United States: U.S. Supreme Court Upholds 'Disparate Impact' Theory In Housing

Last Updated: July 29 2015
Article by Robert L. Schonfeld

In Texas Department of Housing and Community Affairs v. Inclusive Communities, 2015 U.S. LEXIS 4249 (S. Ct. June 25, 2015), the U.S. Supreme Court upheld the use of the "disparate impact" theory in proving housing discrimination under the federal Fair Housing Act. That theory had been recognized by the vast majority of the circuit courts, including the U.S. Court of Appeals for the Second Circuit starting with its decision in Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d Cir. 1988).

Even though the decision in Inclusive Communities did not directly change the law in the Second Circuit or the other circuits that had recognized the "disparate impact" theory, the Supreme Court decision is significant because it did lay down guidelines for what the court would deem to be a proper use of the "disparate impact" theory. The Supreme Court also expounded on the purpose and strength of the federal Fair Housing Act with language that will likely see its way into briefs and future lower court decisions, even in cases that do not involve the "disparate impact" theory.

The "disparate impact" theory allows a person to bring a housing discrimination action under the Fair Housing Act without proving intentional discrimination. To establish a case under the "disparate impact" theory, a person must demonstrate the occurrence of outwardly neutral practices and policies and that those practices have a significantly adverse or disproportionate impact on persons of a particular protected class because of their membership in that class. For example, as was found by the Eastern District of New York in MHANY Management v. Incorporated Village of Garden City, 985 F.Supp.2d 390 (E.D.N.Y. 2013), a municipality's change of zoning in a district to eliminate the potential for affordable rental multifamily units had a "disparate impact" on minorities.

As the Supreme Court noted in Inclusive Communities, a "disparate impact" claim cannot be sustained solely on a statistical disparity if a plaintiff cannot demonstrate that a particular policy caused that disparity. Moreover, as the Supreme Court suggested and as was held by the Second Circuit in Regional Economic Community Action Program v. City of Middletown, 294 F.3d 35 (2d Cir. 2002), the "disparate impact" theory can only be used to challenge general policies and practices and not individual decisions of municipalities.

Dispute Over State Policy

Inclusive Communities stems from a dispute over a policy of a Texas state agency that disproportionately awarded low-income housing tax credits to entities developing housing in predominantly black inner city areas instead of in suburban communities. The Inclusive Communities plaintiffs argued that that policy constituted discrimination under the "disparate impact" theory of the Fair Housing Act because it purportedly caused continued segregation of housing patterns. Both the district court and the U.S. Court of Appeals for the Fifth Circuit, consistent with precedent, held that the plaintiffs' "disparate impact" claims were cognizable under the Fair Housing Act, although the Fifth Circuit remanded the case back to the district court for a trial.

Texas filed a petition for a writ of certiorari on the question of whether "disparate impact" claims were cognizable under the Fair Housing Act, and the Supreme Court granted that petition. The Supreme Court had granted certiorari on the same issue in two earlier cases, Magner v. Gallagher, 132 S.Ct. 548 (2011) and Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, 133 S.Ct. 2824 (2013), but both of those cases settled prior to the oral argument before the Supreme Court. In an opinion delivered by Justice Anthony Kennedy, the Supreme Court by a 5-4 margin affirmed the order of the Fifth Circuit and held that "disparate impact" claims were cognizable under the federal Fair Housing Act.

The reasoning of the Supreme Court is not extraordinary. In finding that "disparate impact" claims could be brought under the Fair Housing Act, the court relied upon the fact that it had previously countenanced "disparate impact" claims under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and that the language in those two statutes regarding "disparate impact" was similar to that of the Fair Housing Act. The court also found significant the fact that Congress had enacted amendments to the Fair Housing Act in 1988 that did not address any issues pertaining to "disparate impact" even though Congress was aware that nine circuit courts had held by that time that "disparate impact" claims could be brought under the Fair Housing Act. The court also noted that the amendments enacted in 1988 assumed the existence of "disparate impact" claims under the statute.

Types of Cases

What is significant about the court's decision in Inclusive Communities is its discussion of what types of cases lend themselves to the "disparate impact" theory and the language in the court's decision regarding the Fair Housing Act and segregation in general.

In its decision, the court specifically noted that "housing restrictions that function unfairly to exclude minorities from certain neighborhoods without any sufficient justification" were "at the heartland of disparate-impact liability." The court cited the decision of the Second Circuit in Huntington Branch, NAACP as an example of an appropriate use of the "disparate impact" theory. In Huntington Branch, NAACP, the Second Circuit held that the Town of Huntington's refusal to amend an ordinance restricting multifamily housing projects to largely minority urban renewal areas disparately impacted minorities.

Noting the findings of the district court that there was a shortage of affordable rental housing for low- and middle-income households in the town, that the impact of the shortage was three times greater on African-Americans than on the overall town population, and that the town had restricted new low-income housing to an area of the town that had a considerably greater percentage of minority residents than the town as a whole, the Second Circuit held that such evidence constituted an appropriate and convincing "disparate impact" claim under the Fair Housing Act.

