As Americans head to the polls today, most people may be thinking about the election and nothing else. But they should also be paying attention to what’s happening at the Supreme Court, where the Justices will be hearing oral argument in Bank of America v. Miami and Wells Fargo v. Miami.
In these consolidated cases, the Justices will be asked to decide whether the City of Miami can sue Wells Fargo and Bank of America under the Fair Housing Act (FHA) for allegedly targeting minority borrowers for high-risk, costly loans. What the Court decides will determine how effective the Act will continue to be in deterring illegal housing discrimination.
Our nation’s housing patterns were shaped by decades of race-based government policies, which left African Americans trapped in segregated ghettos of deteriorating cities as jobs and investments fled for the suburbs. By 1968, the results had become literally explosive, as urban riots consumed cities across the country. With National Guard troops stationed in the basement of the U.S. Capitol, lawmakers finally passed the FHA, which broadly prohibits discrimination in the sale and rental of dwellings and in real estate transactions.
Private lawsuits have always been the primary method of enforcing the FHA. The Act empowers a wide range of parties to sue over illegal discrimination, including “any person who claims to have been injured by a discriminatory housing practice.” That language, the Supreme Court has ruled, covers not only directly victimized minorities but also others who are injured by the ripple effects of housing discrimination — such as whites who lose the social and professional opportunities of an integrated neighborhood, and municipalities whose tax revenues are diminished when segregation drives down property values.
Relying on that language and those precedents, the City of Miami sued Wells Fargo and Bank of America, arguing that the city was injured by the widespread foreclosures that resulted from the banks’ predatory lending practices. As Miami explained, the foreclosures turned borrowers out of their homes and deprived Miami of tax revenue as property values plummeted, while forcing the city to spend more on municipal services to address neighborhood blight. Miami supplied extensive statistical data to support its allegations, along with statements by confidential witnesses that the banks had deliberately targeted black and Latino borrowers for predatory loans.
The banks, however, are asking the Supreme Court to dismiss Miami’s case, arguing that the FHA does not authorize this type of lawsuit. This may seem a flimsy argument, in light of the Supreme Court precedent that allows indirectly harmed collateral victims to enforce the Act — including cities that suffer diminished tax revenue. But the banks are counting on recent decisions, involving different statutes, which say that generally only plaintiffs within the “zone of interests” that a law is meant to protect should be allowed to sue. For example, the Court has suggested that if a company illegally fires a valuable officer for discriminatory reasons, shareholders shouldn’t be able to sue the company under the employment discrimination laws simply because their stock decreased in value. Notwithstanding those decisions, the banks are wrong for several reasons.
First, the FHA’s language, covering “any person” who claims to be “injured” by a discriminatory practice, is incredibly broad. When Congress adopted the FHA, it specifically defined who can sue in broad language to serve the Act’s ambitious goal of transforming the nation’s housing patterns through private enforcement. After all, individual home-seekers often lack the means to vindicate their own rights, and sometimes don’t even know that they have been victimized. Moreover, they have many other understandable reasons to forgo a lawsuit. Unlike individual home-seekers, cities are particularly well-positioned to take on big players like the banks, marshaling sophisticated evidence of illegality like Miami has furnished here.
Second, when Congress amended the FHA in 1988 to increase enforcement, it knew that the Supreme Court had allowed cities to sue for damages to their own finances, and legislators voiced their approval of that result by reaffirming the language previously interpreted by the Court. For the Court to change its mind now would thwart the lawmakers who relied on that settled interpretation.
Third, even under a narrow interpretation of the term “zone of interests,” cities like Miami are within the zone that the FHA is meant to protect. The blight resulting from segregation and discriminatory lending harms cities in many ways, including by discouraging investment, frustrating residents’ ability to find work, entrenching poverty, and damaging local schools. Congress first passed the Act largely to address the trauma afflicting the nation’s urban centers. Cities thus have a genuine interest in preventing housing discrimination.
As this election cycle has made clear, racial division remains a stark reality in our nation, and one culprit is the persistence of rampant segregation in housing. What the Court does in these cases could have significant consequences for the effective enforcement of the key law that was adopted to address that problem. To better deter unlawful discrimination and move toward a racially integrated society, the Court should allow these lawsuits to go forward.