ASK THE LAWYER
MARK TSCHETTER, TSCHETTER HAMRICK SULZER, P.C.
DISPARATE IMPACT
How will the Supreme Court’s Ruling Affect the Industry?
T
he Supreme Court of the United States
(Supreme Court) recently issued its
ruling in Texas Department of Housing v. Inclusive Communities Project,
Inc. (“Texas Department of Housing”). In the
Texas Department of Housing case, the Supreme
Court by a 5-4 ruling confirmed that disparate
impact is a legal basis for fair housing discrimination liability. Texas Department of Housing is
likely to have tremendous and unpredictable
impact on the rental industry for years to come.
What is Disparate Impact?
Disparate impact is a legal theory that makes
housing providers liable for fair housing discrimination. Disparate impact makes housing providers liable for policies and practices that disproportionately impact protected class members.
Is disparate impact new?
No. Fair housing discrimination based on disparate impact has been around for several decades.
How does disparate impact discrimination
differ from traditional housing discrimination?
The Federal Fair Housing Act clearly bars
intentional discrimination based on protected
class status, i.e. policies or practices that discriminate against tenants because of race, creed,
color, national origin, sex, familial status, or disability. Courts classify intentional discrimination
as disparate treatment. In a disparate treatment
case, a tenant must establish that the landlord
had a discriminatory intent or motive, e.g. discriminated against a tenant because of his race.
In a disparate impact case, the tenant does not
need to prove a discriminatory intent, but rather
only prove that the challenged housing practice
or policy adversely affects tenants, that are members of a protected class, disproportionately and
that such practices or policies are not otherwise
justified by a legitimate rationale.
How are disparate impact fair housing
violations proved?
Fair housing disparate impact cases are always
proved through the use of statistical evidence
because it doesn’t matter what your intentions
are, only the results of your policies. The statistics
www.aamdhq.org
apparently do not need to overwhelmingly negatively impact protected class members. In Texas
Department of Housing, the Supreme Court
found disparate impact liability, in part, based on
the challenged policy impacting minorities approximately 13% more of the time.
Because disparate impact is not new, why
should we be concerned now?
Prior to the Supreme Court’s ruling, disparate
impact fair housing cases were primarily, if not
exclusively, limited to zoning type cases. Despite
the fact that HUD, under the Obama administration, adopted disparate impact regulations, fair
housing discrimination based upon disparate
impact was increasingly being called into question.
If the Supreme Court had struck down disparate
impact theory, disparate impact as a basis for fair
housing liability would have died, including the
regulations adopted by the Obama administration.
Disparate impact could only then be resurrected
by specific Congressional action, which would be
unlikely.
The Supreme Court’s ruling has also put the
proverbial blood in the water. Prior to the ruling,
fair housing advocacy groups may have been reluctant to pursue disparate impact claims, given
there was no clear and consistent supporting legal
recognition of disparate impact outside zoning
type cases. Given the Supreme Court’s ruling,
fair housing advocacy groups and fair housing
attorneys are more likely to be emboldened to
pursue disparate impact claims. Based on our
experience, fair housing groups are likely to use
disparate impact cases to generate revenue to
further their missions.
As discussed at length in the dissenting opinion in Texas Department of Housing, disparate
impact can and will led to absurd results. Under
disparate impact theory, a landlord can be found
liable for housing discrimination even when it is
trying to accomplish a worthy goal. Specifically,
disparate impact liability resulted when a city
(landlord) tried to provide sanitary housing by
eliminating rodents. The rodent eradication program resulted in higher rents, which disproportionately impacted minorities. As the dissenters
pointed out, “something has gone badly awry
when a city can’t even make slumlords kill rats
without fear of a lawsuit.” Further, as noted by
the dissenters in Texas Department of Housing,
housing advocacy groups could have sued the
housing authority based on disparate impact even
if the housing authority had taken the exact opposite action. Based on math (the statistics), almost any policy may be subject to challenge.
The worst effect of this disparate impact ruling by the Supreme Court is that it will inevitably
increase the cost of doing rental business. Fair
housing attorneys are likely to see disparate impact
cases as a gold mine, because of disparate impact’s
quasi-like class action nature, and the ability of
disparate impact to generate attorney fee income.
Even in marginal cases, the fair housing plaintiffs’
attorneys will use the threat of large attorney fee
awards to extract inflated settlements. “If you
don’t settle, and even if we win only $20,000, you’re
going to have to pay our attorneys’ fees which will
be over $200,000.” Thus, disparate impact liability is likely to create no-win scenarios for the
multifamily industry. Spend significant money
defending, or pay inflated settlements.
What policies are likely to be challenged by
disparate impact lawsuits?
It’s impossible to predict. Any policy that
statisti