Showdown over Landmark Housing Law Looms at U.S. Supreme Court

Over the past four decades, U.S. courts have ruled that plaintiffs making discrimination claims under the Fair Housing Act don’t have to prove intentional bias.

Civil rights advocates simply have to show that lenders, insurers, developers or government agencies acted in ways that had a “disparate,” or unequal, impact on minority groups.

Now, the Supreme Court is weighing whether to hear an appeal from Texas officials who argue that intent to discriminate must be proven and that the “disparate impact” standard is too loose an interpretation of the landmark 1968 law that prohibited discrimination in housing.

Advocates on both sides say the court’s record under Chief Justice John Roberts, who has engineered a rollback of decades-old protections for racial minorities, suggests the majority is poised to wipe out the standard, Bloomberg Businessweek reports in its Sept. 29-Oct. 5 issue.

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Texas is fighting a lawsuit filed by a group that advocates for affordable housing and integration.

Using the disparate impact standard, the Inclusive Communities Project says the Texas Department of Housing and Community Affairs pushed black residents eligible for housing assistance into poor Dallas neighborhoods. They did that by allocating a disproportionately high number of low-income tax credits to properties in those areas rather than to housing in wealthier, and typically whiter, neighborhoods, the group says.

Broad implications

Texas, which says the program wasn’t intended to be biased, appealed to the Supreme Court after lower courts let the Inclusive Communities Project make a disparate impact argument in the case.

A ruling in Texas’s favor could wipe out disparate impact arguments in cases involving other federal statutes.

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“There’s no doubt that the people on the other side of the aisle do not want the Supreme Court to decide this issue,” says Roger Clegg, the president of the Center for Equal Opportunity, a conservative research group.

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The Department of Justice has settled a number of suits that relied on the disparate impact standard. In 2011, Bank of America agreed to pay $335 million to settle U.S. government claims that Countrywide Financial, which the bank acquired in 2008, had discriminated against black and Hispanic borrowers.

The next year, Wells Fargo & Co. (WFC) reached a $125 million settlement resolving allegations that it steered minority borrowers into expensive subprime loans.

The Texas appeal is being pressed by Attorney General Greg Abbott, a Republican running for governor. His website says he’s a “conservative to the core” who has filed 30 lawsuits against the Obama administration.

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Business groups led by the American Bankers Association are backing the state’s bid for Supreme Court review, calling the issue one of “vital importance to the residential mortgage industry.”

Those groups say lenders are caught in a vise: Under new federal lending rules, they must look at borrowers’ income, assets, debt burden and credit history, while the disparate impact standard means they also have to avoid turning away too many minority applicants.

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