A lawsuit coming out of Mount Holly, New Jersey has caught the attention of the U.S. Supreme Court. The case involves the scope of the Fair Housing Act, a federal law intended to prevent housing discrimination.

The Fair Housing Act makes it unlawful “[t]o refuse to sell or rent after the making of a bona fide offer . . . or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” The specific question before the U.S. Supreme Court is whether the statute authorizes disparate impact claims, and, if so, under what circumstances.

Disparate impact refers to policies or practices that are not overtly discriminatory, but still have a discriminatory effect on a certain protected classes of people. Although the Fair Housing Act does not expressly reference these types of claims, the federal appeals courts have generally allowed them to proceed.

Mount Holly v. Mount Holly Gardens Citizens in Action, Inc. involves the Township of Mount Holly’s plan to redevelop a blighted residential area known as the Gardens. Originally built to house World War II veterans, the neighborhood is now comprised of largely low- and moderate-income minority residents. The plan called for demolishing the neighborhood and building new, significantly more expensive housing units.

Many Gardens residents objected to the redevelopment, complaining about the destruction of their neighborhood and expressing fear that they would not be able to afford to live anywhere else in the Township. A group of residents ultimately sued to prevent the redevelopment, alleging that the plan violated the Fair Housing Act by having a disparate impact on minorities. The Third Circuit allowed the case to proceed, and the Township of Mount Holly appealed to the U.S. Supreme Court.

In its petition for writ of certiorari, Mount Holly argues that unlike other federal anti-discrimination laws, the Fair Housing Act was not intended to allow for disparate impact claims. The Township further argues that these suits leave municipalities open to significant liability for otherwise lawful activities. “Allowing disparate impact claims under the FHA would render illegal many legitimate governmental and private activities designed to promote the general welfare of the community,” it argues.

Meanwhile, the citizens’ action group formed to oppose the redevelopment maintains that the law regarding disparate impact claims is settled, noting that the lawsuits have been recognized by the federal courts and agencies like the U.S. Department of Housing and Urban Development for decades. “Where the courts of appeals are in broad and longstanding agreement on an issue of statutory interpretation and Congress has acquiesced in this interpretation for nearly 38 years, there is simply no need for this court to weigh in on the meaning of the statutory text,” the brief argues.

The Supreme Court has not officially decided to hear the case. However, it did ask the U.S. Solicitor General to weigh in on the issue, specifically asking whether such disparate impact claims should be allowed and what test should be used to evaluate them.

If the Supreme Court does grant certiorari, all eyes will be on New Jersey. Lenders, local municipalities, federal agencies like HUD, and public interest groups all have a vested interest in the outcome of the case. 

Donald Scarinci is a managing partner at Lyndhurst, N.J.-based law firm Scarinci Hollenbeck.  He is also the editor of the Constitutional Law Reporter and Government & Law blogs.