On Wednesday morning, after opinions are released at ten o’clock, the Supreme Court will hold one hour of oral argument on the issue of how difficult it will be to prove discrimination in home sales or rentals, in the case of Texas Department of Housing and Community Affairs v. The Inclusive Communities ProjectArguing for the state agency will be Texas Solicitor General Scott A. Keller of Austin. The private agency involved will be represented by Michael M. Daniel of the Dallas law office of Daniel & Beshara,, P.C., sharing time at the lectern with U.S. Solicitor General Donald B. Verrilli, Jr., representing the federal government as an amicus in support of the Project.

Background

For more than three years, it has been abundantly clear that the Supreme Court has a keen interest in setting some standards on federal enforcement of a major civil rights law, the Fair Housing Act of 1968.  Twice before, however, its agreement to decide the issue has been frustrated by settlement of those cases.  This week, it will try again, in a Texas case about placing low-income housing in racially segregated neighborhoods — a case that seems to have less chance of washing out than the previous ones.

The issue before the Court pulls the Justices into the midst of an abiding dispute over a federal law that affects the everyday lives of many minorities, over where they may make their homes and even their chances to obtain housing.  The dispute has heavy emotional overtones, and civil rights groups — and some federal officials — have made strenuous efforts to head off a final decision by the Supreme Court on the key issue now awaiting the Justices’ attention, fearing that they might well lose.

The dispute can be simply stated: what theory of discrimination can be applied in enforcing Congress’s action against housing offerings that treat renters or buyers differently based on race, color, religion, family status, or national origin?  Does the 1968 law only prohibit housing bias that was intentional? Or does it also prohibit racial or sales policies that have a negative impact on people with the protected characteristics?  An intentional bias claim is considerably more difficult to prove, because it requires a probe into motives that may not be obvious or clear.

In agreeing last October to decide the Texas case, the Justices did as they had previously, and confined their review to those basic questions.  It refused to consider a second question: if “disparate impact” claims can be filed, how should they be judged?  By leaving that second issue out, the Court has put a targeted focus only on the scope of discrimination covered by the law.

If there is anything especially different about the new case, it is that last February the federal Department of Housing and Urban Development, the agency which enforces the 1968 act, issued a new regulation spelling out how to prove a “disparate impact” claim in a housing case.  U.S. Solicitor General Don Verrilli will be using that regulation to help bolster the case for extending the law to disparate-impact claims.  (Such an argument may be somewhat more difficult to make, because a federal trial judge in Washington, D.C., has recently struck down the HUD regulation, ruling that the 1968 law only applies to intentional housing bias.  The government has appealed that to the U.S. Court of Appeals for the District of Columbia Circuit — the only federal appeals court that has yet to rule on the basic issue.)

But the new case before the Court may also be different because the appeal is being pursued by the state of Texas, whose officials seem less likely to be persuaded to settle the case without a ruling by the Justices.  Pressure from civil rights groups and from government officials apparently figured in settlement of the prior cases, from St. Paul, Minnesota, and Mount Holly Township, New Jersey.

The new case arises under a federal program that provides tax subsidies in the form of credits to developers who build housing projects for low-income occupants.  State governments run the program, choosing the developers and the projects.  To qualify for a tax benefit, a project must either have twenty percent or more of the units under rent control and occupied by individuals with incomes of one-half or less of the median gross income in the local area, or have forty percent or more of the units under rent control and occupied by individuals with incomes sixty percent or less of the area’s median gross income.

States carrying out the program must give preference in placing a project to low-income areas — that is, census tracts for which half or more of the households have incomes less than sixty percent of the area’s median gross income, or that have poverty rates of at least twenty-five percent.

A separate federal program, called Section 8, provides subsidies to low-income minority tenants to help them afford housing.  Federal law prohibits properties receiving tax benefits under the other federal program from discriminating against Section 8 tenants.

In Texas, a state agency, the Department of Housing and Community Affairs, is responsible for operating the subsidized program.  Under state law, it must allocate the tax subsidies based upon a point system, using eleven criteria for ranking a project, ranging from income levels of the tenants and the level of community support.  The agency has also developed other criteria, but they cannot displace those that are set out in state law.

In Dallas, a group known as The Inclusive Communities Project works to place Section 8 subsidized tenants in Dallas’s more affluent and predominantly white neighborhoods, mainly in the suburbs, with the specific aim of racially integrating them.  It provides subsidies to the tenants and bonuses to landlords that will accept those tenants.

In 2008, the Project sued the state agency, accusing it of concentrating its efforts in areas mainly populated by minorities.  It included a claim of “disparate impact” under the 1968 law, and sought a court order that would require the agency to place as many subsidized projects in non-minority census tracts as in minority tracts.  It also made a claim of intentional racial bias, but that was dismissed, leaving only the “disparate impact” claim.

The federal trial court ruled for the Project, saying that it had made a persuasive case that the state agency did locate more of the subsidized projects in minority tracts, well out of proportion to what it did in non-minority neighborhoods.  It ordered the agency to come forward with a legitimate rationale for its placement decisions, and to come up with an alternative approach that would serve its policy interests without a discriminatory impact.

The agency then said its placement decisions were made to comply with both federal and state laws, but the trial judge found that it had not come up with a satisfactory alternative placement plan.  It barred it from pursuing its placement policies further.   The state agency appealed to the U.S. Court of Appeals for the Fifth Circuit, but that court was bound by existing precedent recognizing “disparate impact” claims under the 1968 housing law.

