Editor's note: This story has been updated throughout.
The biggest federal housing subsidy program in Texas — which awarded $9.7 billion in tax credits from 1990 to 2011 — effectively has been reinforcing segregated housing, the U.S. Supreme Court found Thursday.
The high court ruled 5-4 against the state of Texas, which administers the federally backed subsidy program.
"Much progress remains to be made in our Nation’s continuing struggle against racial isolation," Justice Anthony Kennedy wrote in the majority opinion. "We must remain wary of policies that reduce homeowners to nothing more than their race."
Kennedy was joined by Justices Ruth Bader Ginsburg, Elena Kagan, Sonia Sotomayor and Stephen Breyer.
The ruling, which strengthens the federal Fair Housing Act, is a victory for civil rights groups across the country.
Under the Low-Income Tax Credit program, run by the Texas Department of Housing and Community Affairs, the state gives federal incentives to private developers to build or rehabilitate low-cost apartments, essentially engineering parts of a city's geography.
The Inclusive Communities Project, a nonprofit devoted to fair housing issues, sued the TDHCA in 2009, arguing that the state doled out tax credits in Dallas in a way that packed minorities into poor neighborhoods and spared white neighborhoods from development of low-income housing. The result is that neighborhoods throughout Dallas remain segregated, the project argued.
A 2012 examination of state data by The Texas Tribune and San Antonio-Express News found that more than three-quarters of credits given out during a two-decade span subsidized the construction of apartments in neighborhoods mostly made up of poor blacks and Hispanics. Few units built with support from the tax credit program were in areas that are predominantly white.
At issue in the case was whether the federal Fair Housing Act directs officials to ensure that their actions do not have an unequal impact on a certain group, even if they didn't intend for it to occur.
The court decided it did not matter if the state housing department did not explicitly set out to discriminate based on race, color, religion, sex or national origin — the effect was enough to violate the law.
"To give families a choice to move to a better place to live when our government chooses where to fund affordable housing is the right thing to do," the Texas Low Income Housing Information Service said in a statement.
The White House released a statement following the decision, saying that it reflects the reality that discrimination exists not just out in the open, but in more hidden forms. "Too many Americans are victims of more subtle forms of discrimination, such as predatory lending, exclusionary zoning and development policies that limit affordable housing," the statement said.
In representing the state, Texas Solicitor General Scott Keller said during oral arguments in January that the FHA only prohibits acts of intentional discrimination because nowhere in the law does it say otherwise.
"Today's decision places an unfair burden on landlords, lenders and developers, and will ironically lead them to make their decisions based upon considerations of race," Texas Attorney General Ken Paxton said in a statement. "The administration's interpretation of federal housing law is overreaching and misguided, and I am disappointed with the Supreme Court's ruling."
The long-awaited decision marked an opportunity for the court to finally state its opinion on an issue that has been brought before the justices three separate times in the past two years. Two prior cases involving so-called disparate impact claims were settled just months before the court got to hear arguments.
Now, some in the housing industry worry that they’ll be required to make decisions based on race to avoid liability, a concern that resonated with a court traditionally wary of upholding race-conscious policies.
Kennedy emphasized, however, that disparate impact liability should be imposed cautiously to prevent creating racial quotas.
"Courts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision," Kennedy wrote.
The court's conservatives dissented, with Justice Clarence Thomas writing, "We as a Court have constructed a scheme that parcels out legal privileges to individuals on the basis of skin color."