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The United States Supreme Court recently held that a private or public entity can be sued for discrimination even if there was no intent by that entity to discriminate, upholding the validity of disparate impact claims in fair housing issues.

The ruling touches on the concept of “disparate impact” which, under the Fair Housing Act, states that any policy or practice that creates a disproportionate “adverse impact” on any group based on race, national origin, color, religion, sex, familial status, or disability may be considered discriminatory or illegal. Opponents have maintained there needs to be intent for a discrimination suit to be valid, but all federal courts of appeal have interpreted the law to mean that an entity can get sued for housing discrimination if its actions have a disparate impact on a protected class, regardless of intent.

In its ruling, however, the Court clarified that just because an action has a disparate impact, it does not mean it is discriminatory. The plaintiff must point to a specific policy that the defendant had and show that the policy had a negative impact on the plaintiff’s protected class. The defendant can avoid liability if it can prove that the policy is necessary to achieve a legitimate business interest. The plaintiff also must be able to show there is an alternative business practice with a less discriminatory effect that would equally serve the defendant’s legitimate business interest in order for the plaintiff’s disparate impact claim to be valid.

As an example, a REALTOR® having a policy of only selling homes to members of their religious institution could face a disparate impact claim if a member of a different faith claims that this policy causes members of the another faith to miss the best homes. In the same light, when considering the adoption of any policy, real estate professionals operating as property managers or housing developers should make sure the policy will not have an unintended disparate impact on a protected class.

March 2023


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