Fair Housing Act; Disparate Impact; Discriminatory Effects; Supreme Court

Today, HUD issued an advanced notice of proposed rulemaking requesting public comments to its 2013 Final Rule which implemented the Fair Housing Act’s disparate impact standard. HUD indicates this rulemaking is in light of the Supreme Court’s  2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which held that disparate impact claims are cognizable under the Fair Housing Act. HUD is reexamining its rule to determine if any changes may be necessary.

HUD is specifically requesting public comments to the following six questions:

  1. Does the Disparate Impact Rule’s burden of proof standard for each of the three steps of its burden-shifting framework clearly assign burdens of production and burdens of persuasion, and are such burdens appropriately assigned?
  2. Are the second and third steps of the Disparate Impact Rule’s burden-shifting framework sufficient to ensure that only challenged practices that are artificial, arbitrary, and unnecessary barriers result in disparate impact liability?
  3. Does the Disparate Impacts Rule’s definition of “discriminatory effect” in 24 CFR 100.500(a) in conjunction with the burden of proof for stating a prima facie case in 24 CFR 100.500(c) strike the proper balance in encouraging legal action for legitimate disparate impact cases while avoiding unmeritorious claims?
  4. Should the Disparate Impact Rule be amended to clarify the causality standard for stating a prima facie case under Inclusive Communities and other Supreme Court rulings?
  5. Should the Disparate Impact Rule provide defenses or safe harbors to claims of disparate impact liability (such as, for example, when another federal statute substantially limits a defendant’s discretion or another federal statute requires adherence to state statutes)?
  6. Are there revisions to the Disparate Impact Rule that could add to the clarity, reduce uncertainty, decrease regulatory burden, or otherwise assist the regulated entities and other members of the public in determining what is lawful?

The 60 day comment period ends on August 20, 2018. Interested persons can submit comments to HUD electronically through http://www.regulations.gov or by mail.

 Ballard has been closely monitoring potential changes to the Rule and will continue to do so. We will also continue to work with clients on issues pertaining to the Rule.

After several years of litigation, the U.S. District Court for the Northern District of Texas recently dismissed disparate impact claims filed against the Texas Department of Housing and Community Affairs (TDHCA) in the fair housing case, The Inclusive Communities Project, Inc. v. The Texas Department of Housing and Community Affairs.

The Inclusive Communities Project (ICP) claims alleged that TDHCA’s procedures for allocating low-income housing tax credits had a disparate impact on racial minorities and thus violated the Fair Housing Act (FHA). Following the District Court’s initial ruling that ICP made a successful prima facie showing of disparate impact, the case was appealed to the Fifth Circuit and U.S. Supreme Court. Even though the Supreme Court held that disparate impact claims were cognizable under the FHA, the case was remanded so ICP’s claims and TDHCA’s defenses could be reassessed in light of the standards in the Supreme Court verdict and new U.S. Department of Housing and Urban Development regulations for evaluating disparate impact claims.

On August 26, 2016, the District Court held that ICP failed to make a prima facie showing of disparate impact under the current standard because its claims (i) did not identify any specific, facially neutral policy that caused the disparate impact, (ii) were in essence claims disparate treatment, and (iii) failed to demonstrate that TDHCA’s policies actually caused the statistical disparities asserted by ICP. For more information, see the Housing Group’s e-alert on this verdict.

Housing Plus bloggers Michael Skojec and Amy Glassman will be featured speakers on Novogradac’s webinar: “Consequences of Disparate Impact for Multifamily Housing” on July 22. The webinar will discuss the implications of the Supreme Court’s decision in the Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. case and explore how the Court’s opinion will shape future cases, HUD’s fair housing efforts, and the larger housing landscape.

The discussion points will include the following topics:

  • Fair Housing Act and defining disparate impact
  • Making a disparate impact claim (including examples)
  • How HUD’s three-step burden-shifting rule works
  • Recent lower-court decisions in Washington, D.C., and Illinois
  • Two prior cases (Magner and Mount Holly)
  • ICP v. TDHCA facts and history
  • Key issues argued in the Supreme Court case
  • Majority opinion, causation, and other safeguards
  • How this plays out—future litigation
  • Possible HUD modifications to the rule
  • One housing authority’s concerns
  • The upcoming affirmatively furthering rule

Registration is still open, but will close at 2 p.m. on July 21. We will be sure to follow up with the webinar’s key takeaways.

Housing Plus blogger Sharon Wilson Géno will moderate a panel – Disparate Impact: How the Supreme Court is Reshaping Affordable Housing Policy in TDHCA v. The Inclusive Communities Project, Inc. – on July 16 at the National Housing & Rehabilitation Association’s Summer Institute conference. She previews the panel discussion below.

It’s hard to disagree with the ideals that lead to the passage of the Fair Housing Act in 1968 – that it should be illegal for housing providers to discriminate based on race, color, religion, national origin, sex, familial status or handicap. This principle seems fundamental to our Constitution and American society.

