Tag: disparate impact

Building Housing That Some People Can’t Afford Isn’t Racist

“Disparate impact” theory holds someone liable for discrimination for a race-neutral policy that statistically disadvantages a specific racial group — say, blacks score lower on a firefighter-promotion test than whites — even if that negative “impact” was neither foreseen nor intended. The application of this theory has been fraught with controversy, to say the least, but it comes up again and again, in contexts ranging from employment to education to voting.

While disparate impact claims have sometimes been sustained under the federal Fair Housing Act (which makes it unlawful to deny housing on the basis of race) since the 1970s, the Supreme Court has only recently agreed to decide whether these claims are lawful. Two years ago, the Court was about to hear such a case, Magner v. Gallagher, when the Justice Department, led by now-Labor Secretary Tom Perez, pressured the city of St. Paul, Minnesota to settle it. The same sort of political pressure is now being brought to bear on Mount Holly Township, New Jersey; supporters of disparate impact theory simply don’t think that it can survive legal scrutiny.

The current case involves a redevelopment plan for a blighted Mount Holly neighborhood (“the Gardens”) that would transform the neighborhood into mid-range single-family dwellings. (Thus far, the township has acquired 259 of 329 properties through various financial incentives, without yet resorting to eminent domain.) The Gardens’ residents sued, arguing that the redevelopment plan violated the FHA because a majority of them would not be able to afford the new homes.

The district court dismissed this argument, holding that the redevelopment plan affected Gardens residents equally, without regard to race, and was tied only to economic considerations. The court of appeals reversed that ruling, holding that the residents’ association had set out a case of discrimination under the theory of disparate impact because a majority of the affected residents were non-white.

Cato has now joined the Pacific Legal Foundation and four other public-interest organizations on an amicus brief arguing not only that disparate impact claims are impermissible under the text of the FHA, but that such claims force unconstitutional actions when applied to governments. Before putting race-neutral policies into effect, government agencies would have to determine whether a particular racial group would be disproportionately impacted and take steps to remedy that difference. By mandating an equality of ends — as opposed to an equality of opportunity — disparate impact liability encourages the adoption of discriminatory quota systems.

Occupy Pennsylvania Avenue: How the Government’s Unconstitutional Actions Hurt the 99%

That’s the title of a new paper that Carl DeNigris and I just published in the Drake Law Review.  Here’s the abstract:

Economic freedom is the best tool man has ever had in the perpetual struggle against poverty. It allows every individual to employ their faculties to a multitude of opportunities, and it has fueled the economic growth that has lifted millions out of poverty in the last century alone. Moreover, it provides a path for individuals and communities to free themselves from coercive government policies that serve political elites and discrete political classes at the expense of the politically weak. Because of their relative political weakness, the poor and lower middle class tend to suffer the most from these inescapable power disparities.

Yet economic freedom — and ultimately, economic growth — is not self-sustaining. This tool of prosperity requires sound principles that provide a framework for cooperation and voluntary exchanges in a free society. Principles equally applied to all and beyond the arbitrary discretion of government actors; principles that provide a degree of certainty and predictability in an otherwise uncertain world. That is, economic freedom requires the rule of law, not men.

In this article, we discuss the corrosive effects that unconstitutional actions have on the rule of law, economic growth and, in turn, on the ability of the poor to improve their economic misfortune. We focus on the institutional dangers and adverse incentives that unconstitutional policies tend to create. These dangers are not just abstract or theoretical; this article shows how specific unconstitutional actions adversely affect the lives of poor Americans. And while Part IV shows that even constitutional violations by local governments can have disastrous effects, our central theme is that the federal government’s disregard for the U.S. Constitution has led to policies that kill jobs, stymie economic growth, and ultimately exacerbate the problems of those living in poverty.

The case studies we use to illustrate our argument are Obamacare, bailouts/crony capitalism, the Sarbanes-Oxley/Dodd-Frank financial regulations, and housing policy.  It’s truly stunning to see how the policies that the government pursues – unconstitutional ones at that – hurt the very people they’re designed to help.  Read the whole thing.

Lower Courts Have to Comply with Supreme Court Orders

In the 2009 case of Ricci v. DeStefano (also known as the “New Haven firefighters case,” in which Cato filed a brief), the Supreme Court declared that an employer that did not certify race-neutral promotion-exam results could be liable to the candidates who were not promoted as a result (because those candidates would have been discriminated against based on their race, or “disparate treatment” in violation of Title VII of the Civil Rights Act). A corollary to that holding is that an employer that did certify such results would be immune from liability for any resulting racial disparities in promotion (known as “disparate-impact” claims under Title VII).

As Justice Anthony Kennedy wrote for the Court majority, “If, after it certifies the results, the City faces a disparate-impact suit, then in light of our holding today it should be clear that the City would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate–treatment liability.”

Despite this clear guidance from the Supreme Court, one of the black New Haven firefighters who did not gain promotion as a result of the test certification sued the city, alleging disparate-impact discrimination. The district court dismissed his claim but the Second Circuit inexplicably reversed that ruling and reinstated the lawsuit – considering Ricci’s corollary holding (quoted above) to be non-binding.

Cato has now filed a short brief supporting New Haven’s request that the Supreme Court review that decision – and perhaps even reverse it summarily – arguing that Title VII’s provisions are complex and onerous enough, such that employers should not be subject to liability for following court orders.

The Court will decide later this spring what to do with this case of City of New Haven v. Briscoe.

Enforcing Housing Codes Is Not Racist

The federal Fair Housing Act makes it unlawful “[t]o refuse to sell or rent after the making of a bona fide offer … or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.”  Magner v. Gallagher addresses the question of whether the FHA’s ban on racial discrimination can be violated by someone who does not actually engage in racial discrimination:  Owners of rental properties in St. Paul, Minnesota brought this suit claiming that the city’s enforcement of its housing code — ensuring that rental units were safe and otherwise habitable — violated the FHA because the repairs and maintenance necessary to comply with the code would increase rents and price out many of their African-American tenants.

Unable to show that the housing code intentionally discriminated based on race, however, the owners argued — and the Eighth Circuit Court of Appeals accepted — a “disparate impact” theory under which a plaintiff need only show that an otherwise neutral practice has a disproportionate effect on some racial group. Cato has now joined the Pacific Legal Foundation, the Center for Equal Opportunity, and the Competitive Enterprise Institute on an amicus brief supporting the city’s request for Supreme Court review and arguing that the statutory language and congressional intent of the FHA preclude disparate impact claims.

We argue that extending such claims to the FHA “would deeply intrude on the authority of state and local governments, and render much of their housing policies illegal,” and “would inappropriately alter the federal-state balance in far-reaching ways.” Indeed, disparate impact claims would preclude all institutions subject to the FHA — public and private — from implementing many practical policies. For example, “because [the FHA] applies to financial institutions, banks and mortgage companies would be pressured to provide loans to unqualified applicants in order to avoid disparate impact liability. Similar actions played a key role in triggering the mortgage crisis of 2007-2008.”

Moreover, the disparate impact doctrine directly conflicts with the Fourteenth Amendment’s equal protection guarantees by forcing government agencies “to engage in unconstitutional race-conscious decision making” in order to avoid liability under the Act. In short, allowing disparate impact claims under the FHA would both lead to adverse economic consequences and create new constitutional tensions.

The Supreme Court will hear Magner v. Gallagher on Feb. 29.