In Ave. 6E Invs., LLC v. City of Yuma, decided last week, the Ninth Circuit considered whether a local government’s refusal to grant a rezoning request that would have allowed higher-density residential development violated the Fair Housing Act (FHA).  This case is one of the most significant cases since last summer’s Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project to address issues of disparate impact and discriminatory intent under the FHA.

The appeal was filed by two private developers known in the region for developing moderately-priced residential subdivisions.  The developers’ subdivisions had a reputation for attracting Hispanic residents.

The developers owned a 42-acre site located in the City of Yuma, Arizona, which they intended to develop for residential use.  In 2008, economic realities forced the developers to consider constructing a higher-density project, and the developers applied for a zoning change to reduce the permitted minimum lot size on the property from 8,000 to 6,000 square feet.  The requested rezoning was consistent with the City’s General Plan, and the City’s planning staff and Planning Commission recommended to the City Council that it be granted.  However, residents of neighboring subdivisions vehemently opposed the prospect of higher-density development, citing concerns that the type of people that a higher-density development would attract would result in more crimes and diminished property values. Following a public hearing, the City Council overrode the planning staff’s recommendation and denied the rezoning request.  This request was the only one of 76 applications considered by the City Council over the preceding three years that the City Council had rejected.

The developers filed suit, alleging that the City Council’s refusal to rezone the property violated the FHA because it constituted intentional discrimination on the basis of race, one of the seven protected classes under the FHA.  Specifically, the developers argued that the City had intentionally discriminated against Hispanics.  The developers contended in the alternative that even if the City did not intend to treat Hispanics in a discriminatory manner, the City nonetheless violated the FHA because the City’s rezoning denial had a discriminatory effect on Hispanics by disproportionately denying them access to affordable housing.  Because the decision had the effect of perpetuating segregation and was not otherwise justified by a legitimate rationale, the developers argued, the City Council was liable under the FHA.

On a motion to dismiss, the district court dismissed the developers’ disparate treatment claims, holding that the developers did not allege plausible claims for relief.  With respect to the disparate impact claims, the district court granted summary judgment in favor of the City.

On appeal, the Ninth Circuit reversed the dismissal of the disparate treatment claims.  Although the City Council itself had not, at least according to the court opinions, expressed any animus toward Hispanics in reaching its decision to deny the rezoning application, the Ninth Circuit nonetheless found it plausible that the City Council’s decision was motivated by discriminatory intent, sufficient to survive a motion to dismiss.  The City Council’s denial of the rezoning request in spite of the planning staff’s and Planning Commission’s recommendations to approve it, the racial undertones of the comments made at the public hearing and the fact that the City Council had not rejected any other applications in three years provided sufficient circumstantial evidence to suggest that the City Council had acted with discriminatory intent.

The Ninth Circuit also reversed the district court’s grant of summary judgment in favor of the City on the developers’ disparate impact claims.  Despite the fact that the denial was a one-time decision and not a course of action, the Ninth Circuit held that the City Council’s decision could have had a disparate impact given the known segregation patterns by race and class that existed within the City.  The City had completed two Analysis of Impediment documents as required in connection with the receipt of federal funds to accomplish fair housing objectives.  Because it had analyzed historical segregation patterns, the City could have recognized that by denying the rezoning request to permit higher-density development, the City was denying Hispanics an affordable opportunity to move into a predominantly White neighborhood.  In reversing, the Ninth Circuit expressly rejected the district court’s reasoning for granting summary judgment:  that similarly priced housing was available elsewhere in that part of the City, thereby precluding a finding of disparate impact.  The Ninth Circuit remanded to the district court to determine whether the City’s decision was justified by a non-discriminatory purpose.

The Ninth Circuit’s opinion provides a roadmap for developers who want to challenge a local government’s denial of a rezoning request on FHA grounds.  However, every rejection of a rezoning application related to higher-density housing may not trigger FHA liability.  The FHA only affords protection to seven enumerated protected classes.  Race is a protected class, but income is not one.  In order to fall under the protection of the FHA, a developer must show that the city’s decision impacts a protected class.  Furthermore, a local government may defend itself against FHA liability by citing a legitimate, non-discriminatory justification for its decision.

Brian Connolly, a land use attorney with Otten Johnson, also contributed to this post.