Judge Throws Out Disparate Impact Case that Sparked Supreme Court Ruling

The housing advocacy group whose lawsuit last year sparked a controversial decision by the U.S. Supreme Court allowing disparate impact cases to be brought under the Fair Housing Act has now seen that lawsuit dismissed by a federal judge who ruled that the group failed to meet the Supreme Court’s standard of establishing disparate impact.

The disparate impact issue has become a heated one in housing in the last few years, especially since the Obama Administration passed a rule allowing disparate impact claims—which are allegations made based on neutral practices that may have a discriminatory effect—under the Fair Housing Act in February 2013.

The Inclusive Communities Project (ICP), a non-profit advocacy group that assists predominantly African-American families eligible for Section 8 housing with finding affordable housing in predominantly Caucasian neighborhoods in the Dallas area, brought a complaint against the Texas Department of Housing and Community Affairs (TDHCA) in 2008 centering on allegations that low-income tax credits were awarded to real estate developers who own property in low-income minority dominated neighborhoods and denied to developers who own property in predominantly Caucasian neighborhoods.

A district court originally ruled that the manner in which TDHCA allocated the tax credits, though neutral, had a disparate impact on the basis of race. In March 2014, the Fifth Circuit Court of Appeals upheld the district court's ruling. The Supreme Court heard arguments for the case in January 2015 and subsequently ruled by a narrow 5-4 vote in June 2015 that disparate impact claims are cognizable under the Fair Housing Act. The case was remanded back to the U.S. District Court for the Northern District of Texas to apply the new standard set forth by the U.S. Supreme Court.

U.S. District Judge Sidney A. Fitzwater in the North Texas court dismissed ICP’s claims on August 26, ruling that ICP failed to provide any evidence that TDHCA’s discretionary application of the low-income tax credits had any disparate impact on low-income housing in North Texas.

“For the reasons explained, the court finds and concludes that ICP has failed to prove a prima facie case of discrimination by showing that a challenged practice caused a discriminatory effect, as defined by 24 C.F.R. § 100.500(a),” Fitzwater wrote in his ruling.

“As ICP and our attorneys review the District Court’s August 26, 2016 decision in ICP v. TDHCA and consider our next steps, we will continue our efforts to ensure low income families of color are able to exercise their fair housing rights and have access to housing outside of high poverty, under resourced, segregated areas of the Dallas Metroplex,” ICP said in a statement. “Since ICP first filed the case against TDHCA in 2008, a growing supply of low income housing tax credit units have been built and now provide a limited number of families of color with access to neighborhoods free from distress and segregation. ICP intends to use all available tools to pursue its mission and efforts, including the now settled Fair Housing Disparate Impact approach.”

TDHCA Executive Director Tim Irvine released the following statement: “We are pleased that the District Court has dismissed this long-standing case, thereby acknowledging that TDHCA's policies and rules do not create a racially discriminatory impact. As we have steadfastly maintained, TDHCA has sought to administer a tax credit program that carries out fair housing-compliant policies to develop affordable housing options for Texans through leveraging federal tax incentives that attract private investment. As the program continues to evolve, we intend to approach the development of policy with sensitivity to changing community needs, extensive public input, and the desire to provide choice and opportunity in a fair housing-compliant and non-discriminatory manner. ”

Click here to view Fitzwater’s complete ruling.