Caseflicks

Court of Appeals for the Second Circuit • 1988

United States v. Starrett City Associates, Starrett City, Inc., Delmar Management Company

840 F.2d 1096 | 1988 U.S. App. LEXIS 2776

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Takeaway

In short, this case holds that the Fair Housing Act forbids an indefinite racial quota system that limits minority access to housing, even when the landlord says the system is needed to preserve racial integration.

Background

Starrett City was a privately owned, federally subsidized Brooklyn apartment complex with 5,881 units. Its developers had obtained governmental approval and financial support partly by assuring officials that the project would be racially integrated. To preserve a targeted racial distribution—roughly 64% white, 22% Black, and 8% Hispanic—Starrett required applicants to disclose their race or national origin and maintained separate applicant files by racial group, apartment size, and income level.

When a unit opened, Starrett generally selected an applicant of the same race or national origin as the departing tenant. It used these racial ceilings because it believed that admitting minorities beyond specified levels would trigger “white flight” and eventually transform the development into a predominantly minority community. The policy caused qualified Black and Hispanic applicants to wait far longer than similarly situated white applicants; minorities were also told that no units were available when units were being held for white applicants.

A prior class action by Black applicants, Arthur v. Starrett City Associates, ended in a consent decree under which Starrett agreed to make additional units available to minority applicants. The decree expressly left unresolved the legality of Starrett's overall quota system. The United States then brought this Fair Housing Act action, alleging violations of 42 U.S.C. § 3604(a)–(d).

On cross-motions for summary judgment, the district court ruled for the government. It held that Starrett's undisputed racial allocation practices denied minorities housing opportunities, imposed longer waits on them, and falsely represented that apartments were unavailable. The court permanently enjoined racial discrimination and required Starrett to adopt objective, uniform, nondiscriminatory tenant-selection standards. Starrett appealed.

Issues

Issue #1

Whether Starrett's use of race-based tenant-selection procedures, which reserved available apartments for white applicants and delayed minority applicants in order to maintain a fixed racial balance, violated the Fair Housing Act.

Holding

Yes. The procedures violated § 3604(a)–(d) because they made housing unavailable to minority applicants, imposed discriminatory rental conditions, expressed racial preferences, and misrepresented availability on the basis of race or national origin.

Reasoning

The Fair Housing Act prohibits refusing to rent or make housing available because of race or national origin, imposing discriminatory rental terms or conditions, expressing racial preferences or limitations, and falsely stating that a dwelling is unavailable when it is available. The Act reaches both intentional discrimination and practices with discriminatory effects on housing opportunities.

Starrett did not dispute the material facts showing disparate treatment. Its active applicant file was predominantly Black and Hispanic, but white applicants occupied a substantially greater share of apartments than their share of the file would predict. Minority applicants waited as much as ten times longer than the average white applicant, and Starrett withheld units from qualified minority applicants so that those units could instead be offered to whites.

The discriminatory effect was direct rather than incidental: an otherwise eligible minority applicant was denied access to an available apartment solely because of race. That practice fell squarely within the statutory prohibitions, regardless of whether Starrett acted with racial animus.

Issue #2

Whether the goal of preserving an integrated housing development, and Starrett's asserted concern that increased minority occupancy would cause white flight, justified its continuing use of rigid racial ceilings that restricted minority access to apartments.

Holding

No. Title VIII does not permit rigid racial quotas of indefinite duration that preserve a fixed level of integration by limiting minority access to otherwise available housing.

Reasoning

The court accepted that the Fair Housing Act advances both antidiscrimination and integration goals, but concluded that Congress treated antidiscrimination as the means by which integration would be achieved. Where those aims conflicted, the Act's broad prohibition on race-based denials of housing could not be displaced by Starrett's effort to preserve a particular racial composition.

Looking to analogous affirmative-action decisions under equal-protection principles and Title VII, the court identified limits on permissible race-conscious measures. Such measures ordinarily must be temporary, tied to a defined remedial goal, supported by a history of discrimination or imbalance within the relevant institution, and designed to expand minority access rather than cap it.

Starrett's plan lacked each of those features. It had already operated for a decade, had no ascertainable endpoint because its purpose was the ongoing maintenance of a racial balance, and was not intended to remedy discrimination against white tenants or any prior imbalance within Starrett City. Most importantly, it was a ceiling quota: it burdened the minority applicants whom the Fair Housing Act was designed to protect by restricting their access to scarce, desirable apartments.

White flight could be a relevant factual consideration in an integration analysis, but it could not justify an inflexible and indefinite quota system that withheld apartments from minorities because of their race. The uncertainty of any predicted tipping point further underscored the impermissibility of basing continuing racial exclusions on that prediction.

Issue #3

Whether Otero v. New York City Housing Authority authorized Starrett's race-conscious tenanting system as an effort to maintain integration.

Holding

No. Otero did not authorize Starrett's long-term quota system, even assuming Starrett could be regarded as a state actor with an affirmative duty to promote integration.

Reasoning

The court found it unnecessary to decide whether Starrett was a state actor. Even if it had governmental authority and an affirmative duty to foster integrated housing, its particular use of racial ceilings still violated the Fair Housing Act.

Otero concerned a one-time initial rent-up of a new public-housing project in exceptional circumstances. The housing authority temporarily departed from a relocation priority to avoid the immediate creation of a predominantly minority “pocket ghetto” in a neighborhood already experiencing substantial white population loss.

Unlike Starrett's system, the policy in Otero was not an ongoing program for maintaining specified racial percentages, did not operate as a strict racial quota, and had a much less burdensome effect on minority applicants. Otero also expressly recognized the danger that race-conscious tenanting could become unlawful racial discrimination or unchecked social engineering.

Accordingly, Otero did not establish that a private landlord may indefinitely reserve apartments for whites and impose racial ceilings on minorities to maintain a preferred racial balance.

Dissents

Judge Newman

Reasoning

Judge Newman viewed the case through the Fair Housing Act's central purpose: ending segregated housing and promoting genuinely integrated communities. Although Starrett's policy literally fell within the Act's language, he concluded that the statute should not be read mechanically to prohibit a private owner from maintaining one of the nation's most successful integrated housing developments. In his view, applying the Act to dismantle integration would contradict, rather than advance, Congress's purpose.

He read the legislative history as directed at discrimination that perpetuates separation of racial groups, especially exclusion of Black residents from white housing. Nothing in that history, he argued, suggested that Congress meant to bar a race-conscious effort to preserve a community in which Black, Hispanic, and white residents lived together.

Judge Newman considered Otero controlling in principle. Otero held that the Fair Housing Act did not automatically invalidate a race-conscious rental decision intended to prevent segregation, even though the decision disadvantaged some minority applicants. He rejected the majority's distinction between Otero's limited duration and Starrett's continuing policy, reasoning that the statutory text did not make legality turn on how long an integration-preserving policy lasted.

At minimum, Judge Newman believed Starrett was entitled to a trial rather than summary judgment. Starrett had submitted substantial expert evidence that eliminating its racial balancing procedures would cause the complex to pass a tipping point and become segregated, while the government disputed that prediction. He would have allowed Starrett to prove that its policy remained necessary to preserve integration.

In Judge Newman's view, the difficult policy choice between equal immediate access for minority applicants and preservation of an integrated community should be left to private property owners unless Congress or the New York Legislature expressly prohibited such integration-maintenance policies. He warned that the court's ruling could destroy a model integrated community without any clear congressional command to do so.