New America Foundation

06/17/2025 | News release | Distributed by Public on 06/17/2025 07:02

Why “Disparate Impact” Matters for Tackling Intentional Housing Discrimination

By

Tara K. Ramchandani

June 17, 2025

This article is part of The Rooftop, a blog and multimedia series from New America's Future of Land and Housing program. Featuring insights from experts across diverse fields, the series is a home for bold ideas to improve housing in the United States and globally.

At the end of April, President Trump issued an executive order titled "Restoring Equality of Opportunity and Meritocracy." Yet the text of the order would bring about exactly the opposite with its plans to "eliminate the use of disparate-impact liability in all contexts to the maximum degree possible."

Disparate-impact liability should be an uncontroversial proposition. It requires only that where a public or private entity has a policy that disproportionately harms people on the basis of their race, sex, or other protected characteristics, and there is a less discriminatory alternative that would satisfy the entity's legitimate needs, the entity should adopt that alternative. It does not require entities to forego their goals or business needs. As my colleague Stephen Hayes details in his companion Rooftop piece, disparate impact is in fact good for business.

In the housing field, the availability of disparate-impact liability has reduced unnecessary and unintentional inequities including in zoning and mortgage lending. But as I've learned in my 15 years litigating civil rights cases, the availability of disparate impact is critical for another reason. Disparate impact allows litigants to expose covert intentional discrimination that would otherwise go undetected.

Intentional Discrimination Is Not Always Apparent

We all know that purposeful discrimination because of characteristics such as race, sex, religion, national origin, or disability is illegal. Businesses understand that telling a customer or potential employee they won't serve or hire them because of their race or religion would expose them to legal liability.

Unfortunately, this doesn't mean that intentional discrimination has been eradicated, including in housing. Instead, it happens behind closed doors and with coded language, making it hard, if not impossible, for outsiders to spot, let alone prove. What might be apparent, however, are disproportionate outcomes. These could be seen in the composition of a workforce, segregation in living patterns, or who qualifies for a loan. Disparate impact allows for those harmed by such policies to bring a lawsuit to address what the Supreme Court termed "artificial, arbitrary, and unnecessary barriers." Strong disparate-impact lawsuits can also reveal that what appeared to be a neutral policy was in fact intentionally designed to be discriminatory.

Courts have long recognized that disparate-impact cases often uncover covert evidence of intentional discrimination. As far back as 1886, in Yick Wo v. Hopkins, the Supreme Court struck down a San Francisco ordinance that sought to restrict which buildings could be used to operate laundromats because the record revealed that only Chinese owners were denied permits and only white applicants were granted permits. Much more recently, in 2015, the Supreme Court confirmed that plaintiffs can bring disparate-impact claims under the Fair Housing Act, which prohibits discrimination in housing and mortgage lending. The decision explained that disparate-impact liability "plays an important role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment. In this way disparate-impact liability may prevent segregated housing patterns that might otherwise result from covert and illicit stereotyping."

That Supreme Court decision described a case my firm litigated against St. Bernard Parish outside of New Orleans in the late 2000s as "at the heartland of disparate-impact liability." That case is an excellent example of how disparate impact can reveal that a facially neutral policy is rooted in stereotypes or even outright animus. There, in the aftermath of Hurricane Katrina, an all-white parish adopted an ordinance limiting housing rentals to blood relatives of the owners-and then placed a moratorium on all new multi-family housing. The effect was to exclude any renter without family already living in the parish and to prevent the building of more affordable units. Given the predominantly white composition of the parish and the racial composition of renters who would seek multi-family units there, Black families were effectively prevented from moving to St. Bernard.

In finding that the moratorium had a discriminatory effect on Black renters, the court held that none of the parish's proffered interests in the ordinance were persuasive and that there was evidence of discriminatory intent motivating its passage. This evidence included testimony from parish officials that public opposition (which was grounded in stereotypes that multifamily housing would convert the parish into a "ghetto" filled with "crime, drugs, violence") led to the introduction of the moratorium.

