What the Supreme Court’s discrimination ruling means for affordable housing

Ryan Holeywell | @RyanHoleywell | July 2, 2015

Supreme Court Building

The Supreme Court ruled last month that policies promoting segregation – even if not intentionally discriminatory – violate the federal Fair Housing Act.

The court’s 5-4 decision upheld a plaintiff’s ability to argue that certain lending, zoning or rental policies that disproportionately affect minorities can continue to be fought through so-called “disparate impact” claims.

The decision was the result of a lawsuit that originated here in Texas. The non-profit Inclusive Communities Project alleged that the Texas Department of Housing and Community Affairs disproportionately directs tax credits to minority areas of Dallas while denying them in white areas. The result: low-income households relying on housing vouchers were concentrated in minority areas. Even if the intention wasn’t discriminatory, the non-profit argued, the effect was.

The federal government has supported the use of disparate impact claims. Texas, however, urged the Supreme Court to determine that the Fair Housing Act doesn’t allow them.

Though the court upheld the plaintiff’s ability to use the disparate impact theory, it limited its application. “While supporters of the disparate-impact theory may perceive the Court’s decision as a ‘win,’ the decision imposes significant limitations on the application of the theory, which provide an important benefit to defendants in FHA cases,” SCOTUSblog wrote.

Houston played an interesting role in the case. The Houston Housing Authority submitted an amicus brief to the court in support of Texas that was cited by Justice Clarence Thomas in his dissent of the ruling. The brief argued that disparate impact “has effectively halted HHA’s ability to develop new affordable housing and to serve its clients, thereby adversely impacting the very individuals the FHA seeks to protect.”

It argued that a previous lower court’s ruling, while intended to prevent segregation, also prevented HHA from investing in communities – even when development “would improve the overall well-being, health, and safety of that community.” Moreover, the brief argued, it would be cost-prohibitive for HHA to use its limited resources to focus development exclusively in “high opportunity areas.”

Urban Edge spoke with Houston Housing Authority President and CEO Tory Gunsolley about the implications of the case. This interviewed has been edited and condensed for clarity and length.

Ryan Holeywell: When did you start to realize this case was going to have big implications?

Tory Gunsolley: I got to Houston about four years ago. From the moment I stepped foot in Houston, I realized that in Texas, there was a heightened awareness of fair housing issues.

You’ve got strong advocates who’ve been successful in filing lawsuits to make changes to the way the tax credit program works in Texas. It was very different than other parts of the country. Even over the last four years, talking with colleagues, they’ve said ‘I can’t believe these challenges you’re having.’

From a national perspective, it got on people’s radar when it got to the Supreme Court. There had been two other cases looking at the same issue, and the policy wonks were aware of those too. The industry groups were all tracking this.

RH: How have lower court rulings in this case affected the way Houston Housing Authority operates?

TG: We filed an amicus brief in this case, and it wound up being influential. The main thing we said was that as a housing authority who primarily serves minorities, the elderly, and people with disabilities, everyone we deal with is in a protected class under the Fair Housing Act. Any decision I take could have a disparate impact on some group.

I was frustrated as a housing authority executive that under the old interpretation, prior to this, it seemed like I was often under the threat of a lawsuit. Unfortunately it is very easy to show that the people I serve are disproportionate to the population of Houston as a whole.

RH: Is the crux of the disagreement on this case between advocates – who influence and advise on development – and agencies – who have to actually execute?

TG: The majority opinion talks about this. The federal government was intimately involved in creating a lot of these segregation issues. Public housing was originally built as segregated housing. FHA was the homeownership program for whites. Central cities further concentrated public housing to serve minorities.

These trends haven’t always been addressed, and the result is most of the people I serve are African-American. So anything I do could have a disparate impact on them. We raised that issue in the brief. If disparate impact is sacrosanct, we aren’t going to build anything without a threat of litigation. And anywhere we do build it, someone could oppose it.

We had eight different sites where we’re trying to use disaster recovery money, and only two have been approved. One is a historic African-American neighborhood that’s rapidly gentrifying. If we don’t build some affordable housing now, there’s a good chance as gentrification continues, there won’t be an opportunity for any. But I have some people saying that disparate impact seems to indicate we shouldn’t build in that neighborhood.

The revitalization argument says the federal government should be investing in Sunnyside. If we don’t, what’s going to happen? Nobody else will. Until it becomes so cheap speculators buy up all the property and it gentrifies quickly. By that point, the land values will have gone up, and we can’t afford to get in.

