# Disparate Impact Claims Under the Fair Housing Act

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URL: https://www.frixlaw.com/law-library/documents/crs%3AR44203

## Record

- **Collection:** Congressional research report
- **Document type:** CRS Report
- **Published:** September 24, 2015
- **Citation:** R44203

## Text

Disparate Impact Claims Under the Fair
Housing Act
name redacted
Legislative Attorney
September 24, 2015

Congressional Research Service
7-....
www.crs.gov
R44203

Disparate Impact Claims Under the Fair Housing Act

Summary
The Fair Housing Act (FHA) was enacted “to provide, within constitutional limitations, for fair
housing throughout the United States.” It prohibits discrimination on the basis of race, color,
religion, national origin, sex, physical and mental handicap, and familial status. Subject to certain
exemptions, the FHA applies to all sorts of housing, public and private, including single family
homes, apartments, condominiums, and mobile homes. It also applies to “residential real estaterelated transactions,” which include both the “making [and] purchasing of loans ... secured by
residential real estate [and] the selling, brokering, or appraising of residential real property.”
There has been controversy over whether, in addition to outlawing intentional discrimination, the
FHA also prohibits certain housing-related decisions that have a discriminatory effect on a
protected class. That controversy was settled when, in June 2015, a divided U.S. Supreme Court
ruled that disparate impact claims are cognizable under the FHA.
Key Takeaways of This Report
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In February 2013, Department of Housing and Urban Development (HUD) for
the first time issued regulations “formaliz[ing] HUD’s long-held interpretation of
the availability of ‘discriminatory effects’ liability under the Fair Housing Act
and to provide nationwide consistency in the application of that form of liability.”
In June 2015, the Supreme Court held in Texas Department of Housing and
Community Affairs v. Inclusive Communities Project that disparate impact claims
are cognizable under the FHA—a view previously espoused by HUD and the 11
U.S. Courts of Appeals to render opinions on the issue. The Court also outlined
certain limiting factors that should apply when assessing disparate impact claims.
The Supreme Court appears to have adopted a three-step burden-shifting test for
assessing disparate impact liability under the FHA. The test outlined by the
Court, which is similar though not identical to the one adopted by HUD, places
the initial burden on the plaintiffs to establish evidence that a housing decision or
policy caused a disparate impact on a protected class. Defendants can counter the
plaintiff’s prima facie showing by establishing that the challenged policy or
decision is “necessary to achieve a valid interest.” The defendant’s “valid
interest” will stand unless the “plaintiff has shown that there is an available
alternative practice that has less disparate impact and serves the entity’s
legitimate needs.” Going forward, the minority of federal circuits that historically
have used a different type of test likely will begin using a burden-shifting scheme
consistent with the test outlined in Inclusive Communities.
The Supreme Court stressed that lower courts and HUD should rigorously
evaluate plaintiffs’ disparate impact claims to ensure that evidence has been
provided to support, not only a statistical disparity, but also causality (i.e., that a
particular policy implemented by the defendant caused the disparate impact).
The Court also emphasized that claims should be disposed of swiftly in the
preliminary stages of litigation when plaintiffs have failed to provide sufficient
evidence of causality.
Although plaintiffs historically have faced fairly steep odds of getting their
disparate impact claims past the preliminary stages of litigation, much less
succeeding on the merits, the “cautionary standards” stressed by the Supreme
Court might result in even fewer successful disparate impact claims being raised
in the courts and/or swifter disposal of claims that are raised.

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Disparate Impact Claims Under the Fair Housing Act

Contents
Introduction ..................................................................................................................................... 1
Disparate Impact Analysis Before Inclusive Communities.............................................................. 2
HUD’s Disparate Impact Rule ......................................................................................................... 6
The Supreme Court in Inclusive Communities ................................................................................ 7
Significance of the Inclusive Communities Decision .................................................................... 10

Contacts
Author Contact Information .......................................................................................................... 12

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Disparate Impact Claims Under the Fair Housing Act

Introduction
The Fair Housing Act (FHA) was enacted “to provide, within constitutional limitations, for fair
housing throughout the United States.”1 It prohibits discrimination on the basis of race, color,
religion, national origin, sex, physical and mental handicap, and familial status. Subject to certain
exemptions, the FHA applies to all sorts of housing, public and private, including single family
homes, apartments, condominiums, and mobile homes. It also applies to “residential real estaterelated transactions,” which include both the “making [and] purchasing of loans ... secured by
residential real estate [and] the selling, brokering, or appraising of residential real property.”2
In June 2015, the Supreme Court, in Texas Department of Housing Community Affairs v. Inclusive
Communities Project,3 confirmed the long-held interpretation that, in addition to outlawing
intentional discrimination, the FHA also prohibits certain housing-related decisions that have a
discriminatory effect4 on a protected class.5
Historically, courts have generally recognized two types of disparate impacts resulting from
“facially neutral decision[s]” that can result in liability under the FHA.6
The first occurs when that decision has a greater adverse impact on one [protected] group
than on another. The second is the effect which the decision has on the community
involved; if it perpetuates segregation and thereby prevents interracial association it will
be considered invidious under the Fair Housing Act independently of the extent to which
it produces a disparate effect on different racial groups. 7

The Supreme Court’s holding in Inclusive Communities that “disparate-impact claims are
cognizable under the [FHA]” mirrors previous interpretations of the Department of Housing and
Urban Development8 (HUD) and all 11 federal courts of appeals9 that had ruled on the issue.
1

