Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS et al. v. INCLUSIVE COMMUNITIES PROJECT, INC., et al.

Certiorari to the United States Court of Appeals for the Fifth Circuit.

No. 13-1371. Argued January 21, 2015 — Decided June 25, 2015.

747 F. 3d 275, affirmed and remanded.

Kennedy, J., delivered the opinion of the Court, in which Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined. Thomas, J., filed a dissenting opinion, post, p. 547. Alito, J., filed a dissenting opinion, in which Roberts, C. J., and Scalia and Thomas, JJ., joined, post, p. 557.

Scott A. Keller, Solicitor General of Texas, argued the cause for petitioners. With him on the briefs were Ken Paxton, Attorney General, Charles E. Roy, First Assistant Attorney General, Joseph D. Hughes, Beth Klusmann, and Alex Potapov, Assistant Solicitors General, and Greg Abbott, former Attorney General, Jonathan F. Mitchell, former Solicitor General, Daniel T. Hodge, former First Assistant Attorney General, and Andrew S. Oldham, former Deputy Solicitor General. Michael M. Daniel argued the cause for respondent Inclusive Communities Project, Inc., et al. With him on the brief was Laura B. Beshara. Solicitor General Verrilli argued the cause for the United States as amicus curiae urging affirmance.

The report occupies pages 519 through 591 of volume 576 of the United States Reports. The Reporter's syllabus is printed at pages 519 through 522; the opinion of the Court begins at page 524 and closes at page 547, where the dissenting opinion of Justice Thomas also begins; the dissenting opinion of Justice Alito begins at page 557 and closes the report at page 591.

[576 U.S. 519] “Held: Disparate-impact claims are cognizable under the Fair Housing Act. Pp. 530-547.”

[576 U.S. 520] “(a) Two antidiscrimination statutes that preceded the FHA are relevant to its interpretation. Both § 703(a)(2) of Title VII of the Civil Rights Act of 1964 and § 4(a)(2) of the Age Discrimination in Employment Act of 1967 (ADEA) authorize disparate-impact claims. Under Griggs v. Duke Power Co., 401 U. S. 424, and Smith v. City of Jackson, 544 U. S. 228, the cases announcing the rule for Title VII and for the ADEA, respectively, antidiscrimination laws should be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose. Disparate-impact liability must be limited so employers and other regulated entities are able to make the practical business choices and profit-related decisions that sustain the free-enterprise system. Before rejecting a business justification—or a governmental entity's analogous public interest—a court must determine that a plaintiff has shown that there is ‘an available alternative . . . practice that has less disparate impact and serves the [entity's] legitimate needs.’ Ricci v. DeStefano, 557 U. S. 557, 578. These cases provide essential background and instruction in the case at issue. Pp. 530-533.”

[576 U.S. 520] “(b) Under the FHA it is unlawful to ‘refuse to sell or rent . . . or otherwise make unavailable or deny, a dwelling to a person because of race’ or other protected characteristic, § 804(a), or ‘to discriminate against any person in’ making certain real-estate transactions ‘because of race’ or other protected characteristic, § 805(a). The logic of Griggs and Smith provides strong support for the conclusion that the FHA encompasses disparate-impact claims. The results-oriented phrase ‘otherwise make unavailable’ refers to the consequences of an action rather than the actor's intent. . . . And this phrase is equivalent in function and purpose to Title VII's and the ADEA's ‘otherwise adversely affect’ language. In all three statutes the operative text looks to results and plays an identical role: as a catchall phrase, located at the end of a lengthy sentence that begins with prohibitions on disparate treatment. . . . [576 U.S. 521] The 1988 amendments signal that Congress ratified such liability. Congress knew that all nine Courts of Appeals to have addressed the question had concluded the FHA encompassed disparate-impact claims, and three exemptions from liability in the 1988 amendments would have been superfluous had Congress assumed that disparate-impact liability did not exist under the FHA.”

[576 U.S. 521] “Recognition of disparate-impact liability under the FHA plays an important role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment. But disparate-impact liability has always been properly limited in key respects to avoid serious constitutional questions that might arise under the FHA, e. g., if such liability were imposed based solely on a showing of a statistical disparity. . . . A disparate-impact claim relying on a statistical disparity must fail if the plaintiff cannot point to a defendant's policy or policies causing that disparity. A robust causality requirement is important in ensuring that defendants do not resort to the use of racial quotas. Courts must therefore examine with care whether a plaintiff has made out a prima facie showing of disparate impact, and prompt resolution of these cases is important. Policies, whether governmental or private, are not contrary to the disparate-impact requirement unless they are ‘artificial, arbitrary, and unnecessary barriers.’ Griggs, supra, at 431. Courts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision.”

