Housing Discrimination Doesn’t Need Intent, Supreme Court Says

scotusMuch of the country’s attention has been on the United States Supreme Court’s rulings on marriage equality and the Affordable Care Act last week, but the nation’s highest court also handed down an important housing decision that looks at whether a public or private entity can get hit with a federal Fair Housing lawsuit even if it had no intent to discriminate. The legal concept is called disparate impact and, ever since the federal Fair Housing Act was enacted in 1968, all federal courts of appeal have interpreted the law to mean an entity can get sued for housing discrimination if its actions have a disparate impact on a protected class, regardless of intent.

In its decision last week, the Supreme Court affirmed a circuit court’s judgement, holding that disparate impact claims are cognizable under the Fair Housing Act, and are an important component to the Fair Housing Act’s role in moving the country toward a more integrated society. “Residents and policy­makers have come to rely on the availability of disparate-impact claims,” the court says in its decision to the case, Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.

Importantly, the court made clear that just because an action has a disparate impact, that doesn’t mean it’s necessarily discriminatory. All the facts in the case have to be looked at, and a plaintiff must be able to point to a specific policy (or policies) of the defendant that is causing the disparity, and even then the defendant can demonstrate that the challenged policy is necessary to achieve a legitimate business interest. Only where the plaintiff can demonstrate that there is an alternative practice that would serve the defendant’s legitimate interest with a less discriminatory effect will a disparate impact claim be established.

FHFor NAR members, since the decision upholds what’s been a longstanding legal concept, there should be little change seen on the ground. What’s more, since the decision includes extensive discussion about the many factors that should be considered when looking at a disparate impact claim, the court appears sensitive to the kinds of concerns that were identified by real estate professionals in a working group NAR created several years ago to look at the disparate impact issue.

In that group, two main concerns were identified: that real estate professionals and others not be held liable for actions if they had no reasonable way of knowing that a disparate impact would be the outcome, and that real estate professionals not be expected to do extensive research into the possible disparate impact of their actions.

“I believe there is much in the decision that reflects an understanding of the type of concerns that NAR members shared in the disparate impact working group and reflected in NAR policy,” says Fred Underwood, NAR’s director of diversity and community outreach programs.

For real estate professionals, the decision means ending housing discrimination remains a national goal and it also affirms that one doesn’t have to intend to discriminate to be the subject of a lawsuit. But it also means disparate impact claims must pass a reasonable hurdle, because the court recognized many factors go into the decisions that shape our housing markets.

More on the case.

More on Fair Housing.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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  1. Dave B

    Would love to hear some examples of actions that the ruling would consider violation. Sounds like the standard and reasonable practice of setting a credit score hurdle and felony search is acceptable for qualifying renters.

  2. Carl Goldberg

    Don’t prices have a disparate impact? After all, most poor people are in protected classes, and a price which is greater than their ability to pay necessarily has a disparate impact on members of that protected class. This whole concept of “disparate impact” is nothing more than leftist, politically correct BS.

  3. Yes a few examples will go a long way helping real estate professionals understand the impact of this decision going forward.

  4. Robert Freedman

    Thanks very much for your comment. As a real estate practitioner, you should see no change. The court just affirmed past appellate court rulings. An example of what they’re talking about is a state housing finance agency’s policy for allocating low-income housing tax credits. If the policy leads to most affordable housing being developed in one particular area, then that could be considered a disparate impact under Fair Housing. But only if it’s determined that the agency could have allocated the credits to projects in other areas. If it’s determined that there were valid business reasons for allocating most of the credits in the one area, then no violation of Fair Housing would necessarily be found. That’s just an interpretation of the ruling. You would want to consult an attorney on these issues. But, the bottom line is, the ruling just affirms how federal courts have been ruling on disparate impact cases that have come before them, and so from the typical real estate practitioner’s perspective, the impact is minimal, because things essentially stay as they are.

