A wise friend of mine often remarks that there is no fair housing without affordable housing. This last year, we saw a few notable developments on the federal level that create new standards and tools to help promote both of these goals.
Discriminatory impact without intent to discriminate
Disparate-impact liability occurs when a housing policy or practice causes a discriminatory impact on a protected class under the federal Fair Housing Act when there is no legitimate, nondiscriminatory business need for the policy. The groups that receive this protection under the federal act are based on race, national origin, color, religion, sex, familial status or disability. While it has always been clear that intentional discrimination violates the law, it has been less clear when a policy that is neutral or nondiscriminatory on its face has the effect of adversely affecting a protected class. Some housing policies that seem neutral in theory can exclude or segregate particular protected groups in practice.
Supreme court case confirms disparate-impact liability
On June 25, 2015, the United States Supreme Court provided clarity on this question of disparate-impact liability. In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the court in a 5-4 decision found that the Fair Housing Act not only prohibits intentional acts of discrimination, but also prohibits policies and practices that have a disparate impact and are otherwise not justified by a legitimate rationale.
In this case, Inclusive Communities Project, Inc. (ICP), a non-profit advocate of racial integration, analyzed the practices of the Texas Department of Housing and Community Affairs (Department) with regard to low-income tax credits for family housing in Dallas. ICP alleged that the Department violated the federal Fair Housing Act (FHA) by allocating a disproportionate number of federal low-income housing tax credits to predominately black, low-income inner-city areas rather than in predominately white suburban neighborhoods. These credits, distributed by the states, enable developers to build affordable housing without losing money. ICP alleged that the Department's selection criteria for allocating the tax credits to developers perpetuated segregated housing patterns instead of distributing the tax credits across all neighborhoods to promote integration. This resulted in a disparate impact on minorities in violation of the FHA. ICP made its case, not by proving intentional discrimination, but rather by presenting statistical evidence that demonstrated an adverse effect on a protected class.
The Department asserted that it had not violated the FHA because there was no intent to discriminate. The court observed that specific phrasing in the FHA as well as the Civil Rights Act of 1964 and the Discrimination Employment Act of 1967 look at the consequences of actions rather than the actor’s intent. The FHA has phrasing “otherwise make unavailable.” As a result, the Supreme Court ruled in favor of ICP, finding that disparate-impact liability may be established under the FHA; thus outright bias as well as racially neutral policies that negatively impact minorities can be found to violate the FHA.
Components of a disparate impact case
In a disparate impact case, a person can challenge practices that have a “disproportionately adverse effect” on those protected by the Fair Housing Act. However, the court ruled that more than just statistical evidence of a disparate impact was required to sustain such a claim. A plaintiff must first show facts or statistical evidence demonstrating a causal connection between a policy provision and a disparate impact on a protected group. Then the burden shifts to the defendant to prove the policy is necessary to achieve a substantial, legitimate, nondiscriminatory public or business interest. If this is established, then the burden shifts back to the plaintiff to show there is an alternative policy with a less discriminatory effect that would still serve the defendant’s legitimate business interest. This goes toward establishing that challenged policies are “artificial, arbitrary and unnecessary barriers.” Remedial orders by the courts when disparate-impact liability is found are to concentrate on the elimination of the offending practice and be race-neutral. Remedial orders that set racial quotas or target risk challenge constitutionality.
Disparate impact theory may encourage housing providers to steer away from discriminatory policies when other options exist. However, those considering disparate impact-claims should proceed cautiously given the proof required and the court’s warning against outright racial quotas. Disparate impact analysis may be most effective when evaluating claims of possible discrimination with regard to mortgage lending, exclusionary zoning, occupancy rules, development policies, insurance underwriting and other measures that may involve subtle forms of discrimination. Suits targeting unlawful zoning laws and other housing restrictions that unfairly exclude minorities without sufficient justification may be challenged based on disparate impact provided sufficient proof can be assembled. Plaintiffs must prove causality between the practice and the adverse effects.
Disparate impact is a long-standing legal concept. The Department of Housing and Urban Development (HUD) has long employed disparate impact analysis as a tool in enforcing the FHA, and the analysis had been upheld in the federal courts. In February 2013, a HUD rule was implemented formally authorizing disparate-impact claims whereby neutral practices with a discriminatory effect may be addressed.