42 U.S.C. §3601. The FHA, 42 U.S.C. §§3601 et seq., was originally enacted as Title VIII of the Civil Rights Act of
1968. For an overview of the FHA, see CRS Report 95-710, The Fair Housing Act (FHA): A Legal Overview, by (name
redacted)
.
2
42 U.S.C. §3605.
3
135 S. Ct. 2504 (2015). The Supreme Court had granted certiorari in two similar disparate impact cases in each of the
previous two terms; however, in both those cases, the parties reached settlement agreements before the Court had the
opportunity to issue an opinion on whether disparate impact claims are cognizable under the FHA. See Magner v.
Gallagher, 132 S. Ct. 1306 (2012) and Twp. of Mt. Holly v. Mt Holly Garden Citizens in Action, Inc., 134 S. Ct. 636
(2013). See also CRS Legal Sidebar WSLG1151, Supreme Court Set to Review Fair Housing Case: Third Time’s the
Charm?, by (name redacted)
.
4
The term “discriminatory effect” is used interchangeably with the term “disparate impact.”
5
Texas Dept. of Hous. & Cmnty Affairs v. Inclusive Communities Project, 135 S. Ct. 2525 (2015).
6
Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1290 (7 th Cir. 1977).
7
Id. The FHA’s protections are not limited to race. See also Inclusive Communities, 135 S. Ct. at 2522 (“Rather, the
FHA aims to ensure that those [valid governmental] priorities can be achieved without arbitrarily creating
discriminatory effects or perpetuating segregation.”).
8
Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11460 (February 15, 2013).
9
Vill. of Arlington Heights, 558 F.2d at 1290 (7th Cir. 1977); Resident Advisory Bd. v. Rizzo, 564 F.2d 126, 149-50 (3d
3rd Cir. 1977); Betsey v. Turtle Creek Assocs., 736 F.2d 983, 988-89 (4th Cir. 1984); Keith v. Volpe, 858 F.2d 467, 484
(9th Cir. 1988); Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 938 (2d Cir. 1988), judgment aff'd,
488 U.S. 15 (1988); Jackson v. Okaloosa County, Fla., 21 F.3d 1531, 1543 (11 th Cir. 1994); Simms v. First Gibraltar
Bank, 83 F.3d 1546, 1555 (5th Cir. 1996); Langlois v. Abington Hous. Auth., 207 F.3d 43, 49-50 (1st Cir. 2000);
Charleston Hous. Auth. v. U.S. Dep't of Agric., 419 F.3d 729, 740-41 (8th Cir. 2005); Graoch Assocs. #33, L.P. v.
Louisville/Jefferson Cnty Metro Human Relations Comm'n, 508 F.3d 366, 374 (6th Cir. 2007); Reinhart v. Lincoln
Conty, 482 F.3d 1225, 1229 (10th Cir. 2007). The U.S. Court of Appeals for the District of Columbia (D.C. Circuit) has
(continued...)

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However, as discussed further below, HUD and the 11 courts of appeals have not all applied the
same criteria for determining when a neutral policy that causes a disparate impact violates the
FHA. In a stated attempt to harmonize disparate impact analysis across the country, HUD
finalized regulations in 2013 that established uniform standards for determining when such
practices violate the act.10
The Inclusive Communities Court did not expressly adopt the standards established in HUD’s
disparate impact regulations. Rather, the Court adopted a three-step burden-shifting test that has
some similarities with these standards. In addition, the Court outlined a number of limiting factors
that lower courts and HUD should apply when assessing disparate impact claims. It likely will
take years to gain a strong understanding of how the Inclusive Communities decision will affect
future disparate impact litigation under the FHA (and other laws such as Title VII of the Civil
Rights Act of 1964).11 While plaintiffs historically have faced fairly steep odds of getting their
disparate impact claims past the preliminary stages of litigation, much less succeeding on the
merits of those claims, it is possible that the “cautionary standards” stressed by the Inclusive
Communities majority might result in even fewer successful disparate impact claims and swifter
disposal of claims that are raised.
This report provides an overview of how the lower courts and HUD evaluated allegations of
discriminatory effects before the Supreme Court’s Inclusive Communities decision. This
discussion is followed by an assessment of Inclusive Communities and an analysis of the potential
implications of the Court’s ruling.

Disparate Impact Analysis Before Inclusive
Communities
As noted, all of the circuit courts of appeals that had previously addressed the issue held that
disparate impact claims are cognizable under the FHA. The U.S. Court of Appeals for the Seventh
Circuit, for example, reasoned that “a requirement that the plaintiff prove discriminatory intent
before relief can be granted under the statute is often a burden that is impossible to satisfy.... A
strict focus on intent permits racial discrimination to go unpunished in the absence of evidence of
overt bigotry ... [which] has become harder to find.”12 The Seventh Circuit went on to explain that
interpreting the FHA so narrowly as to allow systematic discrimination in housing simply because
(...continued)
never ruled on the issue. See Id. at 46; 2922 Sherman Ave. Tenants’ Assoc. v. District of Columbia, 444 F.3d 673, 679
(D.C. Cir. 2006) (“Given that only one side of the issue has been briefed, however, instead of simply adopting the
approach of our respected sister circuits, we think it more appropriate to assume without deciding that the tenants may
bring a disparate impact claim under the FHA.”).
10
78 Fed. Reg. at 11460. HUD’s regulations were subsequently vacated by the U.S. District Court for the District of
Columbia, in a ruling that was issued prior to, and that is at odds with, the Supreme Court’s Inclusive Communities
decision. Am. Ins. Assoc. v. Dept. of Hous. and Urban Dev., 74 F. Supp. 3d 30 (D.D.C. 2014) (interpreting the FHA as
only prohibiting intentional discrimination, not discriminatory effects, and vacating HUD’s Disparate Impact Rule).
The district court’s decision was subsequently vacated and remanded for reconsideration in accordance with the
Supreme Court’s Inclusive Communities ruling. Am. Ins. Assoc. v. Dept. of Hous. and Urban Dev. No. 14-5321, Sept.
23, 2015 (D.C. Cir.) (per curiam). As of the publication date of this report, the district court has not issued a subsequent
ruling.
11
See, e.g., Abril-Rivera v. Dept. of Homeland Sec., 795 F.3d 245, 255-46 (1st Cir. 2015) (applying aspects of Inclusive
Communities to “affirm the district court’s dismissal of plaintiffs’ [Title VII] disparate impact claims.... ”).
12
Vill. of Arlington Heights, 558 F.2d at 1290 (7th Cir. 1977). Such a holding is not limited to disparate impacts on the
basis of race.