[576 U.S. 522] “While the automatic or pervasive injection of race into public and private transactions covered by the FHA has special dangers, race may be considered in certain circumstances and in a proper fashion. This Court does not impugn local housing authorities' race-neutral efforts to encourage revitalization of communities that have long suffered the harsh consequences of segregated housing patterns. These authorities may choose to foster diversity and combat racial isolation with race-neutral tools, and mere awareness of race in attempting to solve the problems facing inner cities does not doom that endeavor at the outset. Pp. 533-546.”

[576 U.S. 533] “Turning to the FHA, the ICP relies on two provisions. Section 804(a) provides that it shall be unlawful:”

[576 U.S. 533] “‘To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.’ 42 U. S. C. § 3604(a).”

[576 U.S. 534] “Here, the phrase ‘otherwise make unavailable’ is of central importance to the analysis that follows.”

[576 U.S. 534] “Section 805(a), in turn, provides: ‘It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.’ § 3605(a).”

[576 U.S. 534] “Applied here, the logic of Griggs and Smith provides strong support for the conclusion that the FHA encompasses disparate-impact claims. Congress' use of the phrase ‘otherwise make unavailable’ refers to the consequences of an action rather than the actor's intent. . . . This results-oriented language counsels in favor of recognizing disparate-impact liability.”

[576 U.S. 534] “A comparison to the antidiscrimination statutes examined in Griggs and Smith is useful. Title VII's and the ADEA's ‘otherwise adversely affect’ language is equivalent in function and purpose to the FHA's ‘otherwise make unavailable’ language. In these three statutes the operative text looks to results. The relevant statutory phrases, moreover, play an identical role in the structure common to all three statutes: Located at the end of lengthy sentences that begin with [576 U.S. 535] prohibitions on disparate treatment, they serve as catchall phrases looking to consequences, not intent. And all three statutes use the word ‘otherwise’ to introduce the results-oriented phrase.”

[576 U.S. 535] “This similarity in text and structure is all the more compelling given that Congress passed the FHA in 1968—only four years after passing Title VII and only four months after enacting the ADEA.”

[576 U.S. 542] “The FHA does not decree a particular vision of urban development; and it does not put housing authorities and private developers in a double bind of liability, subject to suit whether they choose to rejuvenate a city core or to promote new low-income housing in suburban communities.”

[576 U.S. 542] “In a similar vein, a disparate-impact claim that relies on a statistical disparity must fail if the plaintiff cannot point to a defendant's policy or policies causing that disparity. A robust causality requirement ensures that ‘[r]acial imbalance . . . does not, without more, establish a prima facie case of disparate impact’ and thus protects defendants from being held liable for racial disparities they did not create. Wards Cove Packing Co. v. Atonio, 490 U. S. 642, 653 (1989), superseded by statute on other grounds, 42 U. S. C. § 2000e-2(k).”

[576 U.S. 542] “Without adequate safeguards at the prima facie stage, disparate-impact liability might cause race to be used and considered in a pervasive way and ‘would almost inexorably lead’ governmental or private entities to use ‘numerical quotas,’ and serious constitutional questions then could arise. 490 U. S., at 653.”

[576 U.S. 543] “Courts must therefore examine with care whether a plaintiff has made out a prima facie case of disparate impact and prompt resolution of these cases is important. A plaintiff who fails to allege facts at the pleading stage or produce statistical evidence demonstrating a causal connection cannot make out a prima facie case of disparate impact.”

[576 U.S. 543] “Governmental or private policies are not contrary to the disparate-impact requirement unless they are ‘artificial, arbitrary, and unnecessary barriers.’ Griggs, 401 U. S., at 431. . . . Courts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision.”

[576 U.S. 545] “When setting their larger goals, local housing authorities may choose to foster diversity and combat racial isolation with race-neutral tools, and mere awareness of race in attempting to solve the problems facing inner cities does not doom that endeavor at the outset.”

[576 U.S. 545] “The Court holds that disparate-impact claims are cognizable under the Fair Housing Act upon considering its results-oriented language, the Court's interpretation of similar language in Title VII and the ADEA, Congress' ratification of [576 U.S. 546] disparate-impact claims in 1988 against the backdrop of the unanimous view of nine Courts of Appeals, and the statutory purpose.”

