The U.S. District Court for the Northern District of Texas dismissed the fair housing disparate impact suit filed by the Inclusive Communities Project (ICP) against the Texas Department of Housing and Community Affairs (TDHCA). Using the disparate impact theory, ICP claimed that TDHCA violated the Fair Housing Act because the discretion TDHCA used to allocate Low Income Housing Tax Credits (LIHTCs) in the Dallas metropolitan area, while seemingly neutral, had a discriminatory effect. ICP charged that between 1999 and 2008, 94% of LIHTC units in the City of Dallas and 74% of LIHTC units in the metropolitan area were located in areas primarily occupied by racial minorities.
ICP won a major Supreme Court decision on June 25, 2015 that upheld the disparate impact standard in housing discrimination (see Memo, 6/29/15). However, the Supreme Court cautioned that disparate impact should not be established solely based on a showing of statistical disparity, stating that a plaintiff must point to a defendant’s policy or practice causing a disparity. The Supreme Court also explained that disparate impact claims must seek to remove artificial, arbitrary, and unnecessary barriers. Consequently, the Supreme Court questioned whether ICP could prove disparate impact in this case and sent the case back to the lower courts to decide whether ICP’s claim met disparate impact standards.
The District Court noted that the Supreme Court did not disturb and essentially upheld the Fifth Circuit Court’s earlier adoption of the three-step “burden-shifting” test used by a majority of federal appeals courts and codified in HUD regulations on February 15, 2013 (see Memo, 2/8/13). The three steps are:
- First, the party complaining that there is a discriminatory effect has the burden of proving that a policy or practice caused, or predictably will cause, a discriminatory effect.
- Second, if the complaining party makes a convincing argument, then the burden of proof shifts to the defending party, which must show that the policy or practice has a “legally sufficient justification,” meaning it is necessary to achieve a substantial, legitimate, nondiscriminatory interest that cannot be served by another practice that has a less discriminatory effect.
- Third, if the defending party is successful, the complaining party can still succeed by demonstrating that the defending party’s substantial, legitimate, nondiscriminatory interest could be served by another practice that has a less discriminatory effect.
The District Court concluded that ICP did not meet the first step and therefore dismissed the case. The District Court decided that ICP did not identify a specific policy or practice that caused the disparity in the location of LIHTC units. In addition, the Court stated that ICP did not prove facts demonstrating a causal link between a challenged policy or practice of TDHCA and a statistical disparity, and that ICP failed to demonstrate that local zoning rules, community preferences, or developers’ choices did not contribute to the statistical disparity. The District Court also concluded that ICP did not identify any barriers to housing that the court could remove.
The District Court decision, issued on August 26, is at: http://bit.ly/2bRN1jk
A brief ICP media release is at: http://bit.ly/2c3x9Ja