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it is done “discreetly” would be counter to congressional intent, and “[w]e therefore hold that at
least under some circumstances a violation of section 3604(a) can be established by a showing of
discriminatory effect without a showing of discriminatory intent.”13
Beyond agreement that disparate impact claims are cognizable, a number of other commonalities
existed among the circuits before the Inclusive Communities ruling. For example, courts typically
looked to Title VII disparate impact cases in the employment context for guidance in FHA-based
claims (and vice versa).14
Additionally, there was general agreement among the circuits that plaintiffs must rely on more
than a mere statistical anomaly to make a prima facie showing of a discriminatory effect.15 The
Seventh Circuit, for instance, explained that “we refuse to conclude that every action which
produces discriminatory effects is illegal. Such a per se rule would go beyond the intent of
Congress and would lead courts into untenable results in specific cases.”16 The circuits generally
agreed that plaintiffs must provide causal evidence—that is, evidence showing that a particular
practice caused the disparity on a protected class.17
Another important common feature prior to Inclusive Communities is that plaintiffs were rarely
successful with disparate impact claims, at least at the appellate level. Rather, it appears that most
of the plaintiffs’ disparate impact claims that were reviewed by federal courts of appeals were
dismissed in preliminary stages of litigation before trials. One scholar, who conducted a
13

Vill. of Arlington Heights, 558 F.2d at 1290 (7th Cir. 1977).
See, e.g., Vill. of Arlington Heights, 558 F.2d at 1289-90 (7th Cir. 1977); Betsey, 736 F.2d at 989 (4th Cir. 1984);
Mountain Side¸ 56 F.3d at 1251 (10th Cir. 1995); Simms, 83 F.3d at 155-56 (5th Cir. 1996); Langlois, 207 F.3d at 49-51
(1st Cir. 2000); Lapid-Laurel, 284 F.3d at 446-67 (3rd Cir. 2002); Oti Kaga, Inc. v. South Dakota Hous. Dev. Auth., 342
F.3d 871, 883 (8th Cir. 2003); Tsombandidis, 352 F.3d at 575-76 (2nd Cir. 2005); Affordable Hous. Dev. Corp. v. City
of Fresno, 433 F.3d 1182. 1194-95 (9th Cir. 2006); Groach, 508 F.3d at 374 (6th Cir. 2007). See also Abril-Rivera, 795
F.3d at 255-56 (1st Cir. 2015) (applying aspects of Inclusive Communities to “affirm the district court’s dismissal of
plaintiffs’ [Title VII] disparate impact claims.... ”).
15
The Eleventh Circuit, as discussed below, has held that “A showing of a significant discriminatory effect suffices to
demonstrate a prima facie violation of the Fair Housing Act. A plaintiff can demonstrate a discriminatory effect in two
ways: it can demonstrate that the decision has a segregative effect or that it makes housing options significantly more
restrictive for members of a protected group than for persons outside that group.” Hallmark Developers, Inc. v.
Garrison, 466 F.3d 1276, 1286 (11th Cir. 2006) (internal quotations omitted). See also Bonasera v. City of Norcross,
342 Fed. Appx. 581, 585 (11th Cir. 2009).
16
Vill. of Arlington Heights, 558 F.2d at 1290 (7th Cir. 1977).
17
See, e.g., Simms, 83 F.3d at 1555-56 (5th Cir. 1996) (“The relevant question in a discriminatory effects claim against
a private defendant, however, is not whether a single act or decision by that defendant has a significantly greater impact
on members of a protected class, but instead the question is whether a policy, procedure, or practice specifically
identified by the plaintiff has a significantly greater discriminatory impact on members of a protected class. In this case,
Simms does not identify an alleged discriminatory policy, procedure, or practice of First Gibraltar, much less provide
evidence, statistical or otherwise, that such policy, procedure, or practice had a significantly greater impact on members
of a protected class. We therefore conclude that Simms did not present sufficient evidence to establish a violation of the
FHA under a discriminatory effects theory of liability.” (internal citations and quotations omitted)); Fair Hous. in
Huntington Comm. Inc. v. Town of Huntington, 316 F.3d 357, 366 (2 nd Cir. 2003) (“In order to make out a prima facie
case under the FHA on a theory of disparate impact, a plaintiff must demonstrate that an outwardly neutral practice
actually or predictably has a discriminatory effect; that is, has a significantly adverse or disproportionate impact on
minorities, or perpetuates segregation.”); Groach, 508 F.3d at 374 (6th Cir. 2007) (“First, a plaintiff must make a prima
facie case of discrimination by identifying and challenging a specific housing practice, and then showing an adverse
effect by offering statistical evidence of a kind or degree sufficient to show that the practice in question has caused the
adverse effect in question ... ” (internal citations and quotations omitted)); Bonasera, 342 Fed. Appx. at 585 (11th Cir.
2009) (“A plaintiff can demonstrate a discriminatory effect in two ways: it can demonstrate that the decision has a
segregative effect or that it makes housing options significantly more restrictive for members of a protected group than
for persons outside that group.” (internal citations omitted)).
14

