In a ground-breaking decision, the Supreme Court opened the door for cities and municipalities to sue big banks for what the Washington Post describes as “allegedly discriminatory lending practices that they say led to urban blight.”
The past standard has allowed only individuals to sue through through the Fair Housing Act, but a 5-3 majority agreed that cities can also bring suit under the FHA.
Justice Stephen G. Breyer wrote the majority opinion, which did set the bar high for bringing suit, making it clear that cities must prove “some direct relationship between the injury asserted and the injurious conduct alleged.”
This is a huge decision for cities with communities that suffered huge damages due to the predatory and discriminatory practices of big banks that led to the housing bubble, and the eventual collapse of that the housing market.
According to The Washington Post: “Miami and other cities had pursued what had been described as a novel approach under the FHA to recover what they lost in tax revenue and the demand for increased services as a result of the housing collapse. Banks have been sued by individuals and taken to task by the federal government for lending practices, but these new cases are the first in which cities are the plaintiffs and are demanding that banks be held accountable for harming their communities.”
Breyer’s opinion explains that these “predatory lending practices” in minority-specific neighborhoods “led to a ‘concentration’ of ‘foreclosures and vacancies. in those neighborhoods.
Those concentrated ‘foreclosures and vacancies’ caused ‘stagnation and decline in African American and Latino neighborhoods.’ They hindered the city’s efforts to create integrated, stable neighborhoods.
And, highly relevant here, they reduced property values, diminishing the city’s property tax revenue and increasing demand for municipal services.”