United States: Supreme Court Upholds ‘Disparate Impact' Under The FHA But Emphasizes That Claims Cannot Rely On Statistics Alone

In a much-anticipated decision, the U.S. Supreme Court held in Texas Department of Housing and Community Affairs v. Inclusive Communities Project ("Inclusive Communities") that claims of disparate impact discrimination are cognizable under the Fair Housing Act ("FHA"). In the case, the Inclusive Communities Project ("ICP") accused the Texas state housing agency of violating the FHA by causing continued segregated housing patterns through disproportionately allocating low-income housing tax credits. ICP alleged that Texas granting too many tax credits for developments in predominantly African American inner-city neighborhoods and too few in predominantly Caucasian suburban neighborhoods in the Dallas area resulted in a disparate impact based on race in violation of the FHA.

While Inclusive Communities has some housing advocates cheering, it imposes limitations that mitigate its effects. The Court held that a racial imbalance, without more, does not establish a prima facie case of discrimination, and directed lower courts to "examine with care" the claims presented at the pleading stage.1 The Court further directed that remedial orders in disparate impact cases must "concentrate on the elimination of the offending practice" and employ "race-neutral [remedial] means."2 The Court found these limitations necessary to "avoid serious constitutional questions that might arise"3 and "to protect potential defendants against abusive disparate-impact claims."4

"Disparate impact" is one of the ways that courts have permitted plaintiffs to prove fair housing and fair lending violations. As the Court explained, "In contrast to a disparate-treatment case, where a 'plaintiff must establish that the defendant had a discriminatory intent or motive,' a plaintiff bringing a disparate-impact claim challenges practices that have a 'disproportionately adverse effect on minorities' and are otherwise unjustified by a legitimate rationale."5 Importantly, the Court's interpretation of the FHA raises new questions regarding the decision's impact, including whether "disparate impact" claims are permitted under a similar statute that prohibits discrimination in lending, the Equal Credit Opportunity Act (ECOA).

Like Title VII and the Age Discrimination in Employment Act, the FHA permits 'disparate impact' claims In the 5-4 majority opinion, the liberals on the court were joined by the frequent swing justice, Justice Anthony M. Kennedy, who authored the majority opinion. There were spirited dissents from Justices Alito and Thomas, suggesting that the disparate impact theory would have been severely curtailed under the FHA – with implications for other statutes – if Kennedy had voted the other way. In reaching its decision, the Court considered two antidiscrimination statutes that preceded the FHA, section 703(a)(2) of Title VII of the Civil Rights Act and section 4(a)(2) of the Age Discrimination in Employment Act of 1967 (ADEA). Using the cases affirming disparate impact claims under those two statutes, Griggs v. Duke Power Co.,6 and Smith v. City of Jackson,7 respectively, the Court held that antidiscrimination laws should be interpreted to encompass disparate impact claims when their text refers to the results of a policy and not just to the intent that motivated its adoption.

The Court also relied heavily on legislative history to conclude that disparate impact theory is consistent with the statute's purpose: "[I]t is of crucial importance that the existence of disparate-impact liability is supported by amendments to the FHA that Congress enacted in 1988. By that time, all nine Courts of Appeals to have addressed the question had concluded the Fair Housing Act encompassed disparate-impact claims. . . . When it amended the FHA, Congress was well aware of this unanimous precedent"8 and in enacting the amendments with the same language, it effectively ratified disparate impact analysis. The Court also noted that "Congress rejected a proposed amendment that would have eliminated disparate-impact liability for certain zoning decisions." 9

The Court focused on the FHA's catch-all 'otherwise make unavailable' – but there is no analogous language in ECOA The Court relied on a plain meaning interpretation of FHA section 804(a)'s phrase, "otherwise make unavailable," which the Court said refers to the consequences of an action rather than the actor's intent.10 The Court explained that the phrase is equivalent in function and purpose to Title VII and the ADEA's language, "otherwise adversely affect." 11

In relying on the "otherwise make unavailable" language, the Court left open the question of whether "disparate impact" claims are cognizable under ECOA. Unlike the FHA and Title VII, ECOA contains no such catch-all. ECOA's prohibition uses the phrase "discriminate," and courts have traditionally read "discriminate" to require intent: "It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction—(1) on the basis of race, color, religion, national origin, sex or marital status, or age."12

