Racial Bias in Housing Finance Gets U.S. Supreme Court Review

Greg Stohr, Business Week, June 17, 2013

The U.S. Supreme Court will decide whether people who file housing discrimination suits must show they were victims of intentional bias, accepting a case that may undercut the Obama administration’s crackdown on the lending industry.

The justices today agreed to consider an appeal by Mount Holly, New Jersey, which is fighting a U.S. Fair Housing Act lawsuit filed by residents over the demolition of a predominantly minority neighborhood. The town says the residents must prove an intent to discriminate, not just that the project has a disproportionate effect on racial minorities.

The case will test a legal theory, known as “disparate impact,” that the Obama administration has repeatedly invoked in lawsuits against banks over housing and auto loans. Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and SunTrust Banks Inc. (STI) have agreed to pay at least $480 million to settle claims since December 2011.

“Defending allegations of disparate impact–even if proven to be meritless–is typically very expensive,” five lender trade groups, led by the American Financial Services Association, argued in papers urging the justices to intervene.

A decision favoring the banking industry would mark a major change in the enforcement of the 1968 fair-housing law. Eleven courts of appeals have ruled on the issue, and all have said the statute allows disparate-impact claims.

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The high court’s ruling might also affect the Equal Credit Opportunity Act, which bars discrimination in all types of lending and contains similar language. The Consumer Financial Protection Bureau has relied on the disparate-impact doctrine in its enforcement of that law.

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The housing case stems from an effort by Mount Holly to redevelop what it said was a blighted, high-crime area. Known as the Gardens, the neighborhood was originally developed to provide homes for returning World War II veterans and their growing families. In more recent years, the Gardens was the only predominantly black and Hispanic area in town, with 75 percent minority residents in 329 residential units.

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The town began buying homes in the Gardens, in most cases paying between $30,000 and $50,000, until only 70 remained in private hands. The redevelopment effort has since stalled, even as the town has destroyed scores of homes and accumulated $18 million in debt. No new houses have been built, and the remaining structures now form a patchwork amid vacant lots.

A group of current and former residents sued, claiming the effort had a disparate impact on minorities. {snip}

In its appeal, Mount Holly says the Fair Housing Act is written differently than other discrimination laws, indicating that Congress didn’t intend to allow disparate-impact claims. The town says government agencies shouldn’t be left vulnerable to suits over non-discriminatory policies.

{snip}

The suing residents and Obama administration urged the court not to hear the appeal.

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  • If SCOTUS finds for the concept of disparate impact, then I think all criminal law is at risk. For there is hardly a criminal law, from first-degree murder down to local dog code ordinances, which doesn’t have a “disparate impact” on blacks and Hispanics.

    • Anan7

      What about a ‘disparate impact’ of affirmative action and open borders?

    • White Mom in WDC

      Blacks and Hispanics, and really most minorities are just a royal pain in the arce. I really can’t believe I am saying this but a massive deportation of these groups must take place, of course after the Civil War II. There is really no other way.

      We all could speed up the process by bankrupting the financial system. We must simply stop feeding the beast.

  • The__Bobster

    In 2003, Mount Holly Township declared the “Gardens” neighborhood blighted
    and created a redevelopment plan that called for the demolition of more than 300
    townhomes, where three-quarters of the residents were African-American or
    Hispanic.

    “They were only offering to pay $30,000 to $50,000 for the homes, but would
    be building replacement housing at between $200,000 to $250,000,” says Kenneth
    Goldman, director of litigation and advocacy at South Jersey Legal Services, an
    organization representing 30 Garden residents who claim the redevelopment plan
    discriminated against them by pricing them out of the area.
    _________

    I’m guessing the natives employed the usual rent-seeker so that they could hit the ghetto lottery. In this case, they want $250,000 for their old rotting nests.

  • Anan7

    “Intent to discriminate” is one of the most asinine things I’ve ever heard. It penalizes the *thought* of discriminating in one’s own best interests.

    I would rather shut my business down than be forced to hire or lease to someone I don’t want to. I go out of my way to find majority-White areas to visit, live in, work, etc.

    Whatever happened to voluntary consent between to parties? Why is one party FORCED to consent? Isn’t that what makes rape so offensive?

    • bigone4u

      Your last sentence about rape and how it relates to forced consent is interesting to me since I have never seen these issues put together the way you have done so here. Good comment by you and one that I will think more about after dinner.

      • Anan7

        Well thank you for the compliment!

    • THE MAN

      Wouldn’t intent be difficult to prove ! Like when they slammed a concrete brick into Reginall Denny’s head . They had to prove they intended to kill him . Which they didn’t have the mental capacity to understand that smashing a brick into someone ‘s head might kill them . So like wise thought crimes would be a lot more difficult to prove unless the person admitted ,” Yes I wanted to discriminate because it was in my best interest to do so “.

  • bigone4u

    I hope some of these race cases get decided before one of the older Justices croaks and Obama installs an even bigger more influential communist/liberal/progressive–whatever you want to call those whose decisions are not based on law or the Constitution, but based on promoting black causes and big government. As commenter Question Diversity notes, all laws have a disparate impact because blacks violate the law more than others.

    • brengunn

      As commenter Question Diversity notes, all laws have a disparate impact because blacks violate the law more than others.

      Good point. But, it doesn’t stop them from complaining about it, as if it’s the laws that are at fault rather than the offenders. I’ve no doubt some blacks are treated shabbily by the law but I wish we, as a society, could just acknowledge the fact that, for whatever reason, blacks are more prone to illegality than other ethnicities. This is before the law ever gets involved.

      • Sick of it

        People across the board have stories of police abusing their power, so it’s not like they’re nice to anyone but blacks.

  • WR_the_realist

    “Disparate impact” is the most pernicious legal theory ever invented. Every sensible social policy ever considered has disparate impact.

  • APaige

    “decide whether people who file housing discrimination suits must show they were victims of intentional bias” so the Supreme Court has to decide on common sense/common law? “I was wronged!’….prove it. It should be that simple.

  • evilsandmich

    From the original:
    As head of the Justice Department’s Civil Rights Division, Perez supported a deal under which St. Paul withdrew its [disparate impact] Supreme Court appeal and the department agreed not to join a fraud suit against the city.

    I guess Obama didn’t have enough NSA dirt/Extortion info to level against Mount Holly to get them to drop the case. (Neverminding the fact that I don’t know what the plantiffs claim to jackpot justice is. That the city was overpaying for dilapidated shanty boxes? Doesn’t that mean that they owe the city money?)