Disparate Impact Claims of Discrimination and the Fair Housing Act

The United States Supreme Court was scheduled to hear arguments in Mount Holly v. Mount Holly Gardens Citizens in Action, Inc. to address whether disparate-impact claims of discrimination may be brought under the federal Fair Housing Act of 1968. Ultimately, the case settled and the issue remains unclear whether disparate impact claims are viable under the Fair Housing Act. This question is significant for banks, mortgage companies, the insurance industry and other entities covered by the fair housing laws, and resolution of this question will likely be needed in the future.

Revitalization or Discrimination?

In the referenced  case, the township of Mount Holly made  certain efforts to redevelop a deteriorating neighborhood of over 300 houses which  allegedly had a disparate impact on the mostly black and Hispanic residents. The township adopted a redevelopment plan that called for acquiring and demolishing all 329 houses and replacing them with a combination of new apartments and townhomes. The plan called for making 10% of the units affordable for low income residents and providing existing residents with relocation assistance. The residents contend  that the plan constituted  an intentionally racially discriminatory effort to remove minorities from the township and that the redevelopment had a racially disparate impact. The Third U.S. Circuit Court of Appeal concluded that there was not valid claim of intentional discrimination, but it allowed the residents’ disparate impact claim to proceed.

The township appealed to the US Supreme Court where it will likely argue that the text of the Fair Housing Act prohibits only racially disparate treatment, not disparate impact bias. Furthermore, it will argue that from a practical standpoint that communities will need to revitalize certain neighborhoods, and if disparate-impact cases are allowed, the revitalization efforts will be much more difficult, and ultimately deterred. In contrast, the residents will argue that federal appeal courts have upheld the disparate-impact standard on eleven prior occasions and the US Department of Housing and Urban Development promulgated a final regulation that recognized disparate impact claims. Although the issue remains unresolved by the highest court, the potential exposure of litigation for a disparate impact claim should be evaluated by businesses when engaging in transactions covered by the fair housing laws. 

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.