FOR IMMEDIATE RELEASE
 August 19, 2019
Contact:   Caroline Peattie, Fair Housing Advocates of Northern California
(415) 483-7552 / [email protected]
 
HUD has just released proposed changes to a rule that would make it harder for people to bring discrimination claims under the Fair Housing Act – and easier for businesses to discriminate. The federal register can be viewed here.
 
The Trump administration now seeks to gut one of the Act’s critical tools: the Disparate Impact rule. The Fair Housing Act prohibits both intentional discrimination as well as the application of a policy or practice that appears neutral on its face but has a discriminatory effect. In 2013, the U.S. Department of Housing & Urban Development implemented the Disparate Impact rule that ensured that housing and related services such as lending and insurance are made available in ways that do not adversely impact particular communities protected by the Fair Housing Act. Now, however, the proposed rule change would set a higher bar, requiring civil rights advocates to meet five rather than three requirements in order to succeed with a disparate impact claim. The new rule provides a virtual blueprint for how housing providers can successfully defend against disparate impact claims and even claims that the federal Fair Housing Act (FHA) would not override state laws that regulate the insurance industry.
 
The Fair Housing Act, enacted by Congress in 1968 following the assassination of Dr. Martin Luther King Jr., carried a promise with its passage that every American would have equal access to housing and be free from discrimination. “Many civil rights organizations like Fair Housing Advocates of Northern California have effectively used the Act to help eliminate barriers to housing and promote equal opportunity, and it remains one of the most critical pieces of civil rights legislation for advancing racial and other forms of equality,” said Caroline Peattie, Executive Director of Fair Housing Advocates of Northern California. Despite strides made in the last half-century, however, discrimination in housing persists in the rental, lending, sales, and insurance markets.
 
“FHANC is currently involved in three different lawsuits against lenders that allege disparate impact where the lenders’ practices have adversely affected homeowners in communities of color,” said Peattie. “Making the federal fair housing law less accessible and setting the bar even higher to prove discrimination is sending exactly the wrong message to both consumers and the housing industry alike. It’s telling people in the housing industry – including managers, owners, realtors, lenders, and insurers – ‘go ahead, you can discriminate, as long as you’re careful about it and aren’t obvious about showing intent,’ while telling consumers – renters and buyers who are supposed to be protected under the Fair Housing Act – that it may not be worth filing a complaint because it will be too difficult to prove that what you experienced was illegal discrimination.”
 
In 2015, the Supreme Court reached a landmark decision reaffirming the use and importance of disparate impact in Texas Dept. of Housing & Community Affairs v. Inclusive Communities Project, where Justice Anthony Kennedy wrote the majority opinion, stating that the Fair Housing Act has a “continuing role in moving the Nation toward a more integrated society.” It is used to address structural discrimination leading to inequities, a point underlined by Justice Anthony Kennedy’s statement that: “Explicit, legally sanctioned racial segregation in housing may be over, but its vestiges remain today, intertwined with the country’s economic and social life.”
 
As the most diverse and populous state with almost 40 million residents covering a wide range of communities, California could be the most impacted by changes to this longstanding tool to challenge disparities in housing. California and its residents have a strong history in using disparate impact and fighting to preserve it. As Attorney General of California, Senator Kamala Harris played a key role in the Inclusive Communities case, signing a strong amicus brief filed by Attorneys General around the country that strongly supported disparate impact. California cities also stepped up to support disparate impact. The compelling amicus brief filed by municipalities was led by San Francisco and included Los Angeles and Oakland. Both briefs were cited by Justice Kennedy.
 
California has been the site of significant disparate impact litigation over the years, related to lending, families with children, residency restrictions, and replacement housing. For example:

