Gentrification, Displacement, and Disparate Impact Liability: How Gentrification Theory is Not Cognizable Under the Fair Housing Act

by Adam Mikell*


In the United States, the topic of housing has an ugly history comprised of decades of government-sanctioned discrimination and segregation carried out through racially-motivated practices such as “neighborhood composition” rules, racial covenants, steering, and redlining. In 1968—the tail end of the Civil Rights Movement—the Fair Housing Act (FHA) was passed to prohibit discrimination in the sale and rental of housing based on race, color, national origin, religion, sex, ability, and familial status. Despite being a necessary, long-overdue step in ending some of the country’s most shameful practices, some critics of the FHA argue that the act does not provide enough tools to push back against controversial land use decisions that limit the affordable housing stock and risk displacing low-income populations. Recently, this criticism was addressed in an advocacy group’s fight against gentrification in South Los Angeles, arguing that gentrification disparately impacts low-income minority populations. The decision by California’s Second Appellate District Court (Div. 2) sent a strong signal to anti-gentrification advocacy groups that they need to take this fight to their local officials because the existing law cannot offer the protections they seek.



Gentrification is a term commonly associated with urban restructuring and renewal, but there is less consensus on how gentrification’s impact on housing accessibility and community health should be understood. Generally speaking, gentrification can be defined as a tool for the revitalization or transformation of urban neighborhoods that can result in the “displacement of lower income families.” For parties who focus on the “revitalization” aspect, gentrification is a positive tool that brings new life into the city, complete with high-paying job opportunities, lower crime rates, luxury residences, restaurants, and arts and entertainment. For the people already living in these areas, gentrification is more likely to represent threats of disruption and destruction. The so-called “revitalization” of the neighborhood may also lead to higher rents and social exclusion, forcing families out of the areas they live and work in before they have the opportunity to realize any of the supposed benefits pitched as justification for their neighborhood’s transformation. The returns of urban investment are not always shared equally, and these conflicting experiences demonstrate why gentrification is often thought of as a paradox.


Disparate Impact Claims in the United States Supreme Court

The disparate impact standard of liability can be traced back to the 1971 employment discrimination Supreme Court case Griggs. v. Duke Power Co., which held that if a defendant’s actions have had an unjustified and “disproportionately adverse effect” on a protected class, they could be liable for discrimination against that group even if they had no discriminatory intent. To succeed on such a claim, a plaintiff must show a “robust” causal connection linking the alleged discrimination and the defendant’s practices.


The standard rarely got attention in FHA cases until the Court’s 2015 opinion in Texas Department of Housing & Community Affairs v. Inclusive Communities Project Inc. Deciding 5-4, the Court confirmed that disparate impact claims are cognizable under the FHA. However, the majority also emphasized that disparate impact claims are highly limited in “key respects that avoid the serious constitutional questions that might arise under the FHA.” For example, the majority warned that finding an illegal disparate impact based solely on statistical disparities risks causing race to be used in housing decisions in a way that would almost certainly result in public or private entities using racial quotas. Additionally, judges need to apply several “cautionary standards” in disparate impact claims because the FHA only mandates the “removal of artificial, arbitrary, and unnecessary barriers” to housing. So, if a plaintiff tries to prove that a disparate impact exists and it relies on statistical disparities, the argument will likely fail unless the plaintiff can also point to a government policy that caused the disparity at issue. But, even if the policy caused the disparate impact, “housing authorities and private developers [must] be allowed to maintain [the] policy if they can prove it is necessary to achieve a valid interest.” Housing advocates disagree with these limits, arguing that evidence of gentrification causing racial residential segregation supports the need to broaden the scope of disparate impact claims under the FHA.


