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Texas Department of Housing and Community Affairs v. Inclusive Communities Project

Justia Summary

The federal government provides low-income housing tax credits that are distributed to developers by state agencies, including the Texas Department of Housing and Community Affairs. The Inclusive Communities Project (ICP), which assists low-income families in obtaining affordable housing, brought a disparate-impact claim under Fair Housing Act sections 804(a) and 805(a), alleging that allocation of too many credits to housing in predominantly black inner-city areas and too few in predominantly white suburban neighborhoods resulted in continued segregated housing patterns. Relying on statistical evidence, the district court ruled in favor of ICP. While appeal was pending, HUD issued a regulation interpreting the FHA to encompass disparate-impact liability and establishing a burden-shifting framework. The Fifth Circuit held that disparate-impact claims are cognizable under the FHA, but reversed, concluding that the court had improperly required proof of less discriminatory alternatives. The Supreme Court affirmed and remanded. Disparate-impact claims are cognizable under the FHA. The Court noted that the statute shifts emphasis from an actor’s intent to the consequences of his actions. Disparate-impact liability must be limited so that regulated entities can make practical business choices that sustain the free-enterprise system. Before rejecting a business justification—or a governmental entity’s public interest—a court must determine that a plaintiff has shown “an available alternative . . . that has less disparate impact and serves the [entity’s] legitimate needs.” A disparate-impact claim relying on a statistical disparity must fail if the plaintiff cannot point to a policy causing that disparity. Policies, governmental or private, are not contrary to the disparate-impact requirement unless they are “artificial, arbitrary, and unnecessary barriers.” When courts find disparate impact liability, their remedial orders must be consistent with the Constitution and should concentrate on eliminating the offending practice. Orders that impose racial targets or quotas might raise difficult constitutional questions.

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