• The State of California has long relied on disparate impact to challenge occupancy restrictions. In re Accusation of the Dep’t of Fair Employment & Hous. v. Merribrook Apartments, James C. Beard, Owner, FEHC Dec. No. 88-19, (Cal. F.E.H.C. Nov. 9, 1988), the California Department of Fair Employment and Housing concluded that a married couple and their infant child were unlawfully subject to an occupancy restriction that had an adverse disparate impact on prospective renters with children.  
• In Ramirez v. Greenpoint Mortgage Funding, 268 F.R.D. 627 (N.D. Cal. 2010), U.S. Judge Thelton Henderson held that borrowers of color had sufficiently stated a disparate impact claim by alleging that borrowers of color were subject to more discretionary charges that could not be explained by legitimate risk factors.
• In litigation filed in California, the Department of Justice entered into a $335 million settlement with Countrywide involving claims of discriminatory pricing that cost African American and Latino borrowers higher fees and interest rates.  U.S. v. Countrywide Fin. Corp., No. 2-11-CV-10540 (C.D. Cal. 2011).
• The California State Conference of the NAACP and the Community Action League settled claims against the cities of Lancaster and Palmdale for  discriminatory enforcement against African-American housing voucher holders to discourage and exclude them from living in the cities. Cmty. Action League v. City of Palmdale, No. 11-cv-4817 (C.D. Cal. 2012).

 
Banking and insurance trade groups have been exerting pressure to take apart this key protection. Here are some potential outcomes of the elimination of the rule:

• A landlord could exclude qualified applicants without full-time jobs, including seniors and veterans.
• An insurance company could refuse to insure homes under a certain dollar value.  In many communities, this would exclude homes in neighborhoods of color.
• A landlord could evict a tenant if police were called numerous times, even if that tenant was the victim of abuse seeking protection from their abuser, placing women—the primary victims of domestic abuse—and their children at risk of homelessness and further violence.
• Lender or insurance companies could simply show that their computer algorithms are used by the industry in order to defeat claims that their models are discriminatory; merely showing that it is a standard industry practice would act as insulation against claims of discrimination against an individual actor/company. See the Vice article here.

 
Furthermore, language in the proposal indicates that a defendant must simply prove that a practice or policy is profitable in order to withstand a challenge that it has a discriminatory impact, while placing the burden on victims of discrimination to prove that a company can be as profitable without discriminating.
 
Gutting the disparate impact protections under the Fair Housing Act will affect the use of this civil rights tool in other areas, including education, employment, health, environmental justice, transportation, and policing. Following the publication of the proposed rule on the Federal Register, there is a 60-day comment period. Civil rights advocates are concerned that the HUD rule foreshadows a broader application within much of the federal government, as similar efforts are under way in the Education and Justice Departments. Without the use of disparate impact, civil rights groups are far less likely to be able to effectively challenge inequalities related to the nation’s gender wage gap, disproportionate discipline of children of color in schools, over-policing of neighborhoods of color, and the nation’s racial wealth gap.  
 
Government and private discriminatory housing policies such as redlining, lending and insurance policies, advertising, and zoning rules – past and present – have been identified by housing advocates, and analyses by various groups show that they persist around the country today, negatively impacting communities of color, people with disabilities, and ethnic minorities.  Black homeownership is as low as it has been since the 1960s: See article in Urban Wire.
 
"Where you live has everything to do with the opportunities you have available to you,” said Peattie,  "and the Supreme Court's decision underlined that fact by supporting the Fair Housing Act's premise that everyone should have the same chance to live in the housing of their choice, free of discrimination. Now the administration is sending an entirely different message." Peattie maintains that the Trump Administration’s action to gut the disparate impact tool will have a profound, negative effect on the housing choices of millions of Americans of all backgrounds and will undermine equity and equality for decades to come. “Prejudice and bigotry have become more subtle,” said Peattie, “but it’s still there – it’s more difficult to prove, so it’s more important than ever that we strengthen rather than weaken the rule. The Trump administration has made a terrible mistake, and we all need to make our voices heard – both in general, as well as specifically during this comment period, to let them know we won’t stand for civil rights being rolled back.”
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Fair Housing Advocates of Northern California is a non-profit organization serving several Bay Area counties, providing free counseling, enforcement, mediation, and legal or administrative referrals to persons experiencing housing discrimination. FHANC also offers foreclosure prevention counseling, seminars to help housing providers fully understand fair housing law, and education programs for tenants and the community at large. For more information about Fair Housing Advocates of Northern California (FHANC), fair housing laws, and disparate impact, call FHANC at (415) 457-5025 or TDD: (800) 735-2922, email at [email protected], or visit FHANC’s website at www.fairhousingnorcal.org or Facebook page.

