Disparate impact lacks an impact: the need for Pay for Success programs to house formerly incarcerated people.

• Author: Schneider, Eva Coruzzi
• Position: Special Issue on Affordable Housing

"As a society, our decision to heap shame and contempt upon those who struggle and fail in a system designed to keep them locked up and locked out says far more about ourselves than it does about them." (**)

TABLE OF CONTENTS Introduction 530 I. Background 535 A. Incarceration, Segregation, and Poverty Today 540 B. The Importance of Reducing Recidivism 541 C. The Intersection of Homelessness and Incarceration 542 D. Forms of Housing Discrimination Formerly Incarcerated People Face 544 E. HUD Guidance and the Fair Housing Act: The Litigation Regime 547 F. State Action to Address Discrimination in Criminal History Screening 552 II. Frameworks for Addressing Housing Issues Faced by Formerly Incarcerated People 554 A. The Disparate Impact Fix: The Current Model Does Not Adequately Address Problems Faced by Formerly Incarcerated People 554 B. The Equal Protection Fix : Making Formerly Incarcerated People a Protected Class 560 1. The Case for Making Formerly Incarcerated People a Protected Class 560 2. Creating a Protected Class Will Not Adequately Address the Access to Housing and Housing Discrimination Problems Faced by Formerly Incarcerated People 562 C. The Local Fix: The Case for Pay for Success Implementation in States and Municipalities 564 1. The Structure of Pay for Succ ess 566 2. The Benefits of Pay for Success 567 3. The Risks of Pay for Succ ess 570 4. Federal and State Support for Pay for Succ ess 574 5. New York' s Recidi vism Pay for Succ ess Program and Massachusetts ' Homele ssness Pay for Succ ess Program 576 6. Proven Models: Non-Profits that Address Housing Issues of Formerly Incarcerated People in New York 579 III. Recommendations for the Future: State and Local Government Implementation of Pay for Success Programs for Formerly Inc arcerated People 581 Conclusion 584 INTRODUCTION

The United States is home to less than five percent of the world's total population, yet houses nearly twenty-five percent of the world's prison population. (1) Almost one-third of Americans have a criminal record. (2) For the past twelve years, an average of 650,000 people have been released annually from federal and state prisons. (3) Over ninety-five percent of people currently incarcerated in state prisons will be released at some point in the future. (4) Where will they live?

This issue has especially impacted Black communities throughout the United States. Indeed, Black Americans are vastly overrepresented in the American prison system: 1 million of the 2.3 million people currently incarcerated are Black Americans. (5) Statistically, Black Americans make up 13.3 percent of the total population of the United States yet comprise 37.8 percent of the federal incarcerated population. (6) In other words, Black Americans are incarcerated at "nearly three times their proportion of the general population." (7)

For many formerly incarcerated people, the pathway to reentering society is fraught with obstacles. One substantial barrier is obtaining access to safe, secure, and affordable housing--an integral step for successful reentry. (8) This is particularly true for formerly incarcerated people of color. Historically, the federal government supported state-sanctioned segregation and created stringent policies to keep formerly incarcerated people of color out of white neighborhoods and public housing. (9) However, under the Obama Administration, the federal government generated regulations and guidance under the Fair Housing Act ("FHA") to combat housing discrimination that formerly incarcerated people face.

