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Texas Department of Housing & Community Affairs v. Inclusive Communities Project

On June 25, 2015, the Supreme Court issued its decision in Texas Department of Housing & Community Affairs v. Inclusive Communities Project (TDHCA). In a majority opinion by Justice Kennedy, the Court held that plaintiffs can prove violations of the Fair Housing Act (FHA) through evidence of the unjustified disparate impact of facially neutral policies in the absence of proof of discriminatory intent. The decision was a major victory for fair housing and civil rights advocates who rely upon the disparate impact standard to prove allegations of unlawful discrimination at a time when overt expressions of bigotry by housing providers, financial services companies, and government agencies are rare, but whose actions too often are major factors in the structural inequality and residential segregation that plague our country. The Lawyers’ Committee filed an amicus curiae brief in the case on behalf of a broad coalition of civil rights organizations and played a major role in coordinating amicus strategy and communications activities relating to the case. The brief highlighted the harms of residential segregation, the benefits of integration, and the role of the disparate impact standard in overcoming segregation.

In TDHCA, the Inclusive Communities Project, a Dallas-based civil rights organization, challenged the defendant’s administration of the Low-Income Housing Tax Credit (LIHTC) program in the Dallas metropolitan area. Under the LIHTC program, which is administered federally by the Internal Revenue Service, state housing finance agencies allocate tax credits to developers who use the credits to finance the construction or rehabilitation of affordable rental housing for low and moderate income households. The process of applying for credits is competitive, and the processes by which states allocate credits involve a mix of objective criteria and discretion that are encapsulated in a document called a Qualified Allocation Plan. As a result of its policy choices, the defendant disproportionately allocated tax credits for family-occupancy affordable housing to proposed developments in predominantly African American and Latino neighborhoods and rejected applications in predominantly white neighborhoods, thus denying low income and minority households the ability to live in high opportunity neighborhoods that have excellent schools and access to jobs and transit, as well as perpetuating residential racial segregation.

The district court held that the defendant had violated the FHA in light of the disparate impact of its policies and practices but found that the plaintiff had not proven that the defendant engaged in intentionally discriminatory conduct. The Fifth Circuit confirmed that disparate impact claims are viable under the FHA but remanded the case to the district court to evaluate whether plaintiff had demonstrated that there were alternatives less discriminatory than the challenged polices that would also serve the defendant’s interests. The district court had placed the burden of proving that there was no less discriminatory alternative on the defendant, but a U.S. Department of Housing & Urban Development (HUD) regulation that was promulgated after the district court decision placed that burden on the plaintiff. In making this decision, the Fifth Circuit deferred to HUD’s interpretation of the FHA.

The case will now go back to the lower courts for further proceedings consistent with the Fifth Circuit and Supreme Court decisions. The Lawyers’ Committee will continue to monitor the litigation, both because of the organization’s interest in the administration of the LIHTC program and because of its interest in how the disparate impact standard is applied in the lower federal courts.

Click here to read the Supreme Court’s decision in Texas Department of Housing & Community Affairs v. Inclusive Communities Project.

Click here to read the amicus curiae brief filed by the Lawyers’ Committee in Texas Department of Housing & Community Affairs v. Inclusive Communities Project.

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