The federal Fair Housing Act is one of the most important pieces of Congressional legislation in the last half-century or more. It was enacted in the 1960s after the assassination of Dr. Martin Luther King, Jr., at a time of considerable social unrest. In that era, governmental entities at all levels had explicit or implicit policies that prevented integration even when developers had an economic rationale for wanting to build more dense or more affordable housing. Congress thus enacted the FHA “to eradicate discriminatory practices within a sector of our Nation’s economy.”
The FHA declares that “it is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.” To achieve that goal, the FHA makes it unlawful to, among other things, “make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” Among other tools for achieving this objective, the FHA prohibits intentional discrimination – i.e., disparate treatment. If a governmental actor engages in such discrimination, that conduct also violates the federal Equal Protection Clause. The FHA also addresses disparate impact discrimination, forbidding actions by private or governmental bodies that create a discriminatory effect upon a protected class or perpetuate housing segregation without a legitimate reason.
In Avenue 6E Investments, LLC v. City of Yuma, 818 F.3d 493 (9th Cir. 2016), the Ninth Circuit addressed the applicability of the FHA to a rezoning application that that could provide housing affordable to significant numbers of minority groups, particularly Hispanics. The case involved a request by two developers that asked the City of Yuma to rezone their land from lower-density to higher-density housing, mainly for financial reasons. Both zoning alternatives were consistent with the City’s general plan: one would enable more minority group members to buy homes in an area with a white majority population than would the other. The City chose the other. Notably, the developers’ rezoning request was the only one of 76 such applications considered by the City in the last three years that it rejected. In addition, the City denied the request in the face of the recommendations of it’s own professional planning staff and of its Planning and Zoning Commission.
The developers sued the City on the grounds that its refusal to rezone land to permit higher density development violated the Equal Protection Clause and the FHA. The developers alleged that the City denied their zoning request because of intentional discrimination against Hispanics and for creating a disparate impact because the denial disproportionately deprives Hispanic residents of housing opportunities and perpetuates segregation. The federal district court agreed with the City, dismissing the developers’ disparate treatment claims for failure to state a claim and granting summary judgment in favor of the City on the developers’ disparate impact claims.
The Ninth Circuit reversed and remanded to the district court, holding that the developers presented plausible claims for relief for disparate treatment, or intentional discrimination. The court also reversed and remanded on the developers’ disparate impact claim, holding that when a developer seeks to rezone land to permit the construction of housing that is more affordable, a city cannot defeat a showing of disparate impact on a minority group by simply stating that other similarly-priced and similarly-modelled housing is available in the general area.
With respect to disparate treatment claims, the court analyzed whether a discriminatory purpose motivated the City by examining the events leading up to the challenged decision and the legislative history behind it, the City’s departure from normal procedures or substantive conclusions, and the historical background of the City’s decision and whether it creates a disparate impact.
The events leading to the City Council’s denial of the rezoning request included neighborhood opposition that relied upon “racially tinged” code words consisting of stereotypes of Hispanics that would be well-understood in Yuma. For example, the developers have a reputation for selling their products to Hispanic buyers and neighbors expressed concern that the people living in the developers’ subdivisions own numerous vehicles that they park in streets and yards, that they fail to maintain their residences, that they lack pride of ownership, and that they allow their children to roam the streets unattended. Such animus can support a finding of discriminatory motives by government officials, even if the officials do not personally hold such views.
The City Council was fully aware of those concerns when it took the highly unusual step of capitulating to the opposition and overruling the recommendations of its zoning commission and planning staff. Thus, the City’s singling out of the developers’ zoning request supported the contention that the City had a discriminatory intent.
The developers also alleged that the City was aware that its denial would bear more heavily on one race than another in light of historical patterns of segregation by race and class in Yuma. They showed, for example, that substantially all of the available low- to moderate-income housing in Yuma has historically been concentrated in three areas of the City in which more than 75% of the households are Hispanic, whereas whites have been concentrated in two other areas in which the white population has been more than 75%.
Addressing the developers’ disparate impact claim, the Ninth Circuit noted that the district court granted the City’s summary judgment motion on the only ground raised: similarly-priced housing was available in the area. In so ruling, the district court relied upon a nearly ten-year old Eleventh Circuit decision that held that the developer had failed to establish a disparate impact because there was an oversupply of homes in the developer’s projected price range in the relevant part of the county. The district court did not have the benefit of the U.S. Supreme Court’s recent decision, Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., 135 S.Ct. 2507 (2015), in which the Court emphasized that disparate-impact liability was designed to allow “private developers to vindicate the FHA’s objectives and to protect their property rights by stopping municipalities from enforcing arbitrary and, in practice, discriminatory ordinances barring the construction of certain types of housing units.”
Accordingly, based on the reasoning of Texas Department of Housing, the Ninth Circuit rejected the district court’s determination that the availability of similarly-priced and modelled housing in the same quadrant of the City as the zoned property prevents developers from showing a disparate impact. At least in the Ninth Circuit, then, a city cannot defeat a showing of disparate impact on a minority group by simply stating that other similarly-priced and similarly-modelled housing is available in the general area.
Importantly, however, this conclusion does not effectively place an affirmative duty on cities and counties to approve all rezoning applications when a developer seeks to build housing within a particular price range. Rather, it merely means that agencies must demonstrate that an action that creates an adverse effect on minorities is supported by adequate justification. As the Ninth Circuit noted, “municipalities that have good cause for denying zoning changes may do so, unless motivated by conscious or unconscious racial bias. When the developer shows by statistical data that a zoning denial will have a disparate impact on minorities, the city’s obligation is to establish a legitimate and credible basis for its decision. This is not an unreasonable burden.”
Questions? Please contact Bryan W. Wenter, AICP of Miller Starr Regalia.
For more than 50 years, Miller Starr Regalia has served as one of California’s leading real estate law firms. Miller Starr Regalia has expertise in all types of real property matters, including full-service litigation and dispute resolution, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, exactions, title insurance, environmental law, and land use. Miller Starr Regalia attorneys also write Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. For more information, visit www.msrlegal.com.