Fair Housing Act

Issues

In this consolidated action, the Supreme Court will decide whether a city can sue a bank under the Fair Housing Act for discriminatory lending practices, and whether it can recover lost property tax revenues and funds spent addressing widespread foreclosures that the bank’s discriminatory practices allegedly caused. The City of Miami alleges, based on statistical analyses, that loans by Bank of America and Wells Fargo & Co. to minority borrowers were more than five times as likely to result in foreclosures than loans to white borrowers. The banks argue that the City of Miami falls outside the zone of interests required to obtain standing under the Fair Housing Act, and that any alleged causal relationship between the City’s financial losses and the discriminatory housing practices of the banks is too far a stretch to support a valid lawsuit. The City responds that it meets the broad standing requirements of the Fair Housing Act and should recover for its injuries because they are foreseeably and directly linked to the discriminatory lending practices of the banks. A victory by Miami could potentially overburden the courts with similar lawsuits and overextend judicial power; however, Miami’s defeat could leave the FHA under-enforced and cities underfunded to battle urban blight.

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Issues

In this consolidated action, the Supreme Court will decide whether a city can sue a bank under the Fair Housing Act for discriminatory lending practices, and whether it can recover lost property tax revenues and funds spent addressing widespread foreclosures that the bank’s discriminatory practices allegedly caused. The City of Miami alleges, based on statistical analyses, that loans by Bank of America and Wells Fargo & Co. to minority borrowers were more than five times as likely to result in foreclosures than loans to white borrowers. The banks argue that the City of Miami falls outside the zone of interests required to obtain standing under the Fair Housing Act, and that any alleged causal relationship between the City’s financial losses and the discriminatory housing practices of the banks is too far a stretch to support a valid lawsuit. The City responds that it meets the broad standing requirements of the Fair Housing Act and should recover for its injuries because they are foreseeably and directly linked to the discriminatory lending practices of the banks. A victory by Miami could potentially overburden the courts with similar lawsuits and overextend judicial power; however, Miami’s defeat could leave the FHA under-enforced and cities underfunded to battle urban blight.

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Thomas J. Gallagher, together with other owners and former owners of rental properties, sued the City of St. Paul, Minnesota for violating the Fair Housing Act, which prohibits discriminatory housing practices. Gallagher claimed that the City’s aggressive and targeted enforcement of city housing codes against rental units reduced the availability of low-income rentals, with a disparate impact upon African-Americans. The Eighth Circuit held that Gallagher stated a valid FHA claim under the disparate impact theory. St. Paul appeals, arguing that, because the FHA requires evidence of discriminatory intent, Gallagher’s disparate impact claim is insufficient to establish a violation under the Act. Gallagher contends that, given the Court’s prior findings regarding disparate impact claims under the similarly-worded Age Discrimination in Employment Act and Title VII, disparate impact claims are cognizable under the FHA. The Supreme Court’s decision may affect the extent to which city officials can use ordinances, code enforcement actions, and other land-use regulations to regulate low-income neighborhoods.

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This case asked whether disparate impact claims are cognizable under Section 804(a) of the Fair Housing Act (“FHA”). That section makes it unlawful “to refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” The Township of Mount Holly argued that the plain language of the statute does not permit disparate treatment claims, whereas residents of Mount Holly Gardens argued the opposite. Further, the Township asserted that permitting disparate-impact claims raises constitutional concerns—including Equal Protection Clause and Tenth Amendment violations, but the Residents countered that no such violations result from acknowledging disparate-impact liability under the statute. This case presented the Supreme Court with the opportunity to definitively rule on whether the FHA allows for disparate-impact claims. On November 13, 2013, the parties settled, and on November 15, 2013, the Supreme Court dismissed the case.

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In this case, the Supreme Court will determine whether the U.S. Department of Housing and Urban Development (“HUD”)’s interpretation of the Fair Housing Act (“FHA”) to include disparate-impact claims is subject to Chevron deference, which would result in disparate-impact liability under the FHA. The Texas Department of Housing and Community Affairs argues that the Court should not defer to the HUD’s interpretation, which it claims is unreasonable because the language of the FHA differs from other statutes that explicitly allow disparate-impact liability. Inclusive Communities, on the other hand, argues that the HUD’s interpretation is entitled to deference because it is reasonable, and is in fact the most favorable interpretation, given that the FHA’s goal of “remedy[ing] existing effects of prior intentional segregation.” This case will ultimately determine the breadth of the rights of action under the FHA for discrimination in affordable housing. 

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