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qualitative analysis18 of the 92 cases in which a federal court of appeals made a substantive ruling
on an FHA disparate impact claim from 1971 (when the Supreme Court, in Griggs v. Duke
Power,19 first held that disparate impact claims were cognizable under Title VII) through June
2013, found that
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plaintiffs obtained “positive outcomes” in only 18 cases20 (i.e., 19.5% of the
cases);21
most of the cases (64 of 92 or 69.6%) were decided by the appellate courts before
trials at the preliminary stages (i.e., pleading, summary judgment, or preliminary
injunction) of litigation;22
district court rulings in favor of plaintiffs were reversed by the appellate courts
two-thirds of the time (12 of 18 decisions), in spite of the fact that it is estimated
that lower courts are generally affirmed approximately 80% of the time;23 and
lower court rulings in favor of defendants were only reversed by the appellate
courts 12 times out of 74 cases (i.e., 16.2% of the cases).24

As a result, the scholar concluded that,
[w]hatever has prompted the Court’s sudden interest in examining the question of
disparate impact liability under the FHA [i.e., by granting certiorari in disparate impact
cases in two successive terms], this interest cannot be attributable to plaintiffs’ high rate
of success or the appellate courts’ general unwillingness to impose a rigorous and
exacting review of the claims at every stage of the proceedings. 25

While commonalities did exist, the courts did not agree on every aspect of disparate impact
analysis. Importantly, the courts were not in agreement as to how to determine if a discriminatory
effect violates the act. The First,26 Second,27 Third,28 Fifth,29 Eighth,30 and Ninth31 Circuit Courts
18

Stacy E. Seichnaydre, Is Disparate Impact Having an Impact? An Appellate Analysis of Forty Years of Disparate
Impact Claims Under the Fair Housing Act, 63 Am. U. L. Rev. 357 (2013).
19
401 U.S. 424 (1971).
20
The “positive outcomes” by circuit are: First Circuit: 0; Second Circuit: 2; Third Circuit: 3; Fourth Circuit: 2; Fifth
Circuit: 0; Sixth Circuit: 1; Seventh Circuit: 1; Eighth Circuit: 4; Ninth Circuit: 4; Tenth Circuit: 0; Eleventh Circuit: 1.
Stacy E. Seichnaydre, 63 Am. U. L. Rev. at Appx. A (2013).
21
Id. at 393-94. There has been a steady increase of appellate decisions in each decade since Griggs. Three appellate
decisions were issued in the 1970s, 15 in the 1980s, 23 in the 1990s; 36 in the 2000s; and 15 from 2010 through the
first half of 2013. Id. 393-94. However, the number of plaintiffs’ “positive outcomes” has not increased at the same
pace as the total number of appellate decisions—three in the 1970s; seven in the 1980s; three in the 1990s; three in the
2000s; and two in the first three and one-half years of the 2010s. Id.
22
Id. Half of the plaintiffs’ “positive outcomes” were in the 28 post-trial appeals. Id.
23
Id. at 398-99.
24
Id.
25
Id. at 399.
26
See, e.g., Langlois, 207 F.3d at 43 (1st Cir. 2000).
27
See, e.g., Tsombandidis, 352 F.3d at 565 (2nd Cir. 2005).
28
See, e.g., Lapid-Laurel, 284 F.3d at 442 (3rd Cir. 2002). But see Hartman v. Greenwich Walk Homeowner’s Assoc.,
Inc., 71 Fed. Appx. 135 (3rd Cir. 2003) (applying a four-factor test).
29
See, e.g., Inclusive Cmtys. Project, Inc. v. Texas Dept. of Hous. & Cmty. Affairs, 747 F.3d 275, 281-83 (5th Cir.
2014) (applying the burden-shifting test established in regulations issued by HUD; prior to this case, the Fifth Circuit
Court of Appeals “ ... has not previously addressed the question of what legal standards apply to a disparate impact
housing discrimination claim.”).
30
See, e.g., Gallagher v. Magner, 619 F.3d 823 (8th Cir. 2010).

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of Appeals generally applied burden-shifting tests to assess the validity of a disparate impact
claim pursuant to the FHA. Yet there were some differences in the tests applied, even among the
courts that applied burden-shifting schemes. For example, all courts that used burden-shifting
tests agreed that the burden is initially on the plaintiff to make a prima facie showing, generally
with the use of statistics, that a specific policy results in a disparate impact upon a protected class,
and that, upon such a showing, the burden shifts to the defendant to show that the policy was
initiated for some nondiscriminatory, legitimate purpose.32 From there, most of these courts
shifted the burden to the plaintiff to submit proof of a viable, less discriminatory alternative.33
The Second Circuit, on the other hand, upon a defendant’s showing of a nondiscriminatory,
legitimate purpose, kept the onus on the defendant to show there is not a less discriminatory
alternative that would allow the defendant to meet the same legitimate purpose.34
Rather than the three-step burden-shifting test, the Seventh35 Circuit historically applied a fourfactor balancing test originally set out in the Village of Arlington Heights decision. These factors
are
(1) [the] strength of the plaintiff’s statistical showing; (2) the legitimacy of the
defendant’s interest in taking the action complained of; (3) some indication—which
might be suggestive rather than conclusive—of discriminatory intent; and (4) the extent
to which relief could be obtained by limiting interference by, rather than requiring
positive remedial measures of, the defendant.36