For Immediate Release
August 13, 2019
Contact:  Morgan Williams | (202) 898-1661 | [email protected]

Late Monday, August 12, 2019, the U.S. District Court for the Northern District of California largely DENIED Fannie Mae’s Motion to Dismiss a fair housing lawsuit concerning housing discrimination against communities of color.  The lawsuit, brought by the National Fair Housing Alliance (NFHA) and 20 local fair housing organizations, charged Fannie Mae with failing to maintain foreclosed properties (also known as Real Estate Owned or “REO” properties) in Black and LatinX neighborhoods, even as Fannie Mae simultaneously was keeping foreclosed properties in predominately White communities well-maintained.  The fair housing groups allege that Fannie Mae’s poor and improper maintenance policies and practices in Black and LatinX communities contributed to blight and other challenges in these areas. 

In a March, 2018 decision, the federal court found that the fair housing groups had standing to bring a lawsuit against Fannie Mae and upheld their disparate impact claims against the mortgage giant.  Disparate impact is a longstanding protection that allows people to challenge unjustified policies that might seem neutral on their face but result in discriminatory outcomes.  In doing so, the court found that the fair housing groups properly brought the lawsuit alleging that Fannie Mae’s REO maintenance practices unnecessarily discriminated against communities of color, regardless of what the company’s intent might have been.

In Monday’s ruling the court again upheld plaintiffs’ allegations of intentional discrimination. But the court also pointed to the fair housing groups’ assertions that even though they repeatedly warned Fannie Mae that its policies and practices were causing discriminatory outcomes, the company did not change its behavior.  The court noted that “…there are sufficient allegations to establish a claim for disparate impact…and the court finds that the Plaintiffs have set out sufficient allegations of intentional conduct.”
“This decision proves that our courts matter when it comes to fighting illegal discrimination,” said Lisa Rice, President & CEO of the National Fair Housing Alliance.  She continued, “Communities of color were the canaries in the coal mine when it came to redlining and predatory lending practices that contributed to the foreclosure and financial crises.  These same communities that were targeted for unsustainable mortgages were the hardest hit.  Fannie Mae’s practices have contributed to the blighted conditions of Black and LatinX neighborhoods and made it harder for these communities, ten years later, to recover from the crisis.”

“We are quite pleased with the court’s ruling which paves the way for the fair housing groups to continue with our lawsuit against Fannie Mae on both disparate impact and intentional discrimination or disparate treatment claims,” said Morgan Williams, General Counsel of the National Fair Housing Alliance.  “For centuries, lending institutions have behaved in ways that discriminate against communities of color.  It’s difficult to get that hard-wired bias out of our lending DNA.  It’s easier to default to practices that manifest discriminatory outcomes.  Our goal with this lawsuit is to get the industry moving in another direction.  We will never see change if we don’t make change.”

The National Fair Housing Alliance and other local fair housing groups have similar lawsuits pending against Deutsche Bank and Bank of America.

The fair housing groups are represented by Relman, Dane and Colfax, one of the nation’s leading civil rights law firms.  The groups are also represented by Morgan Williams, General Counsel of the National Fair Housing Alliance, and Casey Epp, Supervising Attorney of Fair Housing Advocates of Northern California.

Background

On December 5, 2016, the National Fair Housing Alliance along with 20 local fair housing organizations throughout the United States filed a federal lawsuit against Fannie Mae in federal district court in San Francisco, California.  The lawsuit alleged that Fannie Mae failed to maintain its foreclosed properties (REO properties) in Black and LatinX neighborhoods to the same level of quality and standards as it did for foreclosed properties it owned in predominately White communities. 

The plaintiff fair housing groups conducted a comprehensive multi-year investigation of over 2,300 properties owned by Fannie Mae in 38 metropolitan areas (see map below) and accumulated over 49,000 photographs documenting the mistreatment and poor maintenance conditions in communities of color as well as the superior treatment and proper maintenance of REOs in predominately White communities.  The investigation revealed that Fannie Mae failed to perform routine maintenance, marketing and management activities such as mowing the lawn, trimming hedges, removing debris, maintaining gutters, etc.

NFHA notified Fannie Mae many times of the company’s failure to maintain and market its foreclosed homes in communities of color to the same standard to which it was maintaining and marketing foreclosed homes it owned in similar, predominantly White neighborhoods. In spite of numerous meetings between NFHA and Fannie Mae to address these disparities, Fannie Mae persisted in its willful neglect of REO properties it owned in Black and LatinX neighborhoods.

Resources

• Read the press release announcing lawsuit
• Read the complaint
• View the national presentation describing investigative methodology and findings​