8B — March 27 - April 9, 2015 — Owners, Developers & Managers — M id A tlantic

Real Estate Journal


M ultifamily /POA E xpo By Steven Williams and Alexander Barth, Cohen Seglias

The disparate impacts of Texas v. The Inclusive Communities Project & the future of multi-family A pending US Supreme Cour t dec i s i on in Texas Department of lions of dollars in tax credits that enable multi-family own- ers and developers to build

munities Project. The US Department of Hous- ing and Urban Development has long interpreted the lan- guage of the Act to prohibit regulations that would have a disparate impact on minorities or protected classes—it recent- ly issued a ruling that made this long-held position official. Eleven of the thirteen US Cir- cuit Courts have interpreted the Act to provide for disparate impact claims. On two prior occasions the US Supreme Court has heard appeals on the question of whether the Act permits disparate impact

claims (Twp. Of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc. and Mager v. Gallagher). However, both of these cases were settled before the Supreme Court could issue a decision. In Texas v. The Inclusive Communities Project, one of the key questions before the Supreme Court was whether specific tax credits provided by Texas for the construction and development of low-income housing in blighted areas may have a disparate impact on minorities. Inclusive Commu- nities argued that the tax cred- its issued by the state, while not intentionally discrimina- tory, result in concentrating low-income housing units in predominantly poor, blighted and minority neighborhoods. As such, these tax credits have the effect or “impact” of denying low-income housing residents the opportunities that arise in higher income neighborhoods such as access to better schools. In January, the Supreme Court’s questions for both sides focused on the plain language interpretation of the Act: Do the Act’s amendments make sense if claims of disparate impact are not covered? Does reversing years of judicial deci- sions that have recognized dis- parate impact claims under the Act make sense? Justice Scalia thoroughly questioned both sides, inquiring whether Tex- as’ plain language argument might fail to recognize that the Court should look at the entire Act, and its amendments, to determine what result makes sense. He was equally critical of Inclusive Communities, questioning whether racial disparity and racial discrimi- nation are equal, and whether racial disparity is enough to render a policy, such as state tax subsides, unlawful under the Act. The Court’s decision in this matter could impact thirty- five years of consistent judi- cial acknowledgment that the Act applies to seemingly race neutral policies that have a negative effect on minorities and protected classes. A ruling for Texas would remove the specter of disparate impact claims from housing cases and affirm state tax and subsidy policies that encourage multi- family owners and developers to invest in blighted areas. A continued on page 9B

interpreted to prohibit both “disparate treatment” and “disparate impact” in hous- ing. “Disparate treatment” is intentional discrimination based on a person’s inclusion in a protected class such as race, sex or disability. “Dispa- rate impact,” unlike disparate treatment, has nothing to do with intent. Rather, disparate impact occurs when a policy that appears to be neutral on its face is discriminatory against a protected class when it is applied. It is this provision of the law that’s disputed in Texas v. The Inclusive Com-

Housing and Community Affairs, et al. v. The Inclu- sive Commu- nities Project could bring some signifi- cant changes to the inter-

low-income hous ing in blighted ar- eas around the country. More gener- ally, the out- come of this decision may require own-

Steven Williams Alexander Barth

pretation of the Fair Housing Act, particularly for investors and developers of multi-family low-income housing. At stake in this case? Potentially mil-

ers and landlords to take a close look at their own housing policies. The Fair Housing Act of 1968 (“the Act”) has been



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