However, the Court offered some support to the CFPB and others who advocate reading "disparate impact" into ECOA when Justice Kennedy addressed section 805(a) of FHA, which like ECOA simply uses the term "discriminate," citing a decades-old case: "The Court has construed statutory language similar to §805(a) to include disparate-impact liability. See, e.g., Board of Ed. of City School Dist. of New York v. Harris, 444 U. S. 130, 140–141 (1979) (holding the term 'discriminat[e]' encompassed disparate-impact liability in the context of a statute's text, history, purpose, and structure)." For this reason, it is difficult to predict how Justice Kennedy (who likely would be the swing vote again) would vote if the Court were to consider the use of disparate impact theory under ECOA.

Justice Kennedy's focus on the phrase "otherwise make available," is in contrast to that of Justice Alito, who authored the primary dissent. In his dissent, Justice Alito noted: "§805(a) prohibits any party 'whose business includes engaging in residential real estate-related transactions' from 'discriminating against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.'"14 Justice Alito continued: "Under a statute like the FHA that prohibits actions taken 'because of' protected characteristics, intent makes all the difference."14

But statistics alone do not make a prima facie case – plaintiffs must show causality The Supreme Court affirmed the Fifth Circuit's reversal of the District Court, finding that the plaintiff had failed to satisfy the "robust causality" requirement to make a prima facie case under the FHA: "a disparate-impact claim that relies on a statistical disparity must fail if the plaintiff cannot point to a defendant's policy or policies causing that disparity."15 The Court said disparate impact analysis, "[w]ithout adequate safeguards at the prima facie stage . . . might cause race to be used and considered in a pervasive way and 'would almost inexorably lead' governmental or private entities to use 'numerical quotas,' and serious constitutional questions then could arise."16

The Court held that "disparate impact" liability must be limited so that employers and other regulated entities are able to make practical business choices and profit-related decisions that sustain free-enterprise. The Court wrote, "before rejecting a business justification—or, in the case of a governmental entity, an analogous public interest—a court must determine that a plaintiff has shown that there is 'an available alternative . . . practice that has less disparate impact and serves the [entity's] legitimate needs.'"17

While the decision affirms that disparate impact liability under the FHA remains the law of the land, the Court's forceful reminder that a "robust causality requirement" must be met leaves many questions unanswered for the housing and finance industries and the civil rights advocacy community.

Housing authorities and the financial industry must examine their policies and prepare for additional litigation now that 'disparate impact' has been affirmed In the housing context, there are many cases based on disparate impact pending against developers, agencies, lenders, and insurance companies. These entities should expect more litigation now that any doubt has been removed about the viability of disparate impact liability under the FHA. Relying largely on statistical analyses, these cases will be time consuming, expensive and present reputational risk even if the challenged policy ultimately is vindicated. Some states may have to reexamine their Qualified Allocation Plans and tax credit allocation processes.

Members of Reed Smith's Financial Industry Group are available to provide a thorough analysis of your particular situation. Please contact us to discuss other implications of this important decision.

  1. Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. ____ (June 25, 2015) (slip op., at 20).
  2. 576 U.S. ____ (slip op., at 22).
  3. 576 U.S. ____ (slip op., at 20).
  4. 576 U.S. ____ (slip op., at 22).
  5. 576 U.S. ____ (slip op., at 1).
  6. 401 U.S. 424 (1971).
  7. 554 U.S. 228 (2005).
  8. 576 U.S. ____ (slip op., at 13).
  9. 576 U.S. ____ (slip op., at 14).
  10. 576 U.S. ____ (slip op., at 11).
  11. 576 U.S. ____ (slip op., at 12).
  12. 15 U.S.C. § 1691(a).
  13. 12 576 U.S. ____ (slip op., at 3) (Alito, J., dissenting) (emphasis in original).
  14. 13 576 U.S. ____ (slip op., at 5) (Alito, J., dissenting).
  15. 576 U.S. ____ (slip op., at 20)(citing Wards Cove Packing Co. v. Atonio, 490 U. S. 642, 653 (1989), superseded by statute on other grounds, 42 U.S.C. § 2000e–2(k)).
  16. 576 U.S. ____ (slip op., at 20).
  17. 576 U.S. ____ (slip op., at 10).

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions