On November 16, 2011, the Department of Housing and Urban Development (HUD) issued a proposal, entitled Implementation of the Fair Housing Act's Discriminatory Effects Standard. Comments from the public are due by January 17, 2012.
This announcement is much more involved than it seems, for HUD, to which Congress gave the authority and responsibility for administering the Fair Housing Act and the power to make rules implementing the Act. In HUD's proposal, a demonstration that a housing practice is supported by a legally sufficient justification may not be used as a defense against a claim of intentional discrimination.
The question of "disparate impact" (euphemistically linked to the "effects test") has deep roots in previous and on-going litigation, rising now to judicial review before the United States Supreme Court.
So, what's at stake? Let's take a closer look.
HUD's Preemptive Attack
It is rare, indeed, when a federal agency, such as HUD, seems to be issuing its position on a matter that is currently before the U. S. Supreme Court. But that is what appears to be happening. The case is Gallagher v. Magner, and on November 7, 2011, the Supremes granted a petition to review the Eighth Circuit's decision reversing summary judgment in the defendants' favor. Yet HUD is not filing an amicus curiae, the normative response expected by a federal agency, it is actually publishing its standards now - after the Supreme Court has decided to review the case.
To say HUD's tactic is unusual, is a considerable understatement!
Purpose of HUD's Proposal
So what is the basis of HUD's "preemptive strike," if I might be at liberty to use that term?
Here is HUD's stated purpose for its issuance:
"Although there has been some variation in the application of the discriminatory effects standard, neither HUD nor any Federal court has ever determined that liability under the Act requires a finding of discriminatory intent. The purpose of this proposed rule, therefore, is to establish uniform standards for determining when a housing practice with a discriminatory effect violates the Fair Housing Act."
Now to make sense of that statement of purpose, we'll need to give some consideration to Gallagher v. Magner.
Gallagher v. Magner
Gallagher v. Magner (hereinafter Gallagher), is a claim by owners of rental properties against the City of St. Paul's alleged "practice" of "aggressively enforcing" its Housing Code.
The case arose when a group of landlords claimed that officials in the City of St. Paul, Minnesota, targeted rental properties for housing code violations, with a disparate impact on African-American tenants. Despite the lack of evidence showing intent, the Eighth Circuit Court of Appeals upheld a finding of Fair Housing Act violations.
The Route to the Supreme Court
Here is a brief outline of Gallagher v. Magner's route to the Supreme Court:
Phase 1:
The district court granted the defendants' motion for summary judgment.
Phase 2:
The Eighth Circuit reversed with respect to the plaintiffs' "disparate impact" claim under the Fair Housing Act (FHA), 42 U.S.C. § 3604(a)-(b). In so holding, the Eighth Circuit applied a three prong "burden-shifting" approach requiring: (a) a prima facie case of disparate impact on protected classes; (b) a showing by the defendant that the challenged policy or practice has a "manifest relationship" to a legitimate, non-discriminatory policy objective; and (c) a showing by the plaintiffs that there exists "a viable alternative means" to meet the legitimate objective without discriminatory effects. [619 F.3d at 833-34]
The Eighth Circuit described the "policy or practice" at issue as "the City's aggressive Housing Code Enforcement practices," including allegations that "the City issued false Housing Code violations and punished property owners without prior notification," invitations to "cooperate" with the enforcement authority, or adequate time to remedy Housing Code violations." [Idem 834]
The court held that the plaintiffs presented a prima facie case of disparate impact by presenting evidence that (1) the city had a shortage of affordable housing; (2) racial minorities were disproportionately represented in the pool of those requiring affordable housing; (3) the city's "aggressive enforcement" of its code made ownership of rental properties more expensive; and (4) these increased costs to owners resulted in less affordable housing in the city. [Idem 834-35]
The City of St. Paul's position, when seeking certiorari from the Supreme Court, stated that increased costs relating to enforcement of a housing code would always have a prima facie disparate impact in cities where there is insufficiently low income housing and, of course, minorities are disproportionately in need of such housing.
So, the court found that there was a prima facie case of disparate impact, and the City of St. Paul had demonstrated that the challenged "aggressive enforcement" of its Housing Code promoted legitimate objectives; however, the court also held that the plaintiffs had produced evidence of a viable alternative without discriminatory effect.
