September 7, 2016

The Epilogue is Written for a Landmark Fair Housing Case

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Thirteen months after the Supreme Court announced its landmark decision that validated “disparate impact” as a legitimate legal argument fair housing cases, the U.S. District Court in Dallas (U.S. District Court) has written the epilogue.  Originally, Inclusive Communities Project brought suit against the Texas Department of Housing and Community Affairs when it found that a large number of housing credit development were awarded in areas of concentrated poverty in minority neighborhoods.

However, when the Supreme Court accepted this case, Inclusive Communities Project, Inc. v. Texas Department of Housing and Community Affairs (TDHCA), it agreed only to review the use of disparate impact as a legal argument under the Fair Housing Act of 1968.  Disparate impact is a legal argument, first used in employment law that shows how a seemingly race-neutral policy disproportionately and negatively affects minorities and other classes protected under the Fair Housing Act.  This should not be confused with disparate treatment (direct discrimination), which is what we often associate with fair housing litigation.

Although disparate impact had been validated by 10 U.S. Appeals Courts, it had never been reviewed by the Supreme Court prior to this case.  In a dramatic ruling last year, the Supreme Court did not review the actual merits of the case nor delve into the state’s allocation policies for Low-Income Housing Tax Credits (Housing Credit). What made its ruling last year so important was the Court’s decision that disparate impact, a key tool, could be used as a legal argument in fair housing cases.

In its decision, the Supreme Court also returned the case to the U.S. District Court to review complaints regarding Texas’s Housing Credit policies. As the District Court reexamined this case, it used the Supreme Court’s newly created test for disparate impact cases. The test is a three-step process, akin to a tennis match, in which the plaintiff and defendant are provided opportunities to make their argument. First, the plaintiff must prove that a challenged practice or policy causes a discriminatory effect on its face (prima facie); second, if the plaintiff makes its case, the defendantmust prove that the practice or policy “is necessary to achieve one or more substantial, legitimate, and non-discriminatory interests;” finally, the plaintiff must then demonstrate that the defendant’s interest “could be served by another practice that has a less discriminatory effect.”

In its decision last week, the U.S. District Court dismissed the case and its disparate impact claim. The court could have agreed to accept the first of the three steps in the disparate impact test since the case went all the way to the Supreme Court. Instead, the U.S. District Court opted to review the case from the beginning because, it stated, it did not have the benefit of the Supreme Court’s decision or HUD’s disparate impact regulation published in 2015.

The U.S. District Court ruled that the Inclusive Communities Project could not prove that a specific policy or practice created a disparate impact for African-Americans and other minorities.  Inclusive Communities had relied on statistics that demonstrated a generalized pattern of disparity in the state’s allocation of housing credits in racially-concentrated areas of poverty but could not prove that other policies at the federal, state, and local level were not the cause – in whole or in part – of the disparity.

Echoing the Supreme Court’s decision, the U.S. District Court makes clear that the court will not second-guess a state’s rationale in establishing housing or community development policy because of the complexity and the multiplicity of actors necessary for creating opportunity or revitalization.  This means that future court cases will need to focus on specific actions or policies that create a disparate impact in QAPs, not just broad policies or a pattern that seemingly perpetuates segregation or concentrated poverty.  The Supreme Court validated the “balanced approach” as reasonable housing policy – in other words, mobility, housing preservation, revitalization or other strategies are all valid ways to “affirmatively further fair housing.”

So what does the District Court’s decision mean for the Housing Credit going forward?  Those who feared that 50 state housing finance agencies might be sued or that affordable housing developments would come to standstill can take a deep breath.  There is now a high bar for reviewing disparate impact cases, but a bar nonetheless.

States are well aware that there is evidence of segregation in almost every urban area and that as a nation, we still have not adequately dealt with the legacy of racism and the resulting disparities in opportunity that affect education, health and jobs.  In the past few years, dozens of states have changed their Qualified Allocation Plans (QAP) to foster greater mobility for low-income tenants, and cities are trying to better understand the lack of opportunity resulting from higher-than-average mortality rates, substandard schools and long commutes in certain neighborhoods.  It’s also fair to say that Raj Chetty and Nathanial Hendren’s Equality of Opportunity study has deeply affected the field of housing and community development, creating a greater sense of urgency to help children trapped in multi-generational neighborhoods of poverty.

The U.S. District Court’s decision indicates that we, as fair housing advocates, must generally seek means outside the courts to remedy the inequality of opportunity that plagues our nation.  The courts may not always be the best venue to address the disparities throughout the society.  Instead, the U.S. District Court seems to provide wider deference to the executive branch, in this case the state of Texas, to make such policy changes.  However, it does place a limit on this deference by discouraging states from using racial quotas as a remedy to correcting past wrongs, and reiterates that states must create “race-neutral policies.”

This makes the federal Assessment of Fair Housing (AFH) an especially critical tool for government agencies seeking partners to bring down barriers to opportunity and “affirmatively further fair housing.”  For those of us who care about making real change, now is the time to get involved with our local and state AFH.  The AFH is the planning process now required of every state, local government or public housing authority that receives HUD funding.

The Affirmatively Furthering Fair Housing Rule, published by HUD in June 2015, requires jurisdictions to analyze local and HUD-provided data; identify racial and ethnic areas of concentrated poverty and barriers to opportunity; and set goals that will ultimately be incorporated into documents that guide HUD funding, such as the Consolidated Plan.  Enterprise and its partners are out in the field training local governments new to the AFH process and working with others to guide them through the AFH planning process including bringing more partners to the table.  So, whether you are a local housing CDC, a civil rights organization, a housing developer, or an interested citizens, active involvement in an AFH can make it a more meaningful document rather than another bureaucratic exercise.  If we succeed, we can tackle long-standing racial issues and make real progress. Continuing innovations and improvements to further fair housing QAPs in concert with other housing policies will ultimately make our neighborhoods true communities of opportunity.

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