October 28, 2016
Private: Standing to Enforce the Fair Housing Act
Erwin Chemerinsky
by Erwin Chemerinsky, Dean and Raymond Pryke Professor of First Amendment Law, University of California, Irvine School of Law. Co-counsel for City of Miami in Bank of America v. City of Miami and Wells Fargo v. City of Miami
On Tuesday, Nov. 8, the Supreme Court will hear oral arguments in two significant civil rights cases that raise the question of whether a city can sue to enforce the Fair Housing Act. Bank of America v. City of Miami and Wells Fargo v. City of Miami concern whether a city has standing to sue to challenge discriminatory lending practices of banks. The Court should follow well-established law in this area and allow these suits to go forward.
The Fair Housing Act, adopted in 1968, not long after the death of Dr. Martin Luther King, Jr., broadly prohibits race discrimination in housing. As the Supreme Court noted just two years ago in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, that the law represents Congress’s response to economic and social forces that “left minority families concentrated in the center of the Nation’s cities,” where “residential segregation and unequal housing and economic conditions” resulted in “neighborhoods marked by substandard housing and general urban blight.” The Act declares the “policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.”
The Act makes it unlawful “[t]o discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race [...] or national origin.” It also forbids discrimination by “any person or other entity whose business includes engaging in residential real estate-related transactions […] in making available such a transaction, or in the terms or conditions of such a transaction, because of race […] or national origin.” Two years ago, in Texas Department of Housing and Community Affairs, the Court held that the Act prohibits practices that have a racially discriminatory impact.
A lawsuit to enforce the Act may be brought by the Attorney General or by an “aggrieved person.” The statute broadly defines “[a]ggrieved person” to include any person who— (1) claims to have been injured by a discriminatory housing practice; or (2) believes that such person will be injured by a discriminatory housing practice that is about to occur.”
The City of Miami sued Bank of America and Wells Fargo Bank to challenge their racially discriminatory lending practices. The 63-page complaint alleges that these banks directed highly undesirable mortgage loans especially to African-American and Latino borrowers and refused to refinance them on terms that were available particularly to white borrowers. The United States Court of Appeals for the Eleventh Circuit, in concluding that the City of Miami had standing to sue under the Fair Housing Act, explained: “[T]he bank[s] targeted black and Latino customers in Miami for predatory loans that carried more risk, steeper fees, and higher costs than those offered to identically situated white customers, and created internal incentive structures that encouraged employees to provide these types of loans.”
The complaint alleged that a regression analysis of available data in Miami reported by the Bank demonstrated that African-American borrowers were 4.321 times more likely to receive a discriminatory loan than a white borrower with similar underwriting and borrower characteristics. Latino borrowers were 1.576 times more likely to receive such loans. Statements from bank employees confirmed that the practice was to direct undesirable loans especially to minority borrowers.
The predictable happened and foreclosures occurred, especially when the banks refused to offer refinancing on terms available for white borrowers. A discriminatory loan to an African-American borrower in Miami was 13.324 times more likely to result in foreclosure than a non-discriminatory loan to a white borrower with similar risk characteristics and a discriminatory loan to a Latino borrower was 17.341 times more likely to result in foreclosure than a loan in a predominantly non-discriminatory loan to a white borrower with similar risk characteristics. Moreover, the Complaint alleged that a loan made to a borrower residing in a predominantly minority neighborhood in Miami was 5.857 times more likely to result in foreclosure than a loan in a non-minority neighborhood.
The City of Miami sued claiming that it was “aggrieved” by the banks’ discriminatory lending practices. It suffered loss of tax revenue, costs attendant to the often abandoned houses and a frustration of its goal of ending racial segregation in housing. The United States Court of Appeals for the Eleventh Circuit held that these injuries were sufficient for standing.
But the banks successfully sought review in the Supreme Court and argue that the City is not in the “zone of interests” intended to be protected by the Fair Housing Act and thus is not an “aggrieved” person within the meaning of the statute. The claim is that the City cannot sue because it did not itself suffer discrimination.
But the banks take far too restrictive a view of standing. Congress clearly meant to broadly allow standing to sue to enforce the Act and the complaint alleges many ways in which the City is itself injured by the banks’ discriminatory lending practices. Moreover, the Supreme Court is not writing on a blank slate. In prior cases, the Court explicitly held that cities are “aggrieved” within the meaning of the Fair Housing Act and may sue to enforce its prohibition of discrimination.
For example, in Gladstone, Realtors v. Village of Bellwood (1979), the Court allowed a city – the Village Bellwood – to sue to enforce the Fair Housing Act. Indeed, it found sufficient for standing allegations in the complaint that were almost identical to those in the City of Miami cases, explaining “significant reduction in property values directly injures a municipality by diminishing its tax base, thus threatening its ability to bear the costs of local government and to provide services,” as well as “rob[s] Bellwood of its racial balance and stability, the village has standing to challenge the legality of that conduct.” In Havens Realty Corp. v. Coleman (1982), the Court reaffirmed the broad scope of standing under the Fair Housing Act.
Racial discrimination in housing remains a significant problem throughout the United States. Banks have historically contributed to this problem in their discriminatory lending practices. The Supreme Court should follow its precedents and allow cities to sue to halt and remedy this racial discrimination.
Hear Dean Chemerinsky discuss this issue further in the ACS Breifing Call: Bank of America Corp. v. City of Miami and Wells Fargo & Co. v. City of Miami: Predatory Lending & Standing Under the Fair Housing Act.