  5. Tim House

    Using a FICO score for qualification for entry into rental units or granting of a loan/mortgage could be construed as disparate impact if a protected class has a large percentage that will not qualify for the “arbitrary” limit set by the owner, property manager or lender. As Robert points out, the SCOTUS decision only affirmed previous decisions but in the current divisive climate I anticipate there will be more claims that will affect Realtors.

  6. Paul McDaniel

    I agree with Carl Goldberg. This whole idea of disparate impact is just another way of leveling the playing field through more government control…..which means less free-market. All sorts of things in life aren’t fair and government cannot make them fair; when they attempt it there will be some by-product corruption of the market.

  7. Sue Rockwell

    It’s getting to the point where to protect oneself as a real estate broker with a listing one should not allow open houses or names on a purchase and sale agreement when presented. That way we never meet The selling broker’s client nor do we see their names. Taking it a step further, it’s probably wise to not allow the selling broker to tell the listing agent and seller ANYTHINGA about the potential buyer for fear that information will be used as a basis for a lawsuit if the buyer ‘s offer isn’t the “winning” offer. I agree with Carl.

  8. Vince Brennan

    Carl, you have stolen my thunder. I could not agree with you more given the Supreme Court’s apparent affirmation “,,,,the Fair Housing Act’s role in moving the country toward a more integrated society.” Before long national price control will be in the offing. The madness continues.

  9. Robert Freedman

    Thanks for your comment. Your input is greatly appreciated. Just to be clear, the ruling applies at the policy level, so it really is looking at policies of agencies and other entities; it’s not looking at individual transactions. The issue is whether a policy has a disparate impact and whether there are other ways to achieve the policy goals without putting in place practices that have a disparate impact. It does not pertain to transactions at the individual level, so the impact on real estate practitioners is likely to be minimal. It mainly concerns housing policy decisions of agencies and other entities.

  10. Disparate impact is like a shield for the protected class. It favors the Fair housing act and also provides the protected class with their rights.
    But the question is what about other good and products? Can the protected class afford that? The disparate impact should be applied over other things as well.

  11. M. Lake

    Robert, someone forwarded me this article from Rush Limbaugh and I would like your thoughts on what he is saying in regards to the ruling and if you think this is true and/or a likely outcome: http://www.rushlimbaugh.com/daily/2015/07/13/flooding_the_zone_obama_s_plan_to_integrate_neighborhoods_by_class

  12. Robert Freedman

    Thanks for your comment. The article that’s being referenced concerns a separate issue from the disparate impact ruling. That article is about a rule that was released last week requiring communities that receive certain federal block grants to monitor their housing patterns and look for segregated areas. The disparate impact ruling is a decision of the U.S. Supreme Court that affirms what courts have already been ruling for the past several decades on whether housing policies can be considered discriminatory if they have a disparate impact on some segments of the population. They are both Fair Housing issues, but the disparate impact ruling just affirms what courts have already been ruling, and the rule mentioned in the article is an Administration rule on identifying housing patterns. It applies to local governments that receive certain federal block grants. Thanks again for your comment.

  13. Lori Hopkins-Cavanagh

    Realtors will be effected because their clients will be effected and because there is no end to disparate impacts insidious reach. If an agent does not have a cliental that is composed of equal numbers of specific skin colors, the realtor is racist. In Dodd Frank, the loan officer must ask the race of an applicant which is so very offensive to minorities and better make sure that all clients have equal outcomes regardless of credit worthiness. Schools must ensure that as many whites are disciplined as blacks. proportionately regardless of behavior. Disparate Impact is wrong, the government should be color blind and NAR should not buy into this Communist agenda. God bless America while we can still recognize the freedom and liberties that our constitution is supposed to protect.

  14. As a real estate agent that has seen many changes in my area of operation of Dr. Phillips just outside of Orlando this upholding of the appellant court ruling could be great for affordable housing but, could impact the overall market price of some neighborhoods.