The rental property industry and other interested parties will have to wait for a final court ruling on the validity of the disparate impact rule. On November 13, just a few weeks prior to oral arguments in the Township of Mount Holly v. Mount Holly Gardens Citizens in Action, Inc case before the United States Supreme Court, a settlement was announced.
Title VIII of the Civil Rights Act of 1968, as amended (the Fair Housing Act), prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin. The Department of Housing and Urban Development (HUD), which is charged with enforcement of the Act, has long-interpreted the Act to prohibit practices with an unjustified discriminatory effect – also referred to as a disparate impact – regardless of whether there was an intent to discriminate. Although federal courts have previously ruled on this interpretation, the Act did not include a standard for proving a discriminatory effects violation. The final rule published by HUD, which went into effect on March 17, 2013, formalized its recognition of discriminatory effects liability under the Act along with a three-part burden-shifting test for determining whether a given practice has an unjustified discriminatory effect, thus leading to liability under the Act.
In the Mount Holly case, a New Jersey township created a plan for redeveloping a blighted neighborhood occupied mostly by low to moderate income minority households. The residents sued the township on the basis that the redevelopment had a disparate impact on minorities. A decision by the U.S. Supreme Court would have affected apartment owners because the rule has called into question the legality of some common industry practices, such as tenant screening. As an aside, the settlement caught the attention of the chairman of the House Committee on Oversight and Government Reform, who has requested information pertaining to a possible a possible link between one of the settlement financiers and HUD.