Effect on REALTORS®
The effect of the Supreme Court’s decision will largely be felt by housing developers, rental property managers, lenders and government agencies. If you are involved in any of those areas care should be taken that any policies do not have any unintended disparate impact on a protected class under the Fair Housing Act.
2015 also heralded a new fair housing development with an impact on local community planning.
Affirmatively furthering fair housing
Affirmatively Furthering Fair Housing (AFFH) is a legal requirement that recipients of federal housing funding and grants further the purposes of the Fair Housing Act (FHA). Since 1968, funding recipients have been obligated to reduce barriers to fair housing and help ensure that every person in America has the right to fair housing, regardless of their race, color, national origin, religion, sex, disability or familial status.
The courts have found that the purpose of the AFFH mandate is to ensure that funding recipients do more than simply not discriminate: they must take action to address segregation and related barriers for groups with characteristics protected by the FHA, as often reflected in racially or ethnically concentrated areas of poverty. Congress recognized that “where a family lives, where it is allowed to live, is inextricably bound up with better education, better jobs, economic motivation, and good living conditions” and intended that HUD use its grant programs to assist in ending discrimination and segregation, and increase the supply of genuinely open housing.
HUD published its final rule on Affirmatively Furthering Fair Housing on July 16, 2015. The final rule aims to provide housing funding recipients with clear guidelines as well as easily accessible data and mapping tools so that they can analyze their fair housing landscape and set locally determined fair housing priorities and goals through an Assessment of Fair Housing (AFH). To aid communities in this work, HUD will provide open data to funding recipients and the public on patterns of integration and segregation, racially and ethnically concentrated areas of poverty, disproportionate housing needs, and disparities in access to opportunity.
How was the AFFH administered prior to the new rule?
The FHA itself does not define the precise scope of the AFFH obligation for HUD’s program participants. The prior practice of AFFH carried out by HUD funding recipients involved an analysis of impediments to fair housing choice and a certification that the grantee would affirmatively further fair housing. This was not particularly effective.
What are the improvements in the new rule?
The AFFH rule sets out a framework for local governments, states and Public Housing Agencies (PHA) to take meaningful actions to overcome historic patterns of segregation, promote fair housing choice, and foster inclusive communities that are free from discrimination. In addition to providing publicly open data and maps, HUD will also provide technical assistance to aid recipients as they adopt this approach. Community input and local decision-making are facilitated as well as regional collaboration.
What is the process program participants will follow?
Under the AFFH rule, an AFH will begin with inclusive community participation and will result in the setting of fair housing goals to increase fair housing choice and provide equal access to opportunity for all community members. HUD’s program participants will then factor the fair housing goals and priorities established in their AFH into the investments and other decisions made in their local planning processes.
The AFH Assessment Tool, which includes instructions and data provided by HUD, consists of a series of questions designed to help program participants identify and assess the following:
- Patterns of integration and segregation.
- Racially and ethnically concentrated areas of poverty.
- Disparities in access to opportunity.
- Disproportionate housing needs.
HUD will review the AFH within 60 calendar days after the date of submission. An AFH submission is deemed accepted 61 days after submission unless HUD provides a nonacceptance notification explaining the reasons for nonacceptance and how the program participant may remedy deficiencies.
Who does this apply to?
AFFH applies to jurisdictions that receive HUD funding such as a Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME) funding, Emergency Solutions Grants (ESG), and Housing Opportunities for Persons With AIDS (HOPWA) formula funding, as well as Public Housing Authorities (PHA). For information about which organizations, communities and local governments are federal funding recipients within Wisconsin, visit www.hudexchange.info/grantees or view the data and mapping tool at www.huduser.gov/portal/affht_pt.html#affh.
When will this all be implemented?
While the final rule took effect on August 16, 2015, 30 days after its publication, it will not be fully implemented immediately. The final rule provides for additional time for communities to adopt this improved process for setting local fair housing priorities.
Effect on REALTORS®
The new AFFH rule will largely be felt by housing developers, local community planners and municipal agencies. If you are involved in any of those areas or interested in AFFH issues, be sure to look at the information and resources provided at www.huduser.gov/portal/affht_pt.html#affh.
Resources
Disparate impact resources
Affirmatively furthering fair housing (AFFH) resources
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.