Last week was quite a week at the Supreme Court, with three historic decisions! 1) The Court mandated that single sex marriage is protected by the Constitution. 2) The Affordable Care Act was protected. 3) Finally, in the third decision that was not as well known, the Court preserved the effectiveness of the Fair Housing Act (FHA) as a legal remedy against discrimination.
Affordable housing advocates should know about the background of the FHA and how it works to root out discrimination. In the 1960s, President Lyndon Johnson established the Kerner Commission to investigate the causes of the riots and social unrest in the nation’s cities. The Kerner Commission concluded that residential segregation, unequal housing, and economic distress in inner cities were significant causes of the unrest. The Commission concluded that “our Nation is moving towards two societies, one black, one white, separate, and unequal.” To combat this, the Commission recommended enactment of a “comprehensive” law “making it an offense to discriminate in the sale or rental of any housing.”
Leading up to the Kerner Commission, entrenched real estate and lending practices were creating segregated neighborhoods. Racially restrictive covenants made it illegal to sell property to minorities. Real estate agents “steered” or directed people to neighborhoods where their race was the predominant race. Lenders engaged in redlining or refusing to make loans in minority neighborhoods.
Lyndon Johnson exhorted Congress to pass the Fair Housing Act (FHA) in the wake of Martin Luther King’s assassination. The FHA makes it illegal to refuse to sell or rent a dwelling to any person on the account of race, color, religion, sex, familial status, or national origin. Also, it is illegal to discriminate in real estate transactions or in the terms and conditions of those transactions.
The FHA makes it illegal to practice overt or intentional discrimination. These are cases in which the intent to discriminate is explicitly stated such as when a landlord says he will not rent to African-Americans or Latinos. In addition, Justice Anthony Kennedy writing for the majority, reaffirmed the use of disparate-impact theory. Under disparate-impact theory, discrimination can be proved when there is no explicit discriminatory communication but when the results of a practice lead to segregationist or discriminatory outcomes. For example, a lending institution may state that it will not make loans below $200,000. The lender is not explicitly discriminating with this policy but if the great majority of members of a racial minority obtain loans from competing institutions of below $200,000, then the particular lender’s policy could be found to be discriminatory.
The FHA states that it is illegal to refuse to sell or rent a dwelling, or “otherwise make unavailable or deny” a dwelling on account of race, religion, gender, or familial status. For Justice Kennedy and the majority, the phrase “otherwise make unavailable” indicates that the consequences of an action as well as its intent can make it illegal. In other words, if an action has a disparate impact affecting a particular racial group, the action can be illegal even if no explicit intent to discriminate was communicated.
At the same time, Justice Kennedy warns that statistical disparities by themselves are not illegal. He reiterates previous legal practice that the disparity must not have a business justification. Referring back to the previous example, if there was no way to make safe loans (that did not default) below $200,000, then the lender would not be found to discriminate. However, if borrowers with loans below $200,000 regularly made their mortgage payments and did not default, there would be no business justification for the policy and the lender would be found to have discriminated.
Justice Kennedy’s opinion also reviews and reaffirms Congressional intent in establishing the disparate-impact standard. In 1988, Congress amended the FHA but did not address or curtail disparate impact. By that time, all nine Courts of Appeals had also ruled in favor of disparate impact. Congress was well aware of these judicial interpretations but did not change the wording of the statute to eliminate the disparate-impact standard.
The Supreme Court’s opinion is a tremendous victory for fair housing enforcement. Jurisdictions still enact zoning decisions that have an exclusionary impact against minorities. Some lending institutions engage in pricing discrimination charging higher rates to minorities or women that are just as qualified as whites or men. The Department of Justice and other agencies have used the FHA and disparate-impact theory to issue cease and desist orders and to require lending institutions to compensate the victims of discrimination.
Today, most have learned that it is not too smart to explicitly state their discriminatory intentions. Instead, they usually adopt policies that have a disparate impact. The elimination of the disparate impact standard would have been a big blow against fair lending and housing enforcement.
Justice Kennedy concludes that the “FHA must play an important part in avoiding the Kerner Commission’s grim prophecy that ‘our Nation is moving toward two societies, one black, one white – separate and unequal.’ The Court acknowledges the Fair Housing Act’s continuing role in moving this Nation toward a more integrated society.”
I could not have said it any better. Thank you Justice Kennedy.
Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as Vice President of Research & Policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.