Excerpted From: Allison Roy Kawachi, Municipal Fair Housing Act Litigation and Reparations, 69 UCLA Law Review 1322 (January, 2023) (349 Footnotes) (Full Document)


AllisonRoyKawachiIn the early days of the Great Recession, many Americans blamed the global financial crisis on irresponsible borrowing. President Barack Obama employed this narrative--that the Great Recession was a failure of personal responsibility--in 2009 when he said, “Many Americans bought homes and borrowed money without being adequately informed of the terms, and often without accepting the responsibilities.” This narrative has gradually changed in recent years, however, as scholars have shifted the blame for the Great Recession from irresponsible borrowing to irresponsible lending. As more information about racially discriminatory and predatory mortgage lending has emerged, some have argued that subprime lending constituted a vastly underappreciated civil rights crisis.

The Great Recession and the subprime lending that fueled it had an outsized impact on Black communities, many of which have yet to fully recover. Disproportionate rates of foreclosures in majority Black neighborhoods erased decades of progress towards closing the racial wealth gap. In 2018-- ten years after the 2008 financial crisis began--Black homeownership rates were at the same low as they were in 1968 when the Fair Housing Act (FHA) was passed. Despite the staggering amount of wealth lost because of subprime lending, there is no clear path forward towards reparative justice. The federal government implemented programs designed to provide relief to homeowners facing foreclosure, but these programs have largely failed.

While some advocates have suggested that payments of cash reparations could play a role in helping Black communities recover from losses inflicted through subprime lending, designed specifically to address discriminatory subprime lending have yet to gain national traction. But as public awareness of systemic racism grows, so too does the conversation regarding reparations for slavery and its ensuing harms, including state-sanctioned housing segregation and discriminatory lending that has inhibited the accumulation of Black wealth for more than a century.

This Comment argues that a recent vein of litigation involving the FHA should be considered a promising type of reparations litigation, one uniquely positioned to achieve reparative ends that other types of this litigation have failed to accomplish. The FHA litigation involves more than a dozen local governments that have filed complaints against mortgage lenders. These municipal plaintiffs allege that lending institutions engaged in racially discriminatory lending practices prohibited by the FHA, which resulted in an unprecedented number of foreclosures in majority Black and Latinx neighborhoods. These foreclosures dramatically reduced home values in these communities, causing the plaintiffs to suffer significant losses in property tax revenues. While not all litigation alleging racial discrimination holds the potential to offer reparations, the FHA litigation is unique because it recognizes sweeping injuries to entire communities, thereby paving the way for a remedial response to group-based harm and systemic racial injustice.

The Eleventh and Ninth Circuits have come to different conclusions about this litigation, with each court endorsing a different standard of pleading proximate cause. The ultimate viability of this litigation depends on which standard prevails. Before this municipal FHA litigation develops further, understanding this line of cases within the context of reparations and racial justice is of critical importance.

An all-encompassing reparations remedy faces significant logistical and political challenges. This Comment proposes that FHA suits brought by local governments are small contributions to an immensely complicated issue and preserves optimism that a comprehensive reparations scheme for slavery, JimCrow, and systemic racism can at long last be instituted at some point in the future.

Part I of this Comment provides a broad overview of reparations. Here, I argue that litigation can play a key role in achieving reparations' main objectives-- notwithstanding the significant doctrinal hurdles of finding a viable cause of action, standing, causation, and statutes of limitations that advocates must overcome. In Part II, I analyze the recent FHA litigation and its successes and failures obtaining damages for decreased tax revenues and increased municipal expenditures resulting from discriminatory practices like redlining, reverse redlining, and equity stripping. After providing an overview of this litigation, I analyze the FHA litigation's doctrinal strengths and in particular, its ability to overcome the doctrinal pitfalls of reparations litigation identified in Part I.

Finally, Part III makes a case for why this vein of FHA litigation may rightfully be considered reparations litigation. Here, I examine municipal FHA litigation's ability to address harms to communities deeply rooted in historic wrongs and offer flexible, reparative remedies. Part III ends with an evaluation of the promises and perils of this litigation's overall impact on achieving reparations.

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Despite an extensive history of racial subordination, American efforts to redress injuries stemming from its historical injustices have been largely absent. This is particularly true of harms related to slavery, JimCrow, and extensive systemic racism that affects BlackAmericans. Unsurprisingly, without a formal acknowledgment of these harms, the vestiges of historical injustices continue to haunt the present. As the subprime lending crisis illustrates, an unwillingness to acknowledge past injuries related to housing segregation and discriminatory mortgage lending has given rise to new forms of systemic racism that have stripped away billions of dollars of Black wealth. Through municipal FHA litigation, local governments have uncovered a promising avenue for reparations-like remedies. Although much of reparations litigation has faced significant doctrinal barriers, the FHA litigation can both overcome these barriers and fulfill some of the key goals of reparations.

State and local governments should continue to pursue this line of litigation. Because the fate of many of these cases remains uncertain, legislators can also act to preserve this cause of action and clarify the causation standard. Most importantly, courts considering these FHA claims should view them in their historical contexts, understanding that litigation likely remains the foremost avenue for achieving any semblance of reparations without significant political will.

J.D. 2022, University of California Los Angeles, School of Law.