Identifying Intentional Discrimination by Companies Is Even Harder

In disparate-impact suits against private entities, an additional factor is at play: information asymmetry. Public records are sometimes available to help reveal what may be justifying the actions of governmental entities. By contrast, information about the internal decision-making of private companies is rarely publicly available. Bad actors, of course, hide their discriminatory intent. Disparate-impact claims, however, can shed light on actual motivations underlying policies that cause stark discriminatory effects and appear unjustified. If a strong disparate-impact case proceeds to discovery, the plaintiff can seek documents and testimony that may uncover intentional discrimination.

"Disparate-impact claims can shed light on actual motivations underlying policies that cause stark discriminatory effects and appear unjustified."

This is exactly what happened to my team in a case against Emigrant Mortgage Company. From 1999 to 2008, Emigrant issued mortgage-refinance loans under its STAR NINA program. STAR NINA was designed to strip equity from homes and targeted borrowers who had poor credit but significant equity. The bank did not examine the borrowers' ability to repay the loans and lent the money solely on the basis of the value of the homes. If a borrower fell behind on a single payment, Emigrant imposed an automatic 18 percent default interest rate, forcing many borrowers to sell their homes or face foreclosure. The case was first filed alleging discrimination on the basis of disparate impact because mortgage data showed that Emigrant originated more than 60 percent of its most costly loans in majority Black and Latino geographic areas.

Nearly three years after filing the case, we amended the complaint to include allegations of intentional discrimination. Emigrant's own documents and testimony, obtained through discovery, demonstrated that Emigrant intentionally targeted its toxic STAR NINA loans to neighborhoods based on their racial composition. One particularly striking piece of evidence was Emigrant's marketing documents showing that during the height of the program, 76 percent of Emigrant's advertising dollars went to four newspapers: Caribbean Life, Black Star, Hoy, and Mi Zona Hispana. We also discovered an internal email from a senior member of the management team explaining that Emigrant's loans to Black borrowers were priced higher than its loans to white borrowers because a greater proportion of loans to Black borrowers were STAR loans.

These and other documents and testimony painted a clear picture to us that Emigrant intentionally pedaled its toxic product to these communities. After trial, a jury found that Emigrant had discriminated against the eight plaintiffs because of race, and awarded nearly $1 million in damages. The Second Circuit Court of Appeals affirmed the jury's finding of discrimination.

Opening the Courthouse Doors

No case would have been filed against Emigrant for this program, and no discovery would have been obtained, if disparate impact did not exist. We filed because it was clear that the STAR NINA program disproportionately harmed Black and Latino borrowers, which allowed the plaintiffs to bring claims of discrimination under the Fair Housing Act, the Equal Credit Opportunity Act, and New York state and city civil rights laws. Certainly, no individual borrower is privy to the internal emails of bank executives or a company's marketing expenditures. Without disparate impact, Emigrant's targeting of minority neighborhoods for its predatory refinance product would have gone undetected and without consequence.

Luckily, Trump's related executive order does not carry the force of law, and it does not overturn Supreme Court precedent. But we must fight to retain disparate impact, not only because it prevents the use of unnecessary barriers to equal opportunity and improves business practices but also because it is an important tool to identify and challenge intentional discrimination. In a country where there is immense information asymmetry and where bad actors know how to conceal ulterior motives, disparate impact can help to even the playing field.

Editor's note: The views expressed in the articles on The Rooftop are those of the authors alone and do not necessarily reflect the opinions or policy positions of New America.

You May Also Like

Why Disparate Impact Is Good for Business (The Rooftop, 2025): Lawyer Stephen Hayes explains that the Trump administration is attacking a doctrine that allows companies to serve consumers while improving their bottom line.

The Future of Fair Housing in America: A Q&A with Chiraag Bains (The Rooftop, 2025): Future of Land and Housing director Yuliya Panfil spoke with former White House policy aide Chiraag Bains on housing antidiscrimination protections gutted by the Trump administration.

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