So why some almost 50 years later are housers and courts still grappling with what is and what is not unlawful discrimination under the Fair Housing Act?  Interpreting the legal language of the Fair Housing Act has, in fact, proved challenging in practice. Intentional discrimination against members of the protected classes is clearly prohibited without a doubt, courts have struggled for years with whether a housing policy or decision that is not intentional but has a disparate impact on a protected class is also illegal and, if so, what constitute appropriate standards of proof.  In addition, recipients of HUD funds and the Department itself have struggled with what they need to do to “affirmatively further fair housing” as the Fair Housing Act also requires.

Fair Housing has been a hot topic over the last few weeks as the Supreme Court issued its 5-4 decision in in TDHCA v. ICP, Inc. ‎

The U.S. Supreme Court held that disparate impact claims are viable and HUD issued a rule interpreting the Fair Housing Act provisions regarding affirmatively furthering fair housing providing interpretive guidance for the first time.

Tomorrow, I will be moderating a panel at the National Association of Housing and Redevelopment Associations Summer conference that will explore the implications of these recent event for affordable housing lenders, investors, and developers.  Joining me in this discussion are representatives from HUD, investors and developers to discuss how the legal interpretation of the Fair Housing Act will change moving forward.

The panel will explore how the Supreme Court decision will impact the perspectives and policies used to evaluate housing opportunities in our diverse community landscapes. It will also discuss the interplay between the Supreme Court decision and the AFFH rule and what risks they pose to housers. We will be sure to provide the key take aways of the discussion.

Housing Plus BlogSeveral exciting developments have recently brought changes to the affordable housing industry and we are inviting you to explore them with us at our fifth annual Western Housing Conference. Ballard Spahr and CSG Advisors are pleased to announce this year’s Best of the West in Affordable Housing Development and Financing conference on March 13, in San Francisco. The conference features movers and shakers in affordable housing leading panels, roundtables, and discussion about the most pertinent issues and developments shaping the housing industry.

The Legislative Update Panel has its hand on the pulse of Capitol Hill. Discussion will explore the implication and future of legislation and policies that affect the affordable housing industry.

HUD’s Rental Assistance Demonstration (RAD) Program experienced a boost in governmental support with the recent cap increase. The RAD program now offers renewed opportunities for housing authorities and developers to finance, transform, and create long-term housing options for low-income residents. The RAD Panel brings together a panorama of perspectives to discuss the need-to-know policies, timelines, financing structures, and organizational approaches to the revitalized RAD program.

The Finance Trends and Innovations Panel will offer insights to new loan products, lender programs, and interest rate structures taking shape in affordable housing finance. The discussion will examine new funding sources as a strategic means to preserve and sustain affordable housing.

Roundtable forums will feature Year 15 challenges and the implications of Fair Housing: Disparate Impact. Discussion will examine these two important topics and provide strategies, considerations, and expectations for the future of affordable housing development and management.

Registration for the event is free, and a detailed program description is available.

It is our privilege to create such an informative and collaborative forum for dialogue, exploration, and networking within an industry about which we feel so passionate. Though we will certainly blog about conference updates and insights, we hope you will join us in person.

OHouse in Globen Monday, the United States District Court for the District of Columbia issued a scathing opinion that struck down HUD’s disparate impact rule. The disparate impact rule, also referred to as a “discriminatory effects” standard, established liability under the Fair Housing Act (FHA) for the discriminatory effect of a housing practice, even in the midst of no discriminatory intent. Although many other circuits had found that disparate impact liability did exist under the FHA, in American Insurance Association v. United States Department of Housing and Urban Development, the DC District Court found that such a standard was contrary to the plain language of the FHA.  In an opinion that was very critical of HUD’s strategy for interpreting the Fair Housing Act, the DC District Court noted that most of the other Circuit Courts assessed the question of whether there is disparate impact liability under the FHA only before the U.S. Supreme Court in Smith v. City of Jackson set forth guidance for determining whether such liability exists under the FHA.

In the past few years, the U.S. Supreme Court has agreed to hear three cases that ask the question of whether a disparate impact cause of action exists under the FHA. The first two cases were settled before the Supreme Court could review the question. Last month, however, the Supreme Court agreed to hear the third case, Inclusive Communities Project v. Texas Department of Housing and Community Affairs, which involves a claim that low-income housing tax credits are allocated for non-elderly sites in a manner that has a disparate impact on persons of color.

The DC District Court likely wanted to issue its opinion before the Supreme Court hears the Texas Department of Housing and Community Affairs case; in its opinion this week, the DC District Court stated:

“This is, yet another example of an Administrative Agency trying desperately to write into law that which Congress never intended to sanction…it is nothing less than an artful misinterpretation of Congress’s intent that is, frankly, too clever by half…Fortunately for us all, however, the Supreme Court is now perfectly positioned in Texas Department of Housing to finally address this issue in the not-too-distant future.”

A summary of the American Insurance Association case is available on Ballard Spahr’s website.