LegiStorm

Summary:

The Fair Housing Act (FHA) was enacted “to provide, within constitutional limitations, for fair housing throughout the United States.” It prohibits discrimination on the basis of race, color, religion, national origin, sex, physical and mental handicap, and familial status. Subject to certain exemptions, the FHA applies to all sorts of housing, public and private, including single family homes, apartments, condominiums, and mobile homes. It also applies to “residential real estaterelated transactions,” which include both the “making [and] purchasing of loans ... secured by residential real estate [and] the selling, brokering, or appraising of residential real property.” There has been controversy over whether, in addition to outlawing intentional discrimination, the FHA also prohibits certain housing-related decisions that have a discriminatory effect on a protected class. That controversy was settled when, in June 2015, a divided U.S. Supreme Court ruled that disparate impact claims are cognizable under the FHA. Key Takeaways of This Report  In February 2013, Department of Housing and Urban Development (HUD) for the first time issued regulations “formaliz[ing] HUD’s long-held interpretation of the availability of ‘discriminatory effects’ liability under the Fair Housing Act and to provide nationwide consistency in the application of that form of liability.”  In June 2015, the Supreme Court held in Texas Department of Housing and Community Affairs v. Inclusive Communities Project that disparate impact claims are cognizable under the FHA—a view previously espoused by HUD and the 11 U.S. Courts of Appeals to render opinions on the issue. The Court also outlined certain limiting factors that should apply when assessing disparate impact claims.  The Supreme Court appears to have adopted a three-step burden-shifting test for assessing disparate impact liability under the FHA. The test outlined by the Court, which is similar though not identical to the one adopted by HUD, places the initial burden on the plaintiffs to establish evidence that a housing decision or policy caused a disparate impact on a protected class. Defendants can counter the plaintiff’s prima facie showing by establishing that the challenged policy or decision is “necessary to achieve a valid interest.” The defendant’s “valid interest” will stand unless the “plaintiff has shown that there is an available alternative practice that has less disparate impact and serves the entity’s legitimate needs.” Going forward, the minority of federal circuits that historically have used a different type of test likely will begin using a burden-shifting scheme consistent with the test outlined in Inclusive Communities.  The Supreme Court stressed that lower courts and HUD should rigorously evaluate plaintiffs’ disparate impact claims to ensure that evidence has been provided to support, not only a statistical disparity, but also causality (i.e., that a particular policy implemented by the defendant caused the disparate impact).  The Court also emphasized that claims should be disposed of swiftly in the preliminary stages of litigation when plaintiffs have failed to provide sufficient evidence of causality.  Although plaintiffs historically have faced fairly steep odds of getting their disparate impact claims past the preliminary stages of litigation, much less succeeding on the merits, the “cautionary standards” stressed by the Supreme Court might result in even fewer successful disparate impact claims being raised in the courts and/or swifter disposal of claims that are raised.