Pub. 13 2016 Issue 3

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Issue 3 • 2016 17 The Inclusive Communities Case: How a Lack of Discriminatory Intent Could Result in a Finding of Discrimination The Case. The Inclusive Communities Project, Inc. (ICP), an organization dedicated to racial and socioeconomic integration in the Dallas area, ini- tiated its lawsuit in 2008, alleging that the Texas Department of Housing and Community Affairs (TDHCA) and its officers caused segregation of housing by awarding too many tax credits for affordable housing in predominantly black in - ner-city Dallas neighborhoods and too few cred- its for projects in predominantly white suburban neighborhoods. The District Court concluded that ICP proved its case of disparate impact with statis- tical evidence that more tax credits for affordable housing units were awarded in areas with a low percentage of Caucasian residents than the num- ber that were awarded in 90% to 100% Caucasian areas. TDHCA was unsuccessful in rebutting ICP’s claim. The District Court issued a remedial order requiring TDHCA to add new selection criteria to its award process, such as points for units pro- posed in neighborhoods with good schools, but did not mandate racial targets or quotas. TDHCA appealed the District Court’s decision to the Fifth Circuit Court of Appeals. HUD Responds. While TDHCA’s appeal was pending before the Fifth Circuit, the Secretary of Housing and Urban Development (HUD) issued a regulation interpreting the FHA to include dispa- rate impact liability. Under the FHA, it is unlaw- ful to “refuse to sell or rent… or otherwise make available , or deny, a dwelling to a person because of race” or other protected characteristic, or to “dis- criminate against any person” in real estate trans- actions “because of race” or other protected charac- teristic. 1 The new HUD regulation provides that a plaintiff, in a disparate impact claim arising under the FHA, has the burden of proving that the chal- lenged practice caused or predictably will cause a discriminatory effect. 2 After the plaintiff has estab - lished a prima facie showing of disparate impact, the burden shifts to the defendant to “prove that the challenged practice is necessary to achieve one or more substantial, legitimate, non-discriminato- ry interests.” 3 If the defendant satisfies its burden at step two, the plaintiff may prevail by proving that the substantial, legitimate, non-discrimina- tory inter¬ests supporting the challenged practice could be achieved with another practice that has a less discriminatory effect. 4 TDHCA Wins. The Fifth Circuit Court of Ap- peals agreed that disparate impact claims are cog- nizable under the FHA; however, it reversed and remanded, finding that the District Court improp - erly placed the burden on TDHCA to prove there were no less discriminatory alternatives for allocat- ing low income housing tax credits. 5 In a concur- ring opinion, Judge Jones stated that, on remand, the District Court should reexamine whether ICP made out a prima facie case of disparate impact and suggested that the District Court incorrectly relied solely on statistical analysis without analyz- ing causation. 6 The Supreme Court granted review of the case, issuing its opinion on June 25, 2015 in Texas De- partment of Housing and Community Affairs, et al. v. The Inclusive Communities Project, Inc. 7 In its opinion, the Court traced the history of the FHA and other antidiscrimination statutes that came before it. The first statute it examined was Section 703(a) of Title VII of the Civil Rights Act of 1964 and an early case addressing disparate impact un- der that statute in the context of employment dis- crimination. The Court in that case explained that the statute not only prohibits overt discrimination but also practices that are fair in form but discrim- inatory in operation. Therefore, the Court conclud- ed, Title VII must be interpreted to allow disparate impact claims, but “business necessity” could be a defense in a disparate impact claim. The second statute the Court examined is the Age Discrimination in Employment Act of 1967 (ADEA) and a 2005 case in which a group of older I n a long-running case involving claims of racial discrimination in the awarding of affordable housing tax credits, the United States Supreme Court held that disparate impact claims of racial discrimination are actionable under the Fair Housing Act (FHA), meaning that a defendant could violate the FHA without discriminatory intent to do so. The legal arguments made and conclusions reached in this housing discrimination case could have an impact on claims of discrimination in residential and commercial lending. …the United States Supreme Court held that disparate impact claims of racial discrimination are actionable under the Fair Housing Act (FHA), meaning that a defendant could violate the FHA without discriminatory intent to do so. COUNSELOR’S CORNER DEBBIE RAMIREZ MODRALL SPERLING LAW FIRM n The Inclusive Communities Case  continued on page 18