The Sixth37 and Tenth38 Circuit Courts of Appeals applied hybrid approaches using elements from
both the Seventh Circuit’s balancing test and a burden-shifting framework. The Fourth Circuit
(...continued)
31
See, e.g., Affordable Hous. Dev. Corp., 433 F.3d at 1182 (9th Cir. 2006).
32
See, e.g., Huntington Branch, 844 F.2d at 935-36 (2nd Cir. 1988); Langlois, 207 F.3d at 51 (1st Cir. 2000); LapidLaurel, 284 F.3d at 466-67 (3rd Cir. 2002); Darst-Webbe, 417 F.3d at 901-02 (8th Cir. 2005); Graoch, 508 F.3d at 374
(6th Cir. 2007); Affordable Hous. Dev. Corp., 433 F.3d at 1195-96 (9th Cir. 2006).
33
See, e.g., Mt. Holly Gardens Citizens in Action v. Twp. of Mt. Holly, 658 F.3d 375, 382 (3 rd Cir. 2011) (but see
Rizzo, 564 F.2d at 149 (3rd Cir. 1977) (in an FHA disparate impact case of first impression, holding that the burden of
establishing a less discriminatory alternative is on the defendant) (“The discretion of the district court in determining
whether the defendant has carried its burden of establishing justification for acts resulting in discriminatory effects may
be guided at the least by the following rough measures: a justification must serve, in theory and practice, a legitimate,
bona fide interest of the Title VIII defendant, and the defendant must show that no alternative course of action could be
adopted that would enable that interest to be served with less discriminatory impact.” (internal citations omitted));
Groach, 508 F.3d at 373 (6th Cir. 2007); Darst-Webbe, 417 F.3d at 901-02 (8th Cir. 2005); Mountain Side, 56 F.3d at
1258 (10th Cir. 1995).
34
See, e.g., Tsombanidis, 352 F.3d at 575 (2nd Cir. 2005).
35
See, e.g., Phillips v. Hunter Trails Cmty. Assoc., 685 F.2d 184, 189-190 (7th Cir. 1982) (quoting Vill. of Arlington
Heights, 558 F.2d at 1290).
36
See also, Hartman v. Greenwich Walk Homeowners’ Assoc., Inc., 71 Fed. Appx. 135, 137 (3 rd Cir. 2003).
37
See, e.g., Graoch, 508 F.3d at 374 (6th Cir. 2007) (“Borrowing from our Title VII cases, then, we hold that disparate
impact claims against private defendants under the FHA should be analyzed using a form of the McDonnell Douglas
burden-shifting framework: First, a plaintiff must make a prima facie case of discrimination by identifying and
challenging a specific housing practice, and then showing an adverse effect by offering statistical evidence of a kind or
degree sufficient to show that the practice in question has caused the adverse effect in question. Second, if the plaintiff
makes a prima facie case, the defendant must offer a legitimate business reason for the challenged practice. Third, if the
defendant offers such a reason, the plaintiff must demonstrate that the defendant’s reason is a pretext for
discrimination, or that there exists an alternative housing practice that would achieve the same business ends with a less
discriminatory impact. In order to evaluate the plaintiff’s showing, we consider the strength of the plaintiff’s showing
of discriminatory effect against the strength of the defendant’s interest in taking the challenged action.” (internal
citations and quotations omitted)).

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applied a burden-shifting test when the defendant was a private party, but applied the four-factor
balancing test with public defendants.39 Finally, the Eleventh Circuit has explained that “[a]
showing of a significant discriminatory effect suffices to demonstrate a prima facie violation of
the Fair Housing Act” but the plaintiff must also establish evidence of causality—“A plaintiff can
demonstrate a discriminatory effect in two ways: it can demonstrate that the decision has a
segregative effect or that it makes housing options significantly more restrictive for members of a
protected group than for persons outside that group.”40

HUD’s Disparate Impact Rule
For approximately two decades, through internal adjudicatory proceedings, appeals of those
proceedings to federal courts, policy guidance, and other means, HUD has interpreted the FHA as
supporting disparate impact claims.41 The agency did not formally adopt the policy through
regulations until February 2013. HUD explained in the preamble of the Implementation of the
Fair Housing Act’s Discriminatory Effects Standard Final Rule (the Rule or the Disparate Impact
Rule) that “[t]his regulation is needed to formalize HUD’s long-held interpretation of the
availability of ‘discriminatory effects’ liability under the Fair Housing Act and to provide
nationwide consistency in the application of that form of liability.”42
The Rule defines “discriminatory effect” as a practice that
actually or predictably results in a disparate impact on a group of persons or creates,
increases, reinforces, or perpetuates segregated housing patterns because of race, color,
religion, sex, handicap, familial status, or national origin. 43

HUD adopted the “three-part burden-shifting test currently used by HUD and most federal
courts,” as described in the previous section, to assess whether a discriminatory effect violates the
FHA.44 Specifically, under the Rule, the plaintiff “has the burden of proving that a challenged
practice caused or predictably will cause a discriminatory effect.”45 If a plaintiff is able to
successfully prove a prima facie discriminatory effect, then the burden shifts to the defendant to
“prov[e] that the challenged practice is necessary to achieve one or more [of its] substantial,

(...continued)
38
Mountain Side, 56 F.3d at 1251-52 (10th Cir. 1995) (“To establish a prima facie case of disparate impact
discrimination, plaintiffs must show that a specific policy caused a significant disparate effect on a protected group. ...
[A] prima facie case, once established, as here, could alone suffice to prove a Title VIII violation unless the defendants
justify the discriminatory effect which has resulted from their challenged actions. ... The three factors we will consider
in determining whether a plaintiff’s prima facie case of disparate impact makes out a violation of Title VIII are: (1) the
strength of the plaintiff’s showing of discriminatory effect; (2) the defendant’s interest in taking the action complained
of; and (3) whether the plaintiff seeks to compel the defendant affirmatively to provide housing for members of a
protected class or merely to restrain the defendant from interfering with individual property owners who wish to
provide such housing.”).
39
Betsey, 736 F.2d at 989 (4th Cir. 1984).
40
Hallmark Developers, Inc., 466 F.3d at 1286 (11th Cir. 2006) (internal quotations omitted). See also Bonasera, 342
Fed. Appx. at 585 (11th Cir. 2009).
41
Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11460, 11461 (February 15,
2013).
42
Id. at 11460 (internal citations omitted).
43
24 C.F.R. 100.500(a).
44
Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11460 (February 15, 2013).
45
24 C.F.R. 100.500(c)(1).

