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In Case With Dallas Ties, Supreme Court Upholds Tool For Fighting Housing Bias

Nicole LeBlanc
In January, visitors line up to enter the U.S. Supreme Court in Washington D.C. for the Texas Department of Housing and Community Affairs v. The Inclusive Communities Project case.

In a case with Dallas ties, the U.S. Supreme Court has upheld a key enforcement tool used by the Obama administration and civil rights groups to fight housing bias.

The justices ruled Thursday that federal housing laws can prohibit seemingly neutral practices that harm minorities even without proof of intentional discrimination.

The ruling is a major victory for fair housing advocates who say that even race-neutral policies can have a negative impact on minority groups. The Justice Department has used so-called "disparate impact" lawsuits to win more than $500 million in settlements from companies accused of bias against black and Hispanic customers.

The case involves an appeal from Texas officials accused of accused of violating the Fair Housing Act by awarding federal tax credits in a way that kept low-income housing out of white neighborhoods.

Case started in North Texas

KERA's Stella M. Chavez has more on the ruling's North Texas connection:

The case dates back to 2008 when a Dallas nonprofit, the Inclusive Communities Project, sued the Texas Department of Housing and Community Affairs.

The Dallas group claimed that that for the past two decades, the state had been perpetuating racial segregation.

How? By awarding federal tax credits to affordable housing projects in mostly poor neighborhoods.

Texas housing officials lost in federal district court and the U.S. Court of Appeals.

The Supreme Court’s decision has implications beyond Dallas. It means that housing practices that are discriminatory can be challenged in court, without a group having to prove the discrimination was intentional.

“In other words, if they’re doing the same thing that a racist would do then you don’t have to go ahead prove that they were also racist. That’s what the court upheld – that principle,” said Mike Daniel, one of the attorneys for the Inclusive Communities Project. The group helps poor families find housing in North Texas.

Daniel is happy with the court’s decision and says it reinforces the original intent of the Fair Housing Act of 1968.

Justice Anthony Kennedy wrote the court’s opinion, which points out that despite progress against racial isolation, there are still unequal conditions for minorities.

“And Justice Kennedy was very clear that in addition to eliminating barriers that kept minorities out of white neighborhoods, local governments also have to address the harms of racial segregation, including slum and blight,” Daniel said.

Erika Poethig with the Urban Institute, a social and economic policy research group, says some of the discriminatory practices in place today are less overt.

“The door slamming kinds of discrimination are less prevalent today,” she said. “The fact that families of color or people of color are not shown as many choices or options in neighborhoods is what is more prevalent today and that is an example of more subtle discrimination.”

There’s a wide range of examples of this kind of discrimination, she says.

“Predatory lending. Exclusionary zoning. Other kinds of polices that limit affordable housing, especially in communities where there’s more diversity by race and ethnicity,” she said.”

The issue hasn’t been completely resolved. The Supreme Court is returning the case to a lower court for further review.

The Texas Department of Housing and Community Affairs, which was sued by the Dallas group, says it’s prepared to go back to court.

The group’s executive director, Tim Irvine, issued a statement Thursday.

“It seems difficult to say as a general matter that a decision to build low-income housing in a blighted inner-city neighborhood instead of a suburb is discriminatory, or vice versa,” Irvine said.

Dallas Mayor Mike Rawlings issued a statement Thursday evening. He said: “I am pleased that the Court’s opinion offers important fair housing protections to our most vulnerable citizens. The timing of this ruling is particularly important, as we are currently developing our Neighborhood Plus policies.  The Court’s guidance on legitimate policies and objectives will inform those discussions.”

Here's an excerpt from the Court's ruling

The Federal Government provides low-income housing tax credits that are distributed to developers by designated state agencies. In Texas, the Department of Housing and Community Affairs (Department) distributes the credits. The Inclusive Communities Project, Inc. (ICP), a Texas-based nonprofit corporation that assists low-income families in obtaining affordable housing, brought a disparate-impact claim under §§804(a) and 805(a) of the Fair Housing Act (FHA), alleging that the Department and its officers had caused continued segregated housing patterns by allocating too many tax credits to housing in predominantly black inner-city areas and too few in predominantly white suburban neighborhoods. Relying on statistical evidence, the District Court concluded that the ICP had established a prima facie showing of disparate impact. After assuming the Department’s proffered non-discriminatory interests were valid, it found that the Department failed to meet its burden to show that there were no less discriminatory alternatives for allocating the tax credits. While the Department’s appeal was pending, the Secretary of Housing and Urban Development issued a regulation interpreting the FHA to encompass disparate-impact liability and establishing a burden-shifting framework for adjudicating such claims. The Fifth Circuit held that disparate-impact claims are cognizable under the FHA, but reversed and remanded on the merits, concluding that, in light of the new regulation, the District Court had improperly required the Department to prove less discriminatory alternatives.

The Texas Tribune reports: "The court decided it did not matter if the state housing department did not explicitly set out to discriminate based on race, color, religion, sex or national origin — the effect was enough to violate the law."

Check out the live SCOTUS blog discussing opinions on the ruling.

The Dallas connection (via Texas Tribune)

"Under the Low-Income Tax Credit program, run by the Texas Department of Housing and Community Affairs, the state gives federal incentives to private developers to build or rehabilitate low-cost apartments, essentially engineering parts of a city's geography.

The Inclusive Communities Project, a nonprofit devoted to fair housing issues, sued the TDHCA in 2009, arguing that the state doled out tax credits in Dallas in a way that packed minorities into poor neighborhoods and spared white neighborhoods from development of low-income housing. The result is that neighborhoods throughout Dallas remain segregated, the project argued.

The Dallas non-profit cited a legal argument called “disparate impact.” This means ICP didn't have to prove intentional racial discrimination, only that the result hurt a protected group, KERA News reported in January

A 2012 examination of state data by The Texas Tribune and San Antonio-Express News found that more than three-quarters of credits given out during a two-decade span subsidized the construction of apartments in neighborhoods mostly made up of poor blacks and Hispanics. Few units built with support from the tax credit program were in areas that are predominantly white."

Here's what Texas Attorney General Ken Paxton had to say about the ruling: 

“Texas stands strongly against racial discrimination, and sets policy true to the letter and spirit of the Fair Housing Act. Today’s decision places an unfair burden on landlords, lenders and developers, and will ironically lead them to make their decisions based upon consideration of race. The Administration’s interpretation of federal housing law is overreaching and misguided, and I am disappointed with the Supreme Court’s ruling. This case, however, is far from over. The Court recognized the ‘novelty’ of the plaintiff’s claims, and noted that the FHA does not prohibit actions taken for ‘legitimate objectives.’ The Texas Department of Housing and Community Affairs acted with the legitimate objective of revitalizing neighborhoods and providing affordable, fair housing when it distributed federal tax credits.”

Stella M. Chávez is KERA’s immigration/demographics reporter/blogger. Her journalism roots run deep: She spent a decade and a half in newspapers – including seven years at The Dallas Morning News, where she covered education and won the Livingston Award for National Reporting, which is given annually to the best journalists across the country under age 35.