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Disparate Impact Won't Save Us From Exclusionary Zoning

The Fair Housing Act (FHA) imposes liability upon landlords and governments whose policies have a discriminatory effect against racial minorities. However, the courts have interpreted this doctrine narrowly.
Michael Lewyn | @mlewyn | March 30, 2020, 7am PDT
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Under the "disparate impact" doctrine of the Fair Housing Act (FHA), a landlord or government agency may, under certain circumstances, be liable for housing discrimination when its practices have a discriminatory (or, in legalese, "disparate") impact* upon protected classes listed in the FHA (including racial minorities). Zoning regulations often adversely impact lower-income households, who in turn are disproportionately likely to belong to racial minority groups. For example, if a city requires that all housing consume at least one acre of land, this means that only those who can afford to purchase one acre of land can live in the city. Does this mean that cities are always liable for this sort of exclusionary zoning? A recent case out of the New York suburbs suggests that the answer is "rarely."

The case of MHANY v. Nassau County arises out of the following facts: Garden City (a wealthy Long Island suburb) decided to rezone land that had been used in the "public use” zone—that is, for government buildings. A planning firm hired by the city proposed to zone the land for multi-family housing; because of pressure from Garden City residents, the city instead rezoned most of the land for single-family housing. As a result, the city rejected a nonprofit agency’s proposal to build hundreds of units of multi-family housing, including some "affordable" (i.e., subsidized lower-income) housing. The nonprofit (hereinafter "plaintiff") filed suit under the FHA in a federal trial court.

As to the disparate impact claim, the court first described the three-part test governing disparate impact claims under Supreme Court precedent. First, the plaintiff must show a prima facie case of disparate impact—that is, that the policy of a city or landlord had a negative impact upon a protected class such as a racial minority group. Second, if a prima facie case is shown, the burden shifts to the defendant to show that its policy was supported by a legitimate, nondiscriminatory interest. Third, if the defendant meets the burden in step two, the burden shifts to the plaintiff to show that the defendant’s interest could be served by another practice that 1) has less discriminatory effect than the defendant’s policy and 2) is also effective in meeting the defendant’s legitimate, nondiscriminatory interests.

In MHANY, a higher court (the U.S. Court of Appeals) had already resolved the first two steps: it was clear that Garden City's rezoning disproportionately harmed local African-Americans and Hispanics, and that the city's decision had been supported by the legitimate interests of preventing increased traffic and preventing school overcrowding. The appeals court then sent the case back to the trial court to decide whether plaintiffs met the third element of the three-part test—that is, whether rezoning the land for multi-family use had less discriminatory effect than the city's rezoning, and whether rezoning the land for multi-family use met the city’s goals of reducing school crowding and limiting traffic.

The trial court found for the plaintiff. In particular, the court found that multi-family zoning was less harmful to minorities than single-family zoning, because "one could not build any measurable number of affordable housing units under that [single-family] zoning…while it would have been financially feasible to build 45 to 78 affordable housing units under the R-M controls." Because affordable housing residents were disproportionately African-American and Hispanic, the plaintiff’s alternative had less discriminatory impact than single-family zoning. 

The court’s emphasis on "affordable housing" suggests that cities might be liable for exclusionary zoning if its policy excludes such housing. But what if plaintiffs propose market-rate multi-family housing, or market-rate small-lot single-family housing, instead of (even more expensive) market-rate single-family housing on large lots? The MHANY case suggests that plaintiffs would not prevail unless they can show that more minorities would have lived in the multi-family housing.

The court also found that multi-family zoning met the city’s goals, but again on narrow factual grounds. As to school crowding, the court found that multi-family housing would have met the city’s goals, because Garden City schools were not particularly overcrowded and would not have been overcrowded even with hundreds of new children. Obviously, this ruling would not be relevant to cities with more crowded schools.

Finally, the court found that multi-family zoning met the city's goal of minimizing traffic, because even if such zoning led to more traffic than single-family zoning, it "would have reduced traffic in relation to the conditions under the [prior public use] zone." The court explained, based on expert testimony, that multi-family housing generates far less traffic than office buildings (the primary use under prior zoning). It logically follows that if the city had always zoned the property for single-family housing, plaintiffs would not have been able to show that their proposal reduced traffic, and the city would have prevailed based on its interest in reducing traffic. 

Thus, the MHANY case suggests that a city can avoid disparate impact liability for exclusionary zoning as long as land was always zoned for the use that creates the least possible neighborhood traffic. So if cities can persuade courts that single-family house zoning is the least traffic-creating use, and the land at issue has been zoned for that use for many years, cities are likely to prevail in the majority of disparate impact cases involving exclusionary zoning.

*I note that the U.S. Department of Housing and Urban Development has proposed regulations that make it more difficult to raise disparate impact claims. Even if President Trump is re-elected, it is unclear to what extent courts will defer to these proposed rules. If President Trump is not re-elected, his successor is likely to reinstate existing law or even make it stricter.

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