On June 25 the United States Supreme Court issued its decision in TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS ET AL. v. INCLUSIVE COMMUNITIES PROJECT, INC., ET AL. (“TDHCA v. Inclusive Communities”), upholding the use of the “disparate impact” analysis in the Fair Housing Act.  The decision upholds an important and longstanding principle of the Fair Housing Act, namely that housing policy can be discriminatory by showing that what may seem like neutral policies have the effect of furthering discrimination.

While it affirms the principle of disparate impact, the decision also indicates it could be difficult to prove based solely on a projects location or statistical disparity.  The decision observes that, “From the standpoint of determining advantage or disadvantage to racial minorities, it seems difficult to say as a general matter that a decision to build low-income housing in a blighted inner-city neighborhood instead of a suburb is discriminatory, or vice versa. If those sorts of judgments are subject to challenge without adequate safeguards, then there is a danger that potential defendants may adopt racial quotas—a circumstance that itself raises serious constitutional concerns.”

“Recognition of disparate impact liability under the FHA plays an important role in uncovering discriminatory intent: it permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.   But disparate-impact liability has always been properly limited in key respects to avoid serious constitutional questions that might arise under the FHA, e.g., if such liability were imposed based solely on a showing of a statistical disparity.”

We believe that there will continue to be debate and interpretation as to the limitations and applications of the principle and additional clarity may only come with further litigation or legislation. There is much to be parsed in the decision and, at this early stage, the guidance it provides as to how it should be applied is confusing at best.   NH&RA will continue analyzing the details of the decision and will be reporting further on the potential impact to our members in a future articles on housingonline.com and in Tax Credit Advisor.   We will also discussed the details of the decision and its implication on affordable housing developers on two back-to-back sessions at the NH&RA Summer Institute on July 16 at the Hotel Viking in Newport, RI.

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