Disparate Impact is a legal doctrine under the Fair Housing Act which states that a policy may be considered discriminatory if it has a disproportionate “adverse impact” against any group based on race, national origin, color, religion, sex, familial status, or disability when there is no legitimate, non-discriminatory business need for the policy.
In a disparate impact case, a person can challenge practices that have a “disproportionately adverse effect” on those protected by the Fair Housing Act and are “otherwise unjustified by a legitimate rationale.”
Disparate impact theory safeguards the right to a fair shot for everyone. Where you live determines where you work and how you get there, your access to healthcare, and the school your child attends. Unfortunately, policies and practices still exist that – intentionally or unintentionally – keep some people out of housing they can afford simply because of who they are.
While we have made strides in advancing fairness in the housing sector, segregation persists and there is still more work to be done. Everyone benefits from a housing market free from discrimination where the full participation of all Americans is possible.
Additionally, from a business standpoint, the disparate impact theory helps us maintain open markets free from discrimination – a critical component to the prosperity of America’s future. Discrimination disrupts our economy, causing inefficiency and instability by constraining the full economic participation of all hard-working Americans.
The Supreme Court Upholds Disparate Impact
On January 21, 2015, the U.S. Supreme Court heard oral arguments in a case challenging whether disparate impact will remain a safeguard against discrimination in housing regardless of intent. On June 25, 2015, the Supreme Court ruled, in a decided victory for civil rights groups and consumers across America, that “[d]isparate impact claims are cognizable under the Fair Housing Act” after considering the Act’s “results-oriented language, the Court’s interpretation of similar language in Title VII and the ADEA, Congress’ ratification of disparate-impact claims in 1988 against the backdrop of the unanimous view of nine Courts of Appeals, and the statutory purpose.”
The Court stated:
“Much progress remains to be made in our Nation’s continuing struggle against racial isolation…The FHA must play an important part in avoiding the Kerner Commission’s grim prophecy that ‘[o]ur 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 the Nation toward a more integrated society.”
Examples of Disparate Impact
- An apartment complex only allows people with full-time jobs. This bars disabled veterans and other people with disabilities who may not be able to work full-time, even though they can afford the apartment. The complex could instead consider all income to assess someone’s ability to afford rent.
- A city decides to prohibit all housing that would be affordable to working-class people, and that has the effect of excluding most or all people of color in that region. If the city cannot show a valid reason for its policy, or if a more fair and effective alternative is available, then the policy would have to be set aside under the disparate impact approach.
- A lender has a policy of allowing its loan officers to overcharge consumers at the loan officer’s discretion. The result is that women are charged higher prices than their male counterparts—even though both have the same credit profiles. In a case like this, the lender would have to abandon the discretionary pricing policy and take steps to ensure that women are not over-charged for lending products and services.
Disparate Impact Learning Materials
Disparate Impact Info Pack
Joe Rich, The Robust Causality Requirement In Disparate Impact Claims Under The Fair Housing Act (2018)
Civil rights groups’ letter to HUD regarding the disparate impact rule and the Supreme Court’s Inclusive Communities decision – January 26, 2018
Civil rights groups’ letter to HUD regarding the disparate impact rule and the Supreme Court’s Inclusive Communities decision – July 26, 2017
HUD’s Opposition Motion to Amend, Property Casualty Insurance Association of America v. HUD – April 2017
Professor Stacy Seicshnaydre, Disparate Impact and the Limits of Local Discretion after Inclusive Communities, 24 George Mason L. Rev. 663 (2017):
Professor Bob Schwemm, Fair Housing Litigation After Inclusive Communities: What’s New and What’s Not, 115 Columbia Law Review Sidebar 106 [now: CLR Online] (2015):
Steve Dane, The Potential Impact of Texas Department of Housing and Community Affairs v. Inclusive Communities Project on Future Civil Rights Enforcement and Compliance, The Federal Lawyer (2016):