bias issue is back, SCOTUSblog (Jan. 20, 2015, 5:03 PM),

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