The Fifth Circuit instructed the state agency to follow the new regulations issued by the federal housing department.  Under those regulations, a housing provider would violate the 1968 law if any of its practices on rentals or sales had a discriminatory effect on protected groups, with that effect defined as any actual or predictable disparate effect that creates, increases, reinforces, or perpetuates segregated housing patterns.

If a challenger claiming a violation makes the case that there was a discriminatory effect of a rental or sale policy, the agency or landlord must prove that the practice was necessary to achieve a substantial, legitimate, and non-discriminatory interest.  If the agency or landlord succeeds on that point, then the challenger must show that the interests could be served in a less discriminatory way.

Without waiting for the case to unfold further in lower courts, the Texas agency filed its case in the Supreme Court, raising the question in this form, as granted by the Justices on October 2: “Are disparate-impact claims cognizable under the Fair Housing Act?”

Although eleven federal appeals courts have allowed such claims, the D.C. Circuit has not ruled finally on the issue. It now has before it a government appeal after U.S. District Judge Richard J. Leon ruled in early November that the 1968 law only outlaws intentional bias in housing transactions.   Judge Leon wrote that the appeals courts that had decided the issue all had done so before the Supreme Court, in the 2005 decision in Smith v. City of Jackson, had tightened the analytical rules for finding that a federal law applies to “disparate impact” claims.

Briefs on the merits

The Texas housing agency early in its brief on the merits pointed the Justices to Judge Leon’s decision, which broke ranks with the string of federal court rulings allowing “disparate impact” claims in housing bias cases.

That brief, like Judge Leon’s opinion, is heavily focused on the specific language of the Fair Housing Act.  It said that “there is no language anywhere in the Fair Housing Act’s anti-discrimination rules that refers to ‘effects’ or actions that ‘adversely affect’ others.”   Such language, it added, is absolutely essential, under the Smith v. City of Jackson approach, to extend a law to cover “disparate impact” claims.

By using the language of discrimination — bias “because of” a personal characteristic — the Act “cannot support an additional prohibition on actions that discrimination because of any factor” that happens to correlate with the protected characteristics, the agency contended.

But, it went on, if HUD ‘s reading of the law is one that the language did permit, it should nonetheless be avoided because that approach would force state and local government agencies to engage in “race-conscious decision-making to avoid legal liability.”  Courts would then have to confront the difficult constitutional question whether a government agency that legitimately feared a “disparate impact” lawsuit could legally protect itself by basing its policies specifically on racial factors.

As a final thrust, it argued that, if HUD is allowed to outlaw “disparate impact” under the Act, then any federal law that barred discrimination “because of race” could be similarly expanded.

The Inclusive Communities Project’s merits brief also sought to rely on the specific language of the Act, focusing on the words “make available” — that is, how Congress used that phrase to impose a legal obligation on housing providers to deal with how their policies actually operated in real-world practice, not what their motives or intent were for adopting those policies.

Congress was not concerned, the Project’s filing asserted, with trying to ferret out intentional acts of discrimination, but rather to eradicate the lingering impact that remained from past intentional actions by government agencies to discriminate against minorities.

Congress had expressly mandated, the brief said, that the Act be interpreted in a broad way to get at those continuing effects.   Decades of federal court rulings embracing the “disparate impact” remedy had confirmed that this was Congress’s aim, the Project asserted.

“The congressional directive to remedy the effects of past governmental segregation was based on the congressional findings that the prevailing structure of the housing market in this country remained distorted by those effects and enduring discrimination without regard to motivation or bias,” according to the Project.

As a final point, the Project urged the Court to defer to HUD’s expert view of what the 1968 law was intended to reach.

The federal government has entered the case to defend the “effects” test for housing bias, and to defend HUD’s new regulation.  The opening pages of the federal merits brief stress the unanimity of federal appeals courts in interpreting the Act as HUD does, and noted that Congress was well aware of that view of the law when it adopted amendments in 1988 but left intact the language in the law that the courts had read in extending the law to the effects of housing policies on minorities.

Moreover, in those 1988 changes, the government filing said, Congress created several exemptions from liability that were based on the assumption that such liability — that is, for “disparate impact” — already existed under the Act.

After those changes, other courts of appeals got in line in favor of that interpretation, the federal brief noted.  It included a brief footnote, referring to the fact that the D.C. Circuit had not yet passed on the issue.  It made a one-line reference to Judge Leon’s decision striking down HUD’s new regulation.

Unsurprisingly, it seeks deference to HUD’s expertise, suggesting that the department’s reading of the Act’s language is certainly a permissible one, and is, indeed, the only reading that gives effect to what Congress did in the 1988 amendments.

As in the past when the same legal issue was before the Court, the new cases have drawn considerable support from amici.  The numerical advantage goes to the supporters of “disparate impact” claims, with nearly two dozen briefs compared to fifteen for the challengers.

The Texas agency drew the support of conservative legal advocacy organizations, business groups (including the American Insurance Association, which won its case in Judge Leon’s court in November), the American Bankers Association, and various housing and lending associations or trade groups.

On the side of the Project were an array of civil rights organizations, scholars of housing law, a number of cities, seventeen states, and several groups of law students focusing on equal rights law.

If, as is now expected, this case does go to a decision on the merits, without a prior settlement, a final decision is expected to emerge in late spring or early summer.

 

Posted in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Featured, Merits Cases

Recommended Citation: Lyle Denniston, Argument preview: That housing bias issue is back, SCOTUSblog (Jan. 20, 2015, 5:03 PM), http://www.scotusblog.com/2015/01/argument-preview-that-housing-bias-issue-is-back/