The FHA prohibits discrimination in housing based on "race, color, religion, sex, familial status, or national origin." (10) In 2013, the Department of Housing and Urban Development ("HUD") issued a regulation that formalized a three-part burden-shifting test (11) to prove disparate impact liability under the FHA. (12) Under this regulation, a practice has a discriminatory effect if it actually, or predictably, will result in a disparate impact on a protected group. (13) In 2015, the Supreme Court recognized the disparate impact liability theory based on its interpretation of the FHA in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (14) However, the Court limited the application of disparate impact claims brought under the FHA by enacting certain "safeguards" that apply at the pleadings stage, making establishing a prima facie case more challenging. (15) Also in 2015, HUD issued guidance to Public Housing Authorities ("PHAs") and owners of federally assisted housing, prohibiting the use of arrest records as a basis for denying admission, terminating assistance, or evicting tenants from federally subsidized housing. (16) In 2016, HUD issued further guidance to detail how the disparate impact test applied to formerly incarcerated people. (17) HUD recognized that having a criminal record is not a protected characteristic under the FHA, but that criminal record barriers to housing disproportionately affect racial and ethnic minorities. (18) According to this guidance, an individual who is discriminated against on the basis of her past criminal conviction may bring a disparate impact claim against a housing provider (19) if she can prove "that the [housing provider's] policy results in a disparate impact on a group of persons because of their race or national origin." (20) This guidance does not detail the limitations established by the Court in Texas v. Inclusive Communities. (21) As a result, the more plaintiff-friendly HUD guidance and regulations and the more defendant-friendly 2015 decision by the Court are in tension and may result in conflicting outcomes in the future. (22)

This Note argues that disparate impact litigation alone is insufficient to provide formerly incarcerated people access to safe, affordable, and stable housing. Even with the HUD regulations and guidance and the Court's recent recognition of the disparate impact theory under the FHA, the current litigation model is ineffective for four reasons. First, over the past forty years, plaintiffs have experienced limited success litigating disparate impact claims. Second, the more stringent pleading requirements (or "safeguards") outlined in Texas v. Inclusive Communities will only make it more challenging for plaintiffs to initiate successful disparate impact claims. Third, litigation is a slow, time-consuming, and expensive process that can impede disadvantaged individuals from bringing claims. Lastly, the most recent appointment on the Supreme Court, the single party dominance of the executive and legislative branches, and the appointment of Ben Carson as HUD Secretary (23) will likely undercut the efficacy of disparate impact litigation over the coming years. Ultimately, litigation alone is ill-equipped to accommodate the large volume of housing discrimination that occurs every year.

This Note examines two potential solutions to supplement the current disparate impact litigation regime. First, this Note explores giving formerly incarcerated people protected class status. Protected class status would allow plaintiffs to pursue FHA claims under the disparate treatment theory. (24) Plaintiffs would be able to challenge housing policies that facially discriminate against those who have criminal records. (25) However, several hurdles would have to be overcome to pursue this approach, and the recourse afforded--litigation--still falls short of a solution to the problem. At the outset, whether formerly incarcerated people meet the legal criteria for protected class status is debatable. Moreover, like disparate impact, disparate treatment is often hard to prove (26) and is still rooted in the litigation regime, thus subject to the aforementioned problems. This Note concludes that the feasibility of a protected class designation is questionable.

As a second solution, this Note explores the adoption of the Pay for Success ("PFS") model in conjunction with the use of Social Impact Bonds ("SIBs") to operate outside the litigation framework by funding housing programs for formerly incarcerated people. The PFS model is a private-public partnership for the achievement of a social good. (27) Under the PFS model, partnerships can be forged with non-profits or other service providers whose programs have been shown to achieve successful outcomes ("proven models" or "proven programs") to expand the reach of their services to larger populations. (28) Thus, proven models can be scaled up to effectively provide safe, stable, and affordable housing to more formerly incarcerated people. This Note concludes that this solution, if implemented responsibly, is a more viable remedy that supplements the current litigation model and avoids the problems surrounding the disparate impact test.

Part I of this Note examines the history of mass incarceration and housing segregation in the United States that led to the current intersection of poverty, imprisonment, segregation, and homelessness. It describes the types of discrimination formerly incarcerated people face, reviews recent state action regarding criminal history screening, and explains the current FHA disparate impact litigation regime. Part II identifies the inadequacies of the current disparate impact litigation regime by analyzing the effect Texas v. Inclusive Communities will have, and discusses current disparate impact litigation cases at bar. It also explores the benefits and detriments of two potential solutions: (1) the creation of a protected class of formerly incarcerated persons and (2) the PFS model. Part III concludes that the PFS model is a unique solution that state and local governments should implement to help formerly incarcerated people secure safe, stable, and affordable housing. By expanding proven housing programs and allocating state funds based on the specific housing needs of formerly incarcerated persons, states can effectively reduce...