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legitimate, nondiscriminatory interests.... ”46 Such an interest “must be supported by evidence and
may not be not hypothetical or speculative.”47 If this burden is met, then the burden is shifted
back to the plaintiff to “prov[e] that the substantial, legitimate, nondiscriminatory interest[] ...
could be served by another practice that has a less discriminatory effect.”48

The Supreme Court in Inclusive Communities
On June 25, 2015, in a 5-4 decision, the Supreme Court held that “disparate-impact claims are
cognizable under the Fair Housing Act (or FHA).... ”49 However, the Court cautioned that
disparate impact claims must rely on more than just “a statistical disparity”50 and remedies for
disparate impact violations “that impose racial targets or quotas might raise [] difficult
constitutional questions.”51 The holding was surprising to some given that the Court chose to
grant certiorari in the case in spite of the fact that there was no circuit split, leading to speculation
that the Court was poised to overturn the lower court consensus that disparate impact claims
generally are permissible.52
The Inclusive Communities Project, Inc. (ICP), “a Texas-based nonprofit corporation that assists
low-income families in obtaining housing,” sued the Texas Department of Housing and
Community Affairs (DHCA) alleging that, by disproportionately distributing federal low-income
housing tax credits in black-concentrated metropolitan areas as compared to white-concentrated
suburban communities, DHCA perpetuated racial segregation in violation of the FHA.53 The
federal district court held that the plaintiffs had met their initial burden of establishing that
DHCA’s policy had a discriminatory effect on African-Americans, but concluded that the
defendants had failed to prove that there was no viable, less discriminatory alternative. Consistent
with precedent in the circuit, the Fifth Circuit agreed with the district court that the FHA
authorizes disparate impact claims.54 However, the Fifth Circuit reversed the district court’s ruling
because it had placed the burden of proving there were no less discriminating alternative policies
on the defendant, in contravention of HUD’s disparate impact regulations.55 A concurring opinion,
which was cited favorably by the Supreme Court’s majority opinion,56 also questioned whether
the plaintiff sufficiently established a causal connection between the challenged policy and the
relevant statistical disparity.57 The Supreme Court affirmed the Fifth Circuit’s judgment that
46

24 C.F.R. 100.500(c)(2).
24 C.F.R. 100.500(b)(2).
48
24 C.F.R. 100.500(c)(3). See supra n. 10.
49
Inclusive Communities, 135 S. Ct. at 2525.
50
Id. at 2512.
51
Id. at 2524.
52
See, e.g., Emily Badger, Supreme Court upholds a key tool fighting discrimination in the housing market, Wash.
Post, Jun. 25, 2015, available at http://www.washingtonpost.com/news/wonkblog/wp/2015/06/25/supreme-courtupholds-a-key-tool-fighting-discrimination-in-the-housing-market/.
53
Inclusive Communities, 135 S. Ct. at 2514.
54
Id.
55
Id. at 2515.
56
Id. at 2524 (“And as Judge Jones observed below, if the ICP cannot show a causal connection between the
Department’s policy and a disparate impact—for instance, because federal law substantially limits the Department’s
discretion—that should result in dismissal of this case.” Inclusive Communities, 747 F. 3d at 283-284 (specially
concurring opinion) [(5th Cir. 2014)].”).
57
Id. at 2515.
47

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discriminatory effect claims are viable under the FHA, and remanded the case “for further
proceedings consistent with this opinion,” including, notably, its limiting principles regarding
causality and remedies.58
To support its interpretation of the FHA, the Court began its analysis with two prior cases: Griggs
v. Duke Power Co.59 and Smith v. City of Jackson,60 which the Court described as “provid[ing]
essential background and instruction in the case now before the Court.” In Griggs and Smith, the
Court interpreted Title VII of the Civil Rights Act of 1964 and the Age Discrimination in
Employment Act of 1967 (ADEA), respectively, as supporting disparate impact claims because
both statutes contain language that focuses, not just on the intent or motivation of employers, but
also on the discriminatory consequences or effects of their actions.61 Similarly, FHA Section
804(a) makes it unlawful “[t]o refuse to sell or rent ... 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.”62 The Court stated that “the logic of Griggs and
Smith provides strong support for the conclusion that the FHA encompasses disparate impact
claims ... [because] Congress’ use of the phrase ‘otherwise make unavailable’ refers to the
consequences of an action rather than the actor’s intent.”63
The Court added that this conclusion is bolstered by the fact that Congress amended the FHA in
1988 to establish three exemptions to disparate impact liability without making any changes to
the statutory language that previous courts had relied upon to conclude that disparate impact
claims were cognizable under the act. “In short, the 1988 amendments signal that Congress
ratified disparate-impact liability.”64
After concluding that the FHA supports disparate impact claims, the Court provided guidance as
to how disparate impact claims should be assessed. The Court made clear that, before a plaintiff
can establish a prima facie case of discriminatory effect based on a statistical disparity, courts
should apply a “robust causality requirement” that requires the plaintiff to prove that a policy or
decision led to the disparity.65 The Court stressed that a careful examination of the plaintiff’s
causality evidence should be made at preliminary stages of litigation to avoid “the inject[ion of]
racial considerations into every housing decision”; the erection of “numerical quotas” and similar
constitutionally dubious outcomes; the imposition of liability on defendants for disparities that
they did not cause; and unnecessarily protracted litigation that might dissuade the development of
housing for the poor, which would “undermine [the FHA’s] purpose as well as the free-market
system.”66
The Court emphasized that disparate impact claims should be further limited by ensuring that
defendants, whether private developers or governmental actors, have the ability to counter a
prima facie case with evidence that the policy or decision in question is “necessary to achieve a
valid interest.”67 Further, the Court seemed to indicate that such business decisions—or in cases
58

