United States: Disparate Impact Survives—Court Outlines Limitations on Liability

On June 25, 2015, the US Supreme Court issued a decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, holding that disparate-impact claims are cognizable under the Fair Housing Act (FHA).1 The Court's recognition of disparate-impact claims is in line with the 11 circuit courts that have considered the issue. While recognizing disparate-impact claims, the Court's opinion notes that "disparate-impact liability has always been properly limited in key respects" and discusses limitations that provide key defenses for those facing potential disparate-impact liability.


The petitioner, the Texas Department of Housing and Community Affairs (the Department), was sued by The Inclusive Communities Project (Inclusive Communities), a nonprofit organization that assists lower income families, which are disproportionately minority, with finding affordable rental housing. Inclusive Communities alleged that the Department disproportionately allocated tax credits to developments in predominantly minority areas, as opposed to those with majority Caucasian residents. Because the landlords would then be required to accept housing vouchers for properties built with tax credits, and vouchers were used predominantly by minority members, the practice had the effect of concentrating minority residents in those communities. Inclusive Communities alleged that this practice was a form of disparate-impact discrimination prohibited by the FHA. 

The district court ruled for Inclusive Communities and, in so doing, held that disparate-impact claims were cognizable under the FHA. The Department appealed. While the appeal was pending, the US Department of Housing and Urban Development (HUD) issued a regulation interpreting the FHA to permit disparate-impact claims. On appeal, the Fifth Circuit held that disparate impact was cognizable under the FHA, adopting HUD's test, but on the merits reversed and remanded the case. Before the district court could consider the matter on remand, the Department petitioned the US Supreme Court on the question of disparate-impact liability under the FHA. The Court granted certiorari on the question of first impression of whether disparate-impact claims are cognizable under the statutory text of the FHA.

The FHA prohibits individuals and entities from, among other things, refusing "to sell or rent . . . [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."2 Relying on the Court's prior interpretations of Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act (ADEA)—both of which prohibit practices that constitute express disparate treatment or "otherwise adversely affect" an individual's status because of a prohibited factor—the petitioners argued that the lack of similar "effects" language in the FHA required the Court to interpret the FHA as permitting only disparate-treatment claims. 

The Court's Holding

The Court, in an opinion authored by Justice Kennedy and joined by Justice Breyer, Justice Kagan, Justice Ginsburg and Justice Sotomayor, rejected the petitioner's interpretation, holding that the statutory text of the FHA permits disparate-impact liability. The Court relies on three principal rationales in reaching its holding, as described below. 

Prior Precedent. The Court finds that under its prior cases interpreting similar language in Title VII and the ADEA, the statutory text of the FHA permits disparate-impact liability. The Court reasons that the operative phrase "otherwise make unavailable" in § 3604(a) of the FHA is analogous to the phrase "otherwise adversely affect" in § 703(a)(2) of Title VII and § 4(a)(2) of ADEA, which in Griggs v. Duke Power3 and Smith v. City of Jackson4 respectively, the Court interpreted as permitting disparate-impact liability. The Court construes the "otherwise make unavailable" language in the FHA as referring to an action's consequences rather than an actor's intent. The Court also dismisses the petitioners' contention that inclusion of the "because of race" language in the FHA necessarily requires that a plaintiff show discriminatory intent. The Court notes that the same phrase is present in Title VII and the ADEA and those statutes have consistently been interpreted as permitting disparate-impact liability. 

The 1988 Amendments. The Court also relies on Congress's actions in passing the 1988 amendments to the FHA to support its interpretation. The Court notes that at the time Congress passed the 1988 amendments, Congress knew that nine courts of appeals had addressed the question and concluded the FHA encompassed disparate-impact claims. The Court states that Congress's decision to retain the "otherwise make unavailable" language in the FHA is strong evidence that Congress implicitly ratified the interpretation of the courts recognizing disparate-impact liability. Further, the Court notes that the 1988 amendments would have been "superfluous" if disparate-impact liability did not exist under the FHA. Indeed, the amendments added safe-harbor provisions that allowed an exemption for certain species of impact claims. According to the Court, Congress's recognition of the need for such exemptions assumed the existence of disparate-impact liability; otherwise the exceptions would have been unnecessary.5 

AFHA's Purpose. The Court also finds that recognition of disparate-impact liability is consistent with the FHA's "central purpose" of eradicating discriminatory practices in the housing sector.6 The Court notes that disparate-impact claims have empowered plaintiffs to counteract "unconscious prejudices and disguised animus" that may hide disparate treatment, and has played an important role in uncovering discriminatory intent.7 Disparate-impact liability "permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment,"8 the Court states. 