In contrast to the Supreme Court's approval of the use of the "disparate impact" theory in cases involving exclusionary practices such as in Huntington Branch, NAACP, the court specifically held that the "disparate impact" theory could not be used to block a municipality from "achieving legitimate objectives, such as ensuring compliance with health and safety codes." The court noted as that type of case, Gallagher v. Magner, 619 F.3d 823 (8th Cir. 2010), one of the cases cited above for which the Supreme Court had granted certiorari, but it was settled before the argument.

As discussed in detail at the beginning of Justice Samuel Alito's dissenting opinion in Inclusive Communities, Gallagher involved a municipality's aggressive enforcement of its codes to combat rodent infestation, missing dead-bolt locks, inadequate sanitation facilities and inoperable smoke detectors. While the Supreme Court cautiously did not directly opine on the merits of Gallagher since that case was not before the court, it appears that the court would not have approved of the use of the "disparate impact" theory in Gallagher and the fate of the "disparate impact" theory in general may have been entirely different had Gallagher rather than Inclusive Communities been the case to decide its continued viability.

Even in cases involving health and safety codes rather than exclusionary zoning, housing advocates may have other tools. For example, in Tsombanidis v. West Haven Fire Department, 352 F.3d 565 (2d Cir. 2003), the Second Circuit rejected a "disparate impact" challenge to a fire code that would have required major structural changes to a group home for people with disabilities. However, that court noted that the code could be challenged under a "reasonable accommodation" theory, which would have required a demonstration that an accommodation from the code's requirements was reasonable and necessary to afford the residents an "equal opportunity to use and enjoy" the residence.

It is also not clear whether the Supreme Court's decision in Inclusive Communities will have any impact on the New York City Human Rights Law. Chapter 1, §8-107(17) of the New York City Administrative Code pertaining to "disparate impact" contains different language from the Fair Housing Act, and it is possible that challenges to health and safety codes of the type involved in Gallagher and Tsombanidis could succeed under the New York City law.

As for the merits of the underlying case in Inclusive Communities, the Supreme Court was somewhat skeptical as to whether the "disparate impact" claims in that case would succeed. With regard to the issues involved in Inclusive Communities, the court stated that the case involved "a novel theory of liability" and that it "may be seen simply as an attempt to second-guess which of two reasonable approaches a housing authority should follow in the sound exercise of its discretion in allocating tax credits for low income housing." The court noted that housing developers must be given latitude to consider market factors and zoning officials should be allowed to make decisions based on legitimate concerns, such as cost and traffic patterns.

Therefore, while the "disparate impact" theory survived the challenge to it in Inclusive Communities, the Supreme Court enunciated limitations to its usage in the future. Policies and laws that further segregation such as those challenged in Huntington Branch, NAACP will clearly be susceptible to a "disparate impact" challenge. Policies that are aimed at furthering legitimate health and safety objectives will not be susceptible to a "disparate impact" challenge. Those cases that do not fall clearly into either of those categories, such as Inclusive Communities, may still be sustainable under a "disparate impact" theory but will be considered on a case-by-case basis.

Big Picture

While it is not clear that the plaintiffs in Inclusive Communities will prevail when the case is tried, housing advocates will deem the Supreme Court's decision to be a victory against housing discrimination solely for the strong language used in the decision about the Fair Housing Act.

Besides acknowledging in its conclusion " the Fair Housing Act's continuing role in moving the Nation toward a more integrated society," the Supreme Court's decision sets forth a detailed history of segregation in the United States. The court's opinion acknowledges that racially restrictive covenants, steering by real estate agents, and discriminatory lending practices such as redlining precluded minority families from being able to purchase homes in some communities. The court's decision states that by the 1960s, "these policies, practices and prejudices had created many predominantly black inner cities surrounded by mostly white suburbs."

The court then notes the social unrest in the mid-1960s, President Lyndon Johnson's establishment of the Kerner Commission to determine the causes of social unrest, and the Kerner Commission's finding that social unrest was caused in part by residential segregation and unequal housing. The Kerner Commission recommended the enactment of a law like the Fair Housing Act to combat discrimination, Report of the National Advisory Commission on Civil Disorders, p. 263 (1968). As stated by the court, Congress enacted the Fair Housing Act in response to further unrest in the inner cities after the assassination of Dr. Martin Luther King, Jr. The court concluded that the Fair Housing Act "must play an important part in avoiding the Kerner Commission's grim prophecy that '[o]ur Nation is moving toward two societies, one black, one white—separate and unequal.'"

The Supreme Court's notation that the enactment of the Fair Housing Act in 1968 was related to the assassination of Dr. King is particularly interesting. From the questions asked by Justice Kennedy at the Inclusive Communities argument in January, it appeared unlikely that he would ultimately deliver the court's opinion upholding "disparate impact." One can only wonder whether the subsequent events in Baltimore and concurrent media focus on segregation played a role in his support of the "disparate impact" theory.

In sum, housing advocates, housing developers, and municipalities can all find something to support in the Supreme Court's well-reasoned decision that enhances the power and viability of the Fair Housing Act.

Previously published in the New York Law Journal

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.

Robert L. Schonfeld
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