Glossary

Disparate Impact

A legal theory of housing discrimination liability under which a facially neutral policy or practice can still violate the Fair Housing Act if it has a disproportionately negative effect on members of a protected class, regardless of whether the housing provider intended to discriminate.

Disparate impact liability contrasts with disparate treatment (intentional discrimination), and its availability under the Fair Housing Act was affirmed by the U.S. Supreme Court in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, which also established a burden-shifting framework requiring a plaintiff to show a policy causes a statistically significant disproportionate effect, after which the defendant may justify the policy as necessary to achieve a legitimate, non-discriminatory business interest that cannot be served by a less discriminatory alternative. Common disparate impact challenges in the multifamily context have targeted blanket criminal background check policies (which HUD guidance has flagged as potentially having a disparate impact on certain racial groups given documented disparities in the criminal justice system) and overly restrictive credit or income screening criteria. Because disparate impact liability does not require proof of discriminatory intent, it creates ongoing compliance risk for seemingly neutral, business-justified screening and leasing policies, making periodic fair housing legal review of tenant screening criteria a prudent practice for institutional multifamily operators.