Limits on Disparate-Impact Liability

In holding that disparate-impact claims are cognizable under the FHA, the Court acknowledges several important limitations on disparate-impact liability. In particular, the Court admonishes that disparate-impact claims should be "examine[d] with care" to determine whether the plaintiff has made out a prima facie case, noting that a claim may fail when the plaintiff fails to allege facts or present statistical evidence that demonstrate "robust causality" between the alleged disparity and the challenged policies or practices.9  This examination should be conducted so as to "promptly" resolve cases where plaintiffs do not meet their prima facie burden. As the Court explains, the causality requirement ensures that "[r]acial imbalance . . . does not, without more, establish a prima facie case of disparate impact and thus protects defendants from being held liable for racial disparities they did not create."10 The Court notes that policies that create a disparate impact are those that erect "artificial, arbitrary, and unnecessary barriers."11   

The Court also explains that disparate-impact liability should be "properly limited" by giving defendants in disparate-impact cases "leeway to state and explain the valid interest served by their policies," a standard similar to the Title VII business-necessity defense.12 Legitimate considerations may include market factors.13 This language may well provide greater flexibility for legally sufficient business justifications than contemplated by HUD guidance, which calls for the policy to be the least discriminatory option.

Finally, the Court focuses on the important role that carefully tailored remedies play in disparate-impact cases. Courts should "strive to design [relief] to eliminate racial disparities through race-neutral means,"14 with room for race consciousness "in certain circumstances and in a proper fashion."15 

The Court notes the aforementioned protections—especially those at the prima facie stage—are needed to protect defendants against potential "abusive disparate-impact claims," especially when the "specter" of liability could cause defendants to forego actions that may benefit protected classes.16 Relatedly, the Court notes that not all racial imbalances harm protected classes. For example, without deciding the issue, the Court observes that a decision to site low-income housing for health or safety code violations in either the cities or the suburbs may be a defensible policy choice. 

Dissenting Opinions

Justice Alito's dissent—joined by Chief Justice Roberts, Justice Scalia and Justice Thomas—focuses on the "because of race" language in the FHA, which, the dissenting justices contend, indicates a discriminatory-intent requirement for liability under the FHA.17 Justice Alito also questions the majority's presumption of congressional intent behind the 1988 amendments.18 Finally, Justice Alito argues that the majority's standards for disparate-impact liability are too vague.19 

Although Justice Thomas joined Justice Alito's dissent, he also wrote separately to emphasize his view that Griggs was improperly decided.20 Justice Thomas notes that many racial imbalances might not be discriminatorily motivated and posits that the majority's approach may actually disincentivize state authorities from providing affordable housing in fear of disparate-impact liability.21


Because disparate impact remains cognizable under the FHA, financial institutions should continue to conduct rigorous analyses of their policies and practices to ensure compliance with the law. 

The Court's emphasis on the limits and rigor required for successful FHA disparate-impact claims—including the requirement that plaintiffs show "robust causality" and the role of business justifications—should be carefully developed and considered when defending a disparate-impact claim under the FHA. Indeed, the Court's opinion, which expressly acknowledges that "prompt resolution" of disparate-impact claims should be sought in cases where plaintiffs do not make out their prima facie case, provides important opportunities for defendants facing potential liability to seek dismissal if plaintiffs rely only on statistical disparities or otherwise fail to show causality. Moreover, the Court's focus on the serious constitutional questions that may arise if disparate-impact liability is interpreted too broadly or if remedies are not sufficiently tailored to curtail the offending practice may pave the way for future challenges to overbroad interpretations of disparate-impact liability.    

The Court's discussion of the limits on disparate-impact liability could also be helpful for defending against disparate-impact claims in other contexts, such as in cases arising under the Equal Credit Opportunity Act (ECOA). It also bears noting that the Court has never weighed in on the availability of disparate-impact liability under ECOA. Because ECOA has a distinct legislative history and different operative language, the issue of whether it, too, is focused on the impact of a particular practice will likely be clarified in future cases.

1 Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, No. 13–1371, slip op., - - - U.S. - - - (June 25, 2015).

2 42 U.S.C. § 3604(a) (emphasis added).

3 401 U.S. 424, 431 (U.S. 1971).

4 544 U.S. 228, 236 (2005).

5 Inclusive Cmtys. Project, slip. op. at 13.

6 Id. at 12.

7 Id. at 13.

8 Id.

9 Id. at 14-15.

10 Id. at 14.

11 Id. at 15 (citing Griggs, 401 U.S. at 431).

12 Id. at 14.

13 Id. 

14 Id. 

15 Id. (citing Parents Involved in Cmty. Schs. v. Seattle Sch. Dist. No. 1, 551 U.S. 701, 789 (2007)).

16 Id. at 21. 

17 Id. at 32.

18 Id. at 40.

19 Id. at 20.

20 Id. at 21.

21 Id. at 23.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

David W. Ogden
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