[576 U.S. 546] “Much progress remains to be made in our Nation's continuing struggle against racial isolation. In striving to achieve our ‘historic commitment to creating an integrated society,’ Parents Involved, supra, at 797 (Kennedy, J., concurring in part and concurring in judgment), we must remain wary of policies that reduce homeowners to nothing more than their race. But since the passage of the Fair Housing Act in 1968 and against the backdrop of disparate-impact liability in nearly every jurisdiction, many cities have become more diverse. 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.’ Kerner Commission Report 1. The [576 U.S. 547] Court acknowledges the Fair Housing Act's continuing role in moving the Nation toward a more integrated society.”

[576 U.S. 547] “The judgment of the Court of Appeals for the Fifth Circuit is affirmed, and the case is remanded for further proceedings consistent with this opinion.”

[576 U.S. 547] “It is so ordered.”

[576 U.S. 547] “I join Justice Alito's dissent in full. I write separately to point out that the foundation on which the Court builds its latest disparate-impact regime—Griggs v. Duke Power Co., 401 U. S. 424 (1971)—is made of sand. That decision, which concluded that Title VII of the Civil Rights Act of 1964 authorizes plaintiffs to bring disparate-impact claims, id., at 429-431, represents the triumph of an agency's preferences over Congress' enactment and of assumption over fact. Whatever respect Griggs merits as a matter of stare decisis, I would not amplify its error by importing its disparate-impact scheme into yet another statute.”

[576 U.S. 547] “We should drop the pretense that Griggs' interpretation of Title VII was legitimate. ‘The Civil Rights Act of 1964 did not include an express prohibition on policies or practices that produce a disparate impact.’ Ricci v. DeStefano, 557 U. S. 557, 577 (2009). It did not include an implicit one either.”

[576 U.S. 557] “I agree with the majority that Griggs ‘provide[s] essential background’ in this case, ante, at 533: It shows that our disparate-impact jurisprudence was erroneous from its inception. Divorced from text and reality, driven by an agency with its own policy preferences, Griggs bears little relationship to the statutory interpretation we should expect from a court of law. Today, the majority repeats that error.”

[576 U.S. 557] “I respectfully dissent.”

[576 U.S. 557] “No one wants to live in a rat's nest. Yet in Gallagher v. Magner, 619 F. 3d 823 (2010), a case that we agreed to review several Terms ago, the Eighth Circuit held that the Fair Housing Act (or FHA), 42 U. S. C. § 3601 et seq., could be [576 U.S. 558] used to attack St. Paul, Minnesota's efforts to combat ‘rodent infestation’ and other violations of the city's housing code. 619 F. 3d, at 830. The court agreed that there was no basis to ‘infer discriminatory intent’ on the part of St. Paul. Id., at 833.”

Editorial note. This record is a research edition, not a substitute for the official reporter. It reproduces the Reporter of Decisions apparatus and the Court's own text in extended verbatim passages arranged in the Court's own sequence of analysis, each bracketed with the official United States Reports page on which the passage appears. Passages set without quotation marks are Society prose; every quotation mark in this record encloses the Court's or the Reporter's words.

Editorial note. The Court-authored sections of this record are SELECTED EXCERPTS, not complete opinions. Each such section is headed accordingly, and no section of this record represents a judicial opinion as reproduced in full.

Editorial note. Three limitations are declared. First, the footnotes of the opinion and of the dissents are not reproduced. Second, the dissenting opinion of Justice Thomas at pages 547 through 557 and the dissenting opinion of Justice Alito at pages 557 through 591 appear here only as opening and closing passages, together with a Society summary of the disagreement in the sections that follow; they are not reproduced in full. Third, the Court's account of the statutory history, of the 1988 amendments, and of the Department of Housing and Urban Development's rulemaking at pages 528 through 533 and 536 through 542 is abridged; every omission inside a quotation is marked by ellipsis. The syllabus paragraphs at pages 520 and 521 are likewise given in abridged form with ellipses.

Editorial note. The optical transcription of the digitised bound volume drops the letter i from the fi ligature, so that ‘filed’, ‘profit’, ‘affirmed’, and ‘artificial’ appear defectively, and renders some em dashes as hyphens. Such obvious typographic and scanning defects have been silently corrected against the surrounding text; no substantive word has been altered, modernised, or paraphrased inside a quotation.

