By Charlene Crowell
A long-awaited decision by the United States Supreme Court led to a June 25 ruling that preserves the usage of “disparate impact,” an important legal principle sometimes known as the discriminatory effects standard. The majority opinion held that housing discrimination under the nation’s 1968 Fair Housing Act (FHA) occurs by effect – as well as by intent.
Writing the decision, Justice Anthony Kennedy concluded, “[S]ince the passage of the Fair Housing Act in 1968 and against the backdrop of disparate impact liability in nearly every jurisdiction, many cities have become more diverse. . . .The Court acknowledges the Fair Housing Act’s continued role in moving the Nation toward a more integrated society.”
Joining Kennedy to form a 5-4 majority were Justices Stephen G. Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor.
Although the federal Department of Housing and Urban Development (HUD) codified the use of disparate impact in 2012 through its rule-making process, the case of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., had its oral arguments on January 21. The decision was awaited by consumer advocates and mortgage industry professionals alike.
Among civil rights and housing advocates, the decision was as widely applauded as the number of amicus or “friend of the court” briefs that were filed. The lengthy list of briefs came from diverse organizations, including AARP, Hope Enterprise Corporation, Howard University School of Law Housing Clinic, Judicial Watch, Lawyers’ Committee for Civil Rights Under Law, NAACP Legal Defense and Educational Fund, National Black Law Students Association, the National Fair Housing Alliance and the Center for Responsible Lending (CRL).
“When Americans are denied equal opportunity to housing, they are denied access to good jobs, quality education, safe streets, transit, and a clean and healthy environment, all of which are critical to leading healthy and prosperous lives,” said Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, a coalition of more than 200 organizations.
“We have observed, documented, and reported on disparate impact in mortgage lending, auto lending, student lending, and a suite of other financial services,” said Mike Calhoun, CRL president. “We have witnessed what happens when a single community cannot access such credit – and we know that these consequences are indicative of deeper, more systemic, more troubling realities in lending practices.”
Calhoun’s claims are strongly substantiated by the recently-released 2015 State of the Nation’s Housing from Harvard’s Joint Center for Housing Studies. In part, the report states, “And despite the [housing] rebound in much of the nation, a number of minority and low-income neighborhoods remain severely distressed.”
The report’s data points further illustrate the disproportionate problems faced by consumers of color:
- As of 2014, the homeownership rate for minorities remains 25.5 percentage points lower than that of Whites;
- More than 40 percent of Latino and Black households with mortgages report paying interest rates above 5 percent, compared to less than a third of White and Asian/other minority households;
- Housing wealth represents a much larger share of the net worth of the typical Black or Hispanic homeowner – 58 percent, than of the typical White homeowner – 37 percent; and
- Negative equity – borrowers owing more than their homes are actually worth – is highly-concentrated in minority and low-income neighborhoods.
Beyond this report and the Supreme Court’s decision, in late May, joint action by the Department of Justice and the Consumer Financial Protection Bureau brought a $9 million settlement against Provident Funding Associates, a private mortgage lender, found to have discriminated against 14,000 Black and Latino borrows. Terms of the settlement include the appointment of an independent administrator who will contact affected consumers and distribute restitution payments.
The leaders of two federal agencies – charged with enforcing the Fair Housing Act – added their voices and influence to the continuing fight for fair housing.
“Bolstered by this important ruling, the Department of Justice will continue to vigorously enforce the Fair Housing Act with every tool at its disposal – including challenges based on unfair and unacceptable discriminatory effects,” said Attorney General Loretta Lynch.
“The Supreme Court has made it clear that HUD can continue to use this critical tool to eliminate the unfair barriers that have deferred and derailed too many dreams,” said HUD Secretary Julian Castro. “Working with our partners on the ground, we will continue to do all we can to build a housing market that treats all Americans with basic dignity and respect.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.