9th Circuit Court of Appeals Finds the Existence of Similarly-Priced and Similarly-Modeled Housing Available Elsewhere in City Did Not Necessarily Preclude Developers’ Disparate Impact Claim Under FHA

Plaintiffs, Avenue 6E Investments, LLC and Saguaro Desert Land, Inc. were business entities owned by members of the Hall family, who developed housing in Yuma, Arizona. These developers brought an action against the City of Yuma, asserting § 1983 claim for equal protection violation and claims under Fair Housing Act (FHA), based on contentions that city’s refusal to rezone land to permit higher-density development stemmed from disparate treatment of Hispanics and created disparate impact. After the equal protection and FHA disparate treatment claims were dismissed for failure to state a claim, the United States District Court for Arizona granted summary judgment to city on developers’ FHA disparate impact claim.

Developers alleged in their disparate-treatment claims under the FHA and the Equal Protection Clause, that the City refused their request to rezone the Property because of discrimination or animus against Hispanics. The court found that the second amended complaint contained sufficient allegations that the City’s decision was driven by animus to state a plausible claim for relief. Here, Developers alleged that their reputation as developers of subdivisions favored by Hispanics, and the general demographic trends suggesting that the higher-density development they proposed would attract a greater number of Hispanic homebuyers, were known prior to the denial of their application. Moreover, the R–1–6 zoning sought by Developers was entirely consistent with the City’s General Plan. Additionally, construing the allegations in the complaint in favor of plaintiffs as well as drawing all inferences in their favor, the alleged statements by the neighborhood opposition submitted to city officials contained such code words consisting of stereotypes of Hispanics that would be well-understood in Yuma. The court therefore found plausible circumstantial evidence that community opposition to Developers’ proposed development was motivated in part by animus, and that the City Council was fully aware of these concerns when it took the highly unusual step of acceding to the opposition and overruling the recommendations of its zoning commission and planning staff.

Furthermore, in denying the rezoning, the City Council’s decision ran contrary to the unanimous recommendation provided by the City’s Planning and Zoning Commission, as well as the recommendation of City planning staff. The court noted that the city’s decision to disregard the zoning advice of its own experts provided evidence of discriminatory intent, particularly when that recommendation was consonant with the municipality’s general zoning requirements and plaintiffs proffered additional evidence of animus. Lastly, the court found that Developers did not need to demonstrate a complete absence of desired housing for Hispanics to prevail; discriminatory zoning practices violate the FHA even if they only “contribute to making unavailable or denying housing to protected individuals”. Thus, the court held that the City could not defeat a showing of disparate impact on a minority group by simply stating that other similarly-priced and similarly-modelled housing was available in the general area.

Accordingly, the court reversed the district court’s dismissal of the Developers’ disparate-treatment claims under the FHA and the Equal Protection Clause and the granting of the City’s first summary judgment motion on the disparate-impact claim.

Avenue 6E Investments, LLC v City of Yuma, 2016 WL 1169080 (9th Cir. CA 3/25/2016)