Editorial note. For any purpose requiring the complete official text, including the footnotes and the dissents in full, consult the bound volume through the canonical source recorded with this authority.

Editorial note. The Federal Government provides low-income housing tax credits that are allocated to developers by designated state agencies; in Texas the Department of Housing and Community Affairs performs that function under criteria of its own devising. The Inclusive Communities Project, a nonprofit that assists low-income families in obtaining affordable housing, alleged that the Department had disproportionately approved credits for developments in predominantly minority inner-city neighbourhoods and disproportionately denied them in predominantly white suburban neighbourhoods, thereby perpetuating segregated housing patterns. The claim rested on statistical disparity rather than on any allegation of intentional discrimination.

Editorial note. The District Court found a prima facie case of disparate impact and held that the Department had failed to establish that its allocation criteria were necessary to achieve a substantial legitimate interest. While the appeal was pending, the Secretary of Housing and Urban Development issued a regulation interpreting the Act to encompass disparate-impact liability and establishing a burden-shifting framework. The Court of Appeals for the Fifth Circuit held that disparate-impact claims are cognisable under the Act but reversed and remanded for application of that framework, 747 F. 3d 275 (2014). The Supreme Court affirmed that disparate-impact claims are cognisable and remanded for further proceedings consistent with the limitations it identified.

Editorial note. Section 804(a) and § 805(a) of the Fair Housing Act, in making it unlawful to make housing unavailable or otherwise deny a dwelling 'because of' race, encompass claims based on discriminatory effects as well as claims of intentional discrimination. The rule derived carries express limitations. A plaintiff must show a causal connection between the challenged policy and the disparity, and a statistical showing alone will not suffice; the policy must be the cause of the disparity. A defendant must be given the opportunity to state and prove a valid interest served by the practice. Remedial orders must, where possible, avoid race-conscious relief and should ordinarily eliminate the offending practice rather than impose racial targets or quotas. Courts must guard against liability that would displace legitimate judgments about the siting, financing, and design of housing.

Editorial note. Justice Kennedy reasoned from the antecedent construction of the results-oriented language in Griggs v. Duke Power Co., 401 U.S. 424 (1971), and Smith v. City of Jackson, 544 U.S. 228 (2005), and from the Act's 'otherwise make unavailable' phrase, which he read as referring to consequences rather than to the actor's intent. He gave weight to the unanimous view of the courts of appeals before the 1988 amendments and to Congress's decision in those amendments to add exemptions that presuppose disparate-impact liability. He then devoted the balance of the opinion to the safeguards, explaining that unconstrained impact liability would raise serious constitutional questions by pressing governmental and private actors toward racial considerations, and that disparate impact is properly directed at artificial, arbitrary, and unnecessary barriers rather than at every policy with an unequal effect.

Editorial note. Justice Thomas, dissenting, argued that the foundation of the Court's analysis — the disparate-impact construction of Title VII in Griggs — was itself illegitimate, resting on an agency's preferences rather than on the enacted text, and would not extend that error to a further statute. Justice Alito, dissenting for four Members of the Court, argued that the statutory text requires proof that a decision was made because of race, and pressed the practical consequences of impact liability for housing authorities, including the experience of the Houston Housing Authority in obtaining approval for proposed developments.

Editorial note. Inclusive Communities is the modern terminus of the treatise's fair-housing sequence, which begins with Buchanan v. Warley, passes through Shelley v. Kraemer and Barrows v. Jackson, and includes the constitutional intent requirement of Village of Arlington Heights and the statutory route of Jones v. Alfred H. Mayer Co. It establishes that the Fair Housing Act reaches beyond intentional exclusion to policies whose operation perpetuates segregation, while framing that liability so that it addresses unnecessary barriers rather than every disparity. For land-use practice its significance lies in the causation requirement and in the treatment of remedies, which together determine when zoning, siting, and subsidy allocation decisions may be challenged on effects grounds.

Editorial note. Followed. Applied by the lower federal courts in evaluating impact challenges to zoning, occupancy, lending, and subsidy allocation practices, with the robust-causality requirement operating as the principal limitation at the pleading stage. The administrative burden-shifting standard has been revised by successive Department of Housing and Urban Development rulemakings without disturbing the statutory holding.

Editorial note. Read with the Fair Housing Act, 42 U.S.C. §§ 3601-3619, and the treatise chapters on fair housing and civil rights and on exclusionary zoning.