Inclusive Communities Project, Inc. v. Texas Department of Housing & Community Affairs
747 F.3d 275
5th Cir.2014Background
- Plaintiff Inclusive Communities Project (ICP), a nonprofit helping low-income, predominantly African‑American Section 8 families, challenged the Texas Department of Housing and Community Affairs’ (TDHCA) allocation of Low Income Housing Tax Credits (LIHTC) in Dallas as having a disparate impact under the Fair Housing Act (FHA).
- LIHTC are administered by TDHCA; 9% credits are competitively awarded under a Qualified Allocation Plan (QAP) point system, while 4% credits are non‑competitive subject to threshold underwriting.
- ICP presented statistical and documentary evidence that TDHCA disproportionately approved LIHTC in minority neighborhoods and denied approvals in predominantly white neighborhoods, concentrating affordable units in minority areas.
- After a bench trial the district court found no proof of intentional discrimination but held for ICP on a disparate‑impact claim, applying the Second Circuit’s Huntington Branch burden (defendant must show a compelling interest and no less discriminatory alternatives) and finding defendants failed to meet it.
- The district court imposed remedial changes to the QAP; defendants appealed. While the appeal was pending, HUD promulgated 24 C.F.R. §100.500 setting a three‑step burden‑shifting framework for FHA disparate‑impact claims.
- The Fifth Circuit remanded for the district court to apply HUD’s 24 C.F.R. §100.500 standard in the first instance, reversing and remanding the disparate‑impact judgment and related fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper legal standard for disparate‑impact claims under the FHA | HUD’s three‑step burden‑shifting framework supports liability where a practice causes a discriminatory effect | District court erred by applying Huntington Branch; defendants argued different burdens and contended ICP failed to identify a specific neutral practice causing disparity | Adopted HUD’s 24 C.F.R. §100.500 burden‑shifting test: (1) plaintiff shows challenged practice causes a discriminatory effect; (2) defendant must prove the practice is necessary to achieve substantial, legitimate, nondiscriminatory interests; (3) plaintiff can still prevail by showing alternative practices with less discriminatory effect |
| Sufficiency of ICP’s prima facie showing (identifying the offending practice) | ICP relied on statistical disparities and related evidence to show the challenged allocation practices caused disparate impact | Defendants (and concurring judge) argued ICP failed to isolate a specific facially neutral policy or practice that produced the disparity and thus cannot trigger defendant’s burden | Court did not resolve this on appeal; remanded for the district court to apply HUD standard and reconsider whether ICP adequately identified the neutral practice causing the disparity |
| Whether district court needed to retry or take additional proceedings on remand | ICP would have district court apply new standard to existing record | Defendants sought reversal; they argued various statistical and causation flaws needed resolution | Court remanded to district court to apply the new legal standard and left to the district court’s discretion whether further proceedings are needed |
| Effect of HUD regulation authority to interpret FHA | HUD regulations interpret FHA and set burdens of proof for disparate impact | Defendants contested reliance on HUD rulemaking or argued other circuit tests should control | Court held HUD had authority under 42 U.S.C. §§3608, 3614a and adopted HUD’s regulation as the appropriate standard for FHA disparate‑impact claims |
Key Cases Cited
- Town of Huntington v. Huntington Branch, 488 U.S. 15 (1988) (Supreme Court affirmed Second Circuit outcome but did not decide proper disparate‑impact test)
- Ricci v. DeStefano, 557 U.S. 557 (2009) (discusses Title VII disparate‑impact burdens of proof)
- Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mount Holly, 658 F.3d 375 (3d Cir. 2011) (addresses disparate‑impact proof and burden shifting)
- Gallagher v. Magner, 619 F.3d 823 (8th Cir. 2010) (analyzes allocation of burdens on less‑discriminatory alternatives)
- Graoch Assocs. #33, L.P. v. Louisville/Jefferson Cnty. Metro Hous. Auth., 508 F.3d 366 (6th Cir. 2007) (applies disparate‑impact framework under FHA)
- Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989) (requires plaintiff to link disparity to specific challenged practices)
- Smith v. City of Jackson, 544 U.S. 228 (2005) (statistical disparity alone insufficient for disparate‑impact showing)
- Artisan/American Corp. v. City of Alvin, 588 F.3d 291 (5th Cir. 2009) (recognizes disparate‑impact claims under FHA)