Id. at 2524.
401 U.S. 424 (1971).
60
554 U.S. 228 (2005) (plurality).
61
Inclusive Communities, 135 S. Ct. at 2517-18.
62
Id. at 2518 (emphasis added) (quoting 42 U.S.C. §3604(a)).
63
Id.
64
Id. at 2521.
65
Id. at 2523.
66
Id. at 2523.
67
Id. at 2522-23.
59

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where the defendant is a governmental entity, decisions made in the public interest—should stand
unless the “plaintiff has shown that there is an available alternative practice that has less disparate
impact and serves the entity’s legitimate needs.”68
The Court also cautioned that court-ordered remedies for discriminatory effects generally should
be race-neutral and focused on eradicating the policy that caused the disparate impact, rather than
erecting constitutionally dubious “racial targets or quotas.”69
The opinion concludes:
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,” 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 Court
acknowledges the Fair Housing Act’s continuing role in moving the Nation toward a
more integrated society.70

The primary dissenting opinion, written by Justice Alito and joined by Chief Justice Roberts and
Justices Thomas and Scalia, argued that the statutory text and the circumstances surrounding the
original enactment of the FHA indicated that the act was only intended to bar overt
discrimination—not disparate impact discrimination.71 The dissent also disputed the majority’s
“conten[tion] that the 1988 amendments provide convincing confirmation of Congress’
understanding that disparate-impact liability exists under the FHA.... ”72 Instead, the dissenting
Justices viewed the 1988 amendments as a compromise between Members of Congress—some of
whom agreed that disparate impact claims were cognizable under the FHA and some who did not.
To support this argument, the dissent cited several opinions in which the Court rejected similar
“implicit ratification” arguments.73 Additionally, the dissent took issue with the majority’s
reliance on Griggs.74
Justice Thomas wrote a separate dissent, to which no other Justice joined. It argued that Griggs
was wrongly decided, but even if it should be afforded some precedential value, that value should
be limited to Title VII cases, rather than expanded to other contexts like the FHA and ADEA.75

68

Id. at 2517-18 (citing and quoting Title VII and ADEA cases). The Court did not expressly state that the burden
should be on the plaintiff to prove the existence of a less discriminatory alternative in the FHA context. Instead, it
stated that the plaintiff carries the burden of the third step in the burden-shifting tests applied in Title VII and ADEA
cases, and that “[t]he cases interpreting Title VII and the ADEA provide essential background and instruction in the
case now before the Court.” Id.
69
Id. at 2524.
70
Id. at 2525-26. The “Kerner Commission Report” refers to the Report of The National Advisory Commission on Civil
Disorders (1968). The report was written by a bipartisan commission established by Executive Order 11365, which was
issued by President Lyndon Johnson in July 1967 in response to a series of riots and other civil unrest in the country.
The commission was chaired by Governor Otto Kerner of Illinois.
71
Inclusive Communities, 135 S. Ct. at 2532-37 (J. Alito, dissenting op.).
72
Id. at 2540 (J. Alito, dissenting op.).
73
Id. at 2537-43 (J. Alito, dissenting op.).
74
Id. at 2543-48 (J. Alito, dissenting op.).
75
Id. at 2526-32 (J. Thomas, dissenting op.).

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Significance of the Inclusive Communities Decision
It is unclear exactly how the Inclusive Communities decision will change the way in which the
lower courts and HUD will evaluate disparate impact claims going forward, and any effect likely
will vary from circuit to circuit. However, a review of several of the decision’s most notable
holdings elucidates some potential implications.
First, the Court appears to have adopted a three-step burden-shifting test for assessing disparate
impact liability under the FHA. At step one, the plaintiff has the burden of establishing evidence
that a housing decision or policy caused a disparate impact on a protected class. At step two,
defendants can counter the plaintiff’s prima facie showing by establishing that the challenged
policy or decision is “necessary to achieve a valid interest.” The defendant will not be liable for
the disparate impact resulting from a “valid interest” unless, at step three, the plaintiff proves
“that there is an available alternative practice that has less disparate impact and serves the entity’s
legitimate needs.”
As a result, circuits, such as the Fourth (in cases with public defendants) and Seventh, that
historically have used a balancing test likely will begin using a burden-shifting test. Additionally,
although the opinion offers scant guidance regarding step three, it seems to conclude that the
burden should be on the plaintiff to establish a less discriminatory alternative.76 Thus, the Second
Circuit likely will place the burden on the plaintiff rather than the defendant to establish a less
discriminatory alternative in future decisions in light of Inclusive Communities. These changes
might have taken place even in the absence of the Supreme Court ruling as a result of HUD’s
disparate impact rule.77
In addition, the specific standards that the Inclusive Communities Court detailed for each step of
the burden-shifting test, though considerably similar, may not be identical to those historically
applied by the lower courts and HUD. For example, the standards for steps one and two that are
detailed in Inclusive Communities seem to be largely consistent with those in HUD’s disparate
impact rule. However, the Court used somewhat different language that could be interpreted as
being more exacting on plaintiffs at step one and more deferential to defendants at step two, as
compared to the Rule. Both the Court and HUD’s Rule require plaintiffs to establish a prima facie
case, which must include causal evidence. The Rule states that the plaintiff must “prov[e] that a
challenged practice caused or predictably will cause a discriminatory effect.”78 The Inclusive
Communities Court neither expressly endorses nor disapproves of the “predictably will cause”
language. The Court and the Rule agree that the burden at the second step is on the defendant.
The Court states that defendants can counter a prima facie case by proving that the challenged
practice is “necessary to achieve a valid interest.”79 The Rule, in contrast, states that the defendant

