Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.

PETITIONER:Texas Dept. of Housing and Community Affairs, et al.
RESPONDENT:The Inclusive Communities Project, Inc.
LOCATION: Dallas Housing Authority

DOCKET NO.: 13-1371
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 576 US (2015)
GRANTED: Oct 02, 2014
ARGUED: Jan 21, 2015
DECIDED: Jun 25, 2015

Donald B. Verrilli, Jr. – Solicitor General, Department of Justice, for the United States as amicus curiae, for the respondent
Scott A. Keller – on behalf of the petitioner
Michael M Daniel – on behalf of the respondent

Facts of the case

Low Income Housing Tax Credits are federal tax credits distributed to low-income housing developers through an application process, and the distribution is administered by state housing authorities. In 2009, the Inclusive Communities Project (ICP), a non-profit organization dedicated to racial and economic integration of communities in the Dallas area, sued the Texas Dept. of Housing and Community Affairs (TDHCA), which administers the Low Income Housing Tax Credits within Texas. ICP claimed that TDHCA disproportionately granted tax credits to developments within minority neighborhoods and denied the credits to developments within Caucasian neighborhoods. ICP claimed this practice led to a concentration of low-income housing in minority neighborhoods, which perpetuated segregation in violation of the Fair Housing Act.

At trial, ICP attempted to show discrimination by disparate impact, and the district court found that the statistical allocation of tax credits constituted a prima facie case for disparate impact. Using a standard for disparate impact claims that the U.S. Court of Appeals for the Second Circuit articulated inTown of Huntington v. Huntington Branch, the court then shifted the burden to TDHCA to show the allocation of tax credits was based on a compelling governmental interest and no less discriminatory alternatives existed. TDHCA was unable to show no less discriminatory alternatives existed, so the district court found in favor of ICP. TDHCA appealed to the U.S. Court of Appeals for the Fifth Circuit and claimed that the district court used the wrong standard to evaluate disparate impact claims. The appellate court affirmed and held that the district court’s standard mirrored the standard promulgated by the Department of Housing and Urban Development, the agency tasked with implementing the Fair Housing Act.


Did the district court use the correct standard for evaluating a Fair Housing Act claim of discrimination based on disparate impact?

Media for Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.

Audio Transcription for Oral Argument – January 21, 2015 in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.

Audio Transcription for Opinion Announcement – June 25, 2015 in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.

John G. Roberts, Jr.:

Justice Kennedy has our opinion this morning in Case 13-1371, The Texas Department of Housing and Community Affairs v. Inclusive Communities Project.

Anthony M. Kennedy:

Amidst social unrest in our nation’s inner-cities, Congress passed the Fair Housing Act of 1968, the FHA.

The FHA addressed the denial of housing opportunities on the basis of race, color, religion or national origin, and the question presented for the Court’s determination is whether disparate impact claims are cognizable under the FHA.

In a disparate treatment case a plaintiff must establish that the defendant had a discriminatory intent or motive.

A plaintiff bringing a disparate impact claim challenges practices that have a disproportionately adverse effect on minorities and are otherwise unjustified by a legitimate rationale.

The underlying dispute in this case concerns where housing for low income persons should be constructed in Dallas, Texas.

That is whether the housing should be built in the inner-city areas or in the suburbs.

The Texas Department of Housing and Community Affairs and its officers are the petitioners here and they distribute low income housing tax credits to developers to construct low income housing.

The Inclusive Communities Project (ICP) is the respondent.

ICP brought a disparate impact suit against the Department and it alleged the Department granted too many tax credits for housing in predominantly black inner-city areas and too few tax credits in predominantly white suburban neighborhoods, and this practice the ICP said had an unlawful disparate impact.

The District Court agreed with the ICP.

It concluded that the Department’s selection criteria for the tax credits violated the FHA.

The Court of Appeals for the Fifth Circuit agreed that disparate impact claims are allowed under the FHA.

On the merits the Court of Appeals reversed and remanded.

The Department continued to assert that there is no disparate impact liability under the FHA, and this Court granted certiorari on the question.

The Court now holds that disparate impact claims may be brought under the FHA.

The Court reaches this result based on the consideration of the statute’s results-oriented language, on this Court’s interpretation of similar language in Title VII and the ADEA, and on Congress’ implicit ratification of disparate impact claims in 1988, when it passed amendments, and on the statutory purpose.

This Court does not ride on a blank slate in the realm of disparate impact.

In cases called Griggs v. Duke Power Company and Smith v. City of Jackson, this Court interpreted Title VII and the ADEA to encompass disparate impact claims.

For reasons that are explained in the Court’s opinion, the logic of Griggs and Smith are applicable to the FHA, although the operative statutory language is not identical, but that is because the subject matter of the statute is not the same.

In addition, it’s of importance that the existence of disparate impact liability is supported by the 1988 amendments to the FHA.

1988, at the time the amendments were enacted, all nine of the Courts of Appeals that had addressed the question had concluded that the FHA did allow disparate impact claims and Congress was aware of that consensus.

It declined to amend the operative language.

Indeed, the 1988 amendments created three exemptions from liability that would have made little or no sense if the FHA were limited to disparate impact claims.

Given Congress’ knowledge of the legal landscape in 1988, as well as its targeted amendments, the Court concludes that Congress ratified the existence of disparate impact liability.

Recognition of disparate impact claims moreover is consistent with the FHA’s central purpose, because it allows plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.

Now, to be clear, disparate impact liability mandates the removal of artificial, arbitrary and unnecessary barriers, not the displacement of valid governmental policies.

Indeed, unlike the heartland of disparate impact suits targeting artificial barriers to housing, the underlying dispute in this case involves a novel theory of liability concerning how public funds should be distributed for the construction of low income housing.

It would be paradoxical to construe the FHA to impose onerous costs on actors who encourage revitalizing dilapidated housing in our nation’s cities, merely because some other priority might seem preferable.

Private developers must therefore be given latitude to consider market factors and housing authorities should be given leeway to base their decisions on a mix of objective and subjective factors.

Anthony M. Kennedy:

The FHA does not put housing authorities and private developers in a double bind of liability, subject to suit whether they choose to rejuvenate a City Core or to promote new low income housing in suburban communities.

Moreover, plaintiffs bringing disparate impact claims must prove, not only a statistical disparity, but also that the defendant’s policy or policies caused that disparity.

To be sure while the automatic or pervasive injection of race into public and private transactions covered by the FHA has special dangers, it is also true that race may be considered in certain circumstances and in a proper fashion.

This Court does not impugn local housing authorities’ race-neutral efforts to encourage revitalization of communities that have long suffered the harsh consequences of segregated housing patterns.

For these reasons and others set forth in the opinion, the judgment of the Court of Appeals is affirmed.

The case is remanded for proceedings consistent with this opinion.

Justice Thomas has filed a dissenting opinion.

Justice Alito has filed a dissenting opinion, in which the Chief Justice and Justices Scalia and Thomas join.