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

The U.S. Supreme Court ruled today on a case involving what constitutes housing discrimination, deciding in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project that federal law impacts not only intentional discrimination but also practices that have a discriminatory effect – even without an actual intent to discriminate. On the policy merits of using a so-called “disparate impact” measure to determine whether discrimination occurred, CEI senior fellow John Berlau expressed concern over the use of that standard, whether applied to housing or other matters, such as auto loans.

Statement by John Berlau, Competitive Enterprise Institute Senior Fellow:

“The Supreme Court has issued its ruling on whether and when ‘disparate impact’ is permitted under the Fair Housing Act; but whether or not disparate impact is good policy is far from settled.

The use of disparate impact — the principle that a practice can be illegal if it affects minorities in a certain way — is doing great harm to people the civil rights laws were intended to help. 

When developers are told they will be penalized for building low-income housing in certain areas, as was at issue in the case before the Supreme Court, they will likely cease building as much affordable housing. 

Similarly, auto lenders will cease making as many loans to low-income consumers if the Consumer Financial Protection Bureau prevails in its contention that different groups paying different interest rates in the aggregate constitutes discrimination. While the Supreme Court has warned that illegal disparate impact arises only if the policy is “arbitrary, artificial, and unnecessary,” we can be sure that bureaucrats will assert these to be the case even when they are not.  Policy makers need to ask some hard questions about who really gains from disparate impact enforcement.”