76

The Court did not expressly state that the burden should be on the plaintiff to prove the existence of a less
discriminatory alternative in the FHA context. See supra, n. 70.
77
See, e.g., Inclusive Communities, 747 F.3d at 276 (5th Cir. 2014) (“We adopt the standard announced in recently
enacted Department of Housing and Urban Development (HUD) regulations regarding burdens of proof in disparate
impact housing discrimination cases.... ”); Property Cas. Ins. Assoc., 66 F. Supp.3d at 1053 (N.D. Ill. 2014) (“Under
these circumstances, HUD’s adoption of the three-step burden-shifting approach outlined in the Disparate Impact Rule
was reasonable and the Court defers to it.”).
78
24 C.F.R. §100.500(c)(1) (emphasis added).
79
Inclusive Communities, 135 S. Ct. at 2522-23.

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must “prov[e] that the challenged practice is necessary to achieve one or more substantial,80
legitimate, nondiscriminatory interests.... ”81
Two other major takeaways involve how disparate impact claims should be evaluated. The
Supreme Court stressed that lower courts and HUD should rigorously evaluate plaintiffs’ claims
to ensure that evidence has been provided to support not only a statistical disparity, but also
causality. Additionally, the Court emphasized that claims should be disposed of swiftly in the
preliminary stages of litigation if plaintiffs have failed to establish a prima facie case of disparate
impact.
As previously mentioned, over the last several decades, plaintiffs have faced fairly steep odds of
getting their disparate impact claims past the preliminary stages of litigation, much less
succeeding on the merits of those claims. Additionally, all of the federal courts of appeals and
HUD, when assessing disparate impact claims, have stated that they were applying tests that
required plaintiffs to show that a challenged policy actually caused the disparate impact in order
to support a prima facie case. Nevertheless, the Inclusive Communities decision might result in
some lower courts applying the causality standards more stringently than they had previously,
thus making it more difficult for plaintiffs to establish prima facie cases of discriminatory effects.
The Inclusive Communities majority opinion82 explicitly criticized one specific case—the Eighth
Circuit’s decision in Magner v. Gallagher, a case which the Court had previously granted
certiorari, but ultimately dismissed because the parties settled out of court. The Court stated that
Magner “was decided without the cautionary standards announced in this opinion.”83 The primary
point of contention likely was not with the three-step burden-shifting test that the Eighth Circuit
applied,84 but rather with how the court applied the test.
It is possible that, by its criticism, the Inclusive Communities Court might have been signaling its
disapproval of the Eighth Circuit’s failure to require the plaintiffs to provide evidence that directly
tied the city’s housing code enforcement to a reduction in the affordable housing of AfricanAmericans. Instead, the Eighth Circuit relied on indirect evidence and “reasonable ...
infer[ences].”85 In other words, it is possible that the Inclusive Communities Court expects lower
courts to ensure that plaintiffs have provided evidence at the preliminary stages of litigation that
fully “connects the dots” between the neutral policy and the disparate impact, before concluding
that plaintiffs have established a prima facie case.86

80

In the preamble to the Rule, HUD defines the term “substantial” to mean “a core interest of the organization that has
a direct relationship to the function of that organization.” 78 Fed. Reg. at 11,470.
81
24 C.F.R. §100.500(c)(2) (emphasis added).
82
The primary dissenting opinion also criticized Magner. Inclusive Communities, 135 S. Ct. at 2532, 2548 (J. Alito,
dissenting op.).
83
Inclusive Communities, 576 U.S. at 21-22.
84
The test applied by the Magner court was similar, but not identical to the test outlined by the Supreme Court in
Inclusive Communities. For example, the Magner court stated that, at step two, the defendant had the burden of proving
that “its policy or practice had a manifest relationship to a legitimate, nondiscriminatory policy objective and was
necessary to the attainment of that objective.” Magner, 619 F.3d at 834 (8th Cir. 2010). In contrast, the Supreme Court
stated that the defendant’s burden at step two is to prove that the challenged policy is “necessary to achieve a valid
interest.” Inclusive Communities, 135 S. Ct. at 2524.
85
Magner, 619 F.3d at 835 (“... the evidence shows that the City’s Housing Code enforcement temporarily, if not
permanently, burdened Appellants’ rental businesses, which indirectly burdened their tenants. Given the existing
shortage of affordable housing in the City, it is reasonable to infer that the overall amount of affordable housing
decreased as a result.”) (emphasis added).
86
Id. (“Though there is not a single document that connects the dots of Appellants’ disparate impact claim, it is enough
(continued...)

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In sum, it is possible that the “cautionary standards”87 stressed by the Inclusive Communities
majority might result in even fewer successful disparate impact claims being raised, and swifter
disposal of claims that are raised. This could, in turn, discourage claims from being raised at all.

Author Contact Information
(name redacted)
Legislative Attorney
[redacted]@crs.loc.gov , 7-....

(...continued)
that each analytic step is reasonable and supported by evidence.”).
87
Inclusive Communities, 135 S. Ct. at 2524.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR44203. Public record. Not legal advice.