HIGHLIGHTS:

• On June 25, 2015, the U.S. Supreme Court held that individuals and groups can challenge housing policies or practices that have a disproportionate adverse effect on protected classes – even if there is no discriminatory intent behind them.
• This decision has the potential to impact a wide range of housing policies and practices, including criminal background checks, decisions of creditworthiness and zoning decisions.
• Businesses and local governments must be prepared to show that an policy or practice that causes a disparate impact on a protected class "is necessary to achieve a valid interest."

On June 25, 2015, the U.S. Supreme Court held that individuals and groups can challenge housing policies or practices that have a disproportionate adverse effect on protected classes (i.e., a disparate impact) – even if there is no discriminatory intent behind them. This decision has the potential to impact a wide range of housing policies and practices, including but not limited to criminal background checks, decisions of creditworthiness and zoning decisions.

The case, Texas Dep't of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., No. 13–1371 (June 25, 2015), involved a lawsuit brought by an advocacy group against the Texas Department of Housing and Community Affairs under the Fair Housing Act. The Fair Housing Act prohibits discrimination on the basis of race or color, national origin, religion, sex, disability, and the presence of children. The advocacy group alleged that the Department and its officers had caused continued segregated housing patterns by allocating too many tax credits to housing in predominantly minority inner-city areas and too few in predominantly white suburban neighborhoods.

The Court's decision parsed the statutory language of the Fair Housing Act and determined that one provision addressed the consequences of a housing practice, rather than the intent behind the practice. In light of the statute's overarching purpose of eradicating discriminatory housing practices, the Court reasoned that

disparate-impact liability ... 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.

Despite its broad ruling, the Court recognized that housing providers should be able to make practical business choices and profit-related decisions. It therefore cautioned against an expansive reading of disparate-impact liability and suggested that it should not be "so expansive as to inject racial considerations into every housing decision."

Before the Supreme Court decided to hear this case, all of the lower courts addressing the issue had found that disparate-impact claims were cognizable under the Fair Housing Act. However, today's decision validates that approach and is therefore expected to lead to increased litigation by plaintiffs' organizations and the Department of Justice.

As a result of this decision, businesses and local municipalities making housing determinations, including developers, apartment managers and financial institutions, must be prepared to defend any policy or practice that causes a disparate impact on a protected class of individuals by showing that the policy or practice "is necessary to achieve a valid interest."