The Importance of Disparate Impact in Combatting Housing Discrimination

By Abi Velasco, Racial Equity Policy Associate

The United States has a long history of instituting racist housing policies — and, in particular, anti-Black policies — that have allowed white people to build wealth while making it very difficult for Black people to do the same.

After the passage of the post-World War II GI bill that provided veterans low-interest mortgages and helped them earn college degrees, banks provided loans to white veterans while denying loans to Black veterans. Banks, the real estate industry, neighborhood organizations, and even the federal government through the Federal Housing Administration, perpetuated this practice, known as redlining. Redlining and the inequitable development of Black neighborhoods left Black people living in neighborhoods without the resources needed to lead thriving and fulfilling lives, such as public transit, good schools, jobs, and affordable and healthy food. This practice of inequitable development in Black neighborhoods occurred during periods of so-called “Urban Renewal,” in which the federal government funded cities to clear “slum” neighborhoods.

In the summer of 1967, the long history of systemic and institutional racism, frustrations of living in poverty, and high rates of unemployment led to uprisings against racial injustice in cities across America, such as Detroit and Newark.

President Lyndon B. Johnson created the so-called Kerner Commission to study the causes of the riots. The commission’s findings were notable. While a set of prior investigations into similar uprisings had concluded that protestors acted out of a desire to cause destruction, the Kerner Commission had different findings. They instead reported that the 1967 uprisings were a response to how white supremacy had kept Black Americans in deep poverty through racist and violent police practices, employment discrimination, voter suppression, inadequate housing, and a criminal legal system intent on incarcerating them. The report boldly stated what previous investigations refused to acknowledge: “white society is deeply implicated in the ghetto. White institutions created it, white institutions maintain it, and white society condones it.”

In the same year that the Kerner Report was released, Congress passed the Fair Housing Act of 1968 (FHA), which prohibits discrimination in the sale, rental, and financing of housing based on race, religion, national origin, or sex. In 1988, the law was amended to bar discrimination based on disability or family status. To its credit, the Fair Housing Act of 1968 was an attempt to address some of the conclusions in the Kerner Commission’s report. Through the Act, Congress sought both to decrease poverty by eliminating structural inequities that long plagued the housing market and to prohibit overt and subtle discrimination in housing. Overt discrimination uses practices such as restrictive neighborhood covenants in home deeds to prohibit the sale of homes to Black families. Such covenants were discussed on a recent episode of John Oliver’s “Last Week Tonight,” which covered America’s long history of discrimination in housing. More subtle discrimination occurs when facially neutral policies and practices have a discriminatory effect. This type of discrimination is harder to pinpoint and can be difficult to prove. The Supreme Court has recognized that the Fair Housing Act prohibits both overt discriminatory practices and practices with a disparate impact.

Disparate impact claims have been central to upholding the promise of the Fair Housing Act by providing a mechanism to end policies that negatively impact the ability of a protected class to obtain housing. Where successful, a disparate impact claim forces the defendant to adopt alternative policies and practices that have a less discriminatory effect.

In September 2020, the Trump Administration took a turn backwards in the quest to eradicate housing discrimination. The Department of Housing and Urban Development (HUD) issued a rule that would make it almost impossible to challenge under the Fair Housing Act policies and practices that have a discriminatory impact. Even industry players such as Bank of America and Quicken Loans warned HUD about the dangers of this rule. Public Citizen served as co-counsel on a lawsuit filed on behalf of several fair housing groups to challenge the new HUD rule. Fortunately, a Massachusetts court blocked the rule from going into effect while another lawsuit was underway.

Allowing practices with discriminatory impact to go unaddressed in the housing market would be devastating to our work to ensure the promise of equality in housing. Implicit discrimination in the housing market continues to exist and lock people out of wealth-building opportunities. In 2017, the racial homeownership gap, meaning the gap between home ownership between Black and white homeowners, was 30.1% — and continues to grow. Equally worrisome, Black communities continue to experience under-resourced schools and high unemployment rates that make it harder for Black communities to thrive.

Recently, the Biden Administration has proposed a new rule to rescind the harmful Trump approach. In August 2021, Public Citizen joined the National Fair Housing Alliance and others to express its strong support for the proposal.

The ability to bring disparate impact claims to combat discrimination in housing is essential for racial justice. Public Citizen will continue to work to ensure America meets its promise of equality in housing. Achieving a housing market free from insidious policies that have a discriminatory impact on underserved communities is a necessary step forward for our nation.