In a surprising move in early February, the city of St. Paul, Minn., withdrew its petition to the Supreme Court to hear a housing discrimination case that would have determined whether disparate impact analysis is recognized under the Fair Housing Act.

Oral arguments in Magner v. Gallagher were scheduled to begin February 29, 2012, but according to a statement released by the city of St. Paul, the city had second thoughts about pursuing the case given the potential for unintended consequences of a decision in its favor. Specifically, the city was concerned about a ruling undermining important civil rights enforcement.

Political pressure may also have been a factor in the decision, as Department of Justice (DOJ) and other Administration officials urged the city to withdraw the case. The case will now go back to federal court; a trial is expected in the spring. The city said it was confident it will be successful in its efforts to enforce housing codes to protect poor people from substandard living conditions.

The case began when group of rental property owners in St. Paul sued the city, claiming that aggressive enforcement of the city’s housing code had a disparate impact on the availability of housing for racial minorities. The trial judge dismissed the case on summary judgment, concluding there was insufficient evidence of disparate impact. On appeal, the 8^th U.S. Circuit Court of Appeals reversed this decision, and the city petitioned the Supreme Court to review the case. In November 2011, the Supreme Court granted certiorari.

Housing providers, lenders and local municipalities had been keeping a close watch on the case because of the business implications. Apartment firms have successfully used the disparate impact argument to fight against zoning policies that restrict new affordable housing. Firms argued that such policies discriminate by denying housing to protected classes who would be largely served by the housing.

However, the city of St. Paul’s decision to withdraw its case has subsequently increased the profile of a HUD proposal that would set uniform standards for determining when a housing policy with a discriminatory effect violates the Fair Housing Act. For more on HUD’s proposal, as well as NMHC/NAA comments on it, visit www.nmhc.org/goto/6417.