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.