Applying Inclusive Communities to Gentrification Theory in California

Nearly seven years after it was decided, Inclusive Communities would find its way back to the spotlight. In Crenshaw Subway Coalition v. City of Los Angeles, the California appellate court addressed whether gentrification theory can be used to make a cognizable disparate impact claim under the FHA. To the dismay of countless residents of South Los Angeles and housing advocates throughout the country, the court—relying heavily on Inclusive Communities—held that the plaintiff’s “gentrification theory [was not] cognizable under the Fair Housing Act.”


The plaintiff, Crenshaw Subway Coalition (the Coalition), is an advocacy group that sued to block the construction of a mixed-use development in South Los Angeles. The project was approved by the City of Los Angeles (the City) and includes an expansion of a shopping mall and new offices, apartments, hotels, and condominiums. The Coalition claimed that the development will gentrify the neighborhood, specifically arguing that it will lead to an “influx of new, more affluent residents” which will result in higher rents and property values, culminating in the displacement of the low-income minority residents currently living in this neighborhood. The Coalition argues that, because most of the low-income residents in this neighborhood are Black or Latinx, the project violates the FHA’s disparate impact prong because it will make housing inaccessible to those residents.


The court in Crenshaw rejected the Coalition’s argument, writing that “[t]he gentrification theory necessarily injects racial considerations into the City’s decisionmaking process,” which would contradict the Supreme Court’s holding in Inclusive Communities. It goes on to say that if the Coalition’s gentrification theory were recognized under the FHA, the City would be obligated “to avoid gentrification-based displacement” for a project proposed in a majority minority neighborhood, but it could approve an otherwise identical project if it were in a predominantly white neighborhood. This is the unconstitutional “inject[ion of] racial considerations” that Inclusive Communities warns against. Yet, for the Coalition, using racial considerations in urban planning is one of their last hopes at combating gentrification and preserving the “political, cultural, and commercial heart of Black Los Angeles.”


When addressing the issue of preservation, Crenshaw turned to the original purpose of the FHA, describing it as a “tool for ‘moving . . . toward a more integrated society,’ not a less integrated one.” Turning to this purpose frustrates housing advocates because, despite being objectively inclusive when evaluated in a vacuum, it does little in practice to protect minority communities from being priced out of their neighborhood to make way for wealthy, mostly white, families. Allowing that to take place hardly promotes an integrated society.


Perhaps the most frustrating problem for anti-gentrification advocates is that Crenshaw faithfully applied Supreme Court precedent. Judges are tasked with interpreting the existing law, not writing new laws. Regardless of whatever personal opinions the judges have on gentrification and the scope of the FHA’s protections, the holding is accurate insofar as the binding precedent in Inclusive Communities allows. The Coalition could not point to an invalid policy that causes a disparate impact on a protected class, so the court was not willing to block the City’s development for the purpose of preserving a neighborhood’s racial makeup, even when the neighborhood’s motivation is to avoid being displaced. The court explained that “preservation” would still perpetuate segregation and racial isolation, and nothing in Inclusive Communities was meant to say that the FHA allows certain types of segregation if it isn’t “to the detriment of minorities.” Unfortunately, the lack of a cognizable claim under the FHA does not mean the potential risks associated with this new project would be any less detrimental for Crenshaw’s minority communities.


Crenshaw’s application of Inclusive Communities to gentrification claims shows that preventing displacement and preserving affordability in majority minority neighborhoods is ultimately a matter of increasing cooperation and willpower with state and local governments. Especially at the local level, government officials have the ability to enact policies that could curb the harms of gentrification and promote affordable housing while still enabling economic growth in the city. Many cities are starting to take more intentional steps to do so, though affordable housing policies face plenty of challenges of their own. These efforts are a good sign because, if Crenshaw is any indication, future FHA cases will likely be consistent with Inclusive Communities’ limited allowance for disparate impact claims. This leaves policy and legislation as the only meaningful options to protect communities from gentrification-based displacement.



*Adam Mikell, J.D. Candidate, University of Minnesota Law School Class of 2023, JLI Vol. 40 Staff Member