We had $45 million in disaster recovery money, and I had planned about 2,000 units of housing. Because many of our sites have been rejected or delayed, I’m now planning to develop less than 1,000 units.  At the end of the day, if the rule is applied without any broader recognition, it could stop housing production and reduce the amount of affordable housing that gets built. It could actually harm the parties it’s meant to help.

RH: You don’t strike me as someone who’s trying to discriminate against black people. Is it frustrating to get painted with that brush?

TG: We said ‘Justices, there’s got to be some way for housing authorities to try to do good work without being clobbered for it.’ This is where it’s nuanced. Absolutely, if there are banks who are redlining, and the only way to show it is through disparate impact, of course there should be penalties. But I don’t see what I’m doing as the same thing. Some advocates would disagree.

In all fairness to the advocates, I agree integration is a good goal. And all things being equal, I’d rather build in the best neighborhoods than the worst neighborhoods. In Houston, the best neighborhoods are the white neighborhoods. The land costs are much higher and the opposition is so much higher that it’s almost impossible to do that.

You saw a lot of opposition to us building in Pinemont. The neighbors got together and were able to kill that deal. My point – as somebody who wants to build affordable housing, has 40,000 families on my waiting list, and is able to build less than half what I hoped for – is we need more units overall. The law was making it more and more difficult to build anything.

RH: So what’s your reaction to the ruling? Will it change how you operate?

TG: I’ve been asked ‘Tory, how can you side with Texas? They’re doing awful things.’ I’ve said that my goal wasn’t to gut the Fair Housing Act, and in fact, I would have been disappointed if the ruling had gone too far in favor of the state.

What we got in the opinion was more nuanced. I think we’re in a better place now than before the opinion, in terms of safeguards and directions to lower courts. In the best-case scenario, the courts wouldn’t be deciding these issues. There would be clear rules that tell me if I build here, I’m fine. That’s not the case.

Today, if I decide to build somewhere, someone sues me, and the court decides whether disparate impact applies. As a developer, you don’t want to be involved in that.

Still, the impact of the decision won’t be as big as you’d think. The main source of capital dollars I have to do new construction is CDBG Disaster Recovery funds. We have agreements with the state and HUD that puts affirmatively further fair housing as a goal, without regard to disparate impact. We are trying to do a balanced plan where we’re building in some high-opportunity areas and some gentrifying areas and some areas that need revitalization.

The impact of the case would be in the revitalizing areas, if a plaintiff decided to sue us. We would have perhaps a little bit more safeguards that could make us successful in lawsuit. But maybe not. At the end of the day, there’s still a lot of uncertainty.

RH: What other challenges are you facing?

TG: There’s another important question that the policy wonks around affordable housing have been trying to answer: what’s best for a household? And to what level do we allow self-determination to make those choices, and to what level does Washington, the state or the locality make those decisions? It’s very nuanced.

As a practitioner, I want the best outcomes for individuals and communities. I think there’s no question the federal government caused some of these problems, and I think the federal government therefore has a role in trying to fix some of those problems.

On one hand, the government has a role in investing in neighborhoods. I think self-determination has to play some role. I can’t necessarily be held accountable for the decisions my population is making. In our program, if you have a housing choice voucher, you can move any place in the country. The reality is most people tend to stay in the neighborhoods they’re in.

It costs a lot of money to provide all the case management to encourage families to do something very scary – move from the inner city where church, family and government services are – to a white suburb. It’s a huge thing to ask a family to do.

There is some evidence that the people who did move benefited from it, particularly younger girls. I think this is where every family needs to make these choices. We need to provide information, but we can’t force people to take those options. At the end of the day, you’re talking about families and people. All of this ties into disparate impact.

We’ve crated small market-rent areas where vouchers are worth more, because rent in West Houston is more expensive than in Southeast Houston. But we’re constrained by HUD limitations on how much more or less we can make them worth – it’s really only 10 percent.

We’ve been doing this a little over a year. We’re not having that much success, in terms of large percentages of people saying ‘I’m moving to West Houston.’

At the same time, as all of this is going on, the state legislature passed a law saying cities can’t implement policies that require non-discrimination based on source of income. So in Texas, it’s perfectly legal for a landlord to say ‘Vouchers? We don’t take vouchers.’ It’s discrimination, but it’s legal discrimination in Texas. It limits people’s opportunity.

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