In Aids Healthcare Foundation v. City of Los Angeles (CH Palladium, LLC), published June 15, 2020, the Second District Court of Appeal, Division 3 affirmed dismissal, after demurrer, of a suit against the defendant city for allegedly violating the federal Fair Housing Act and the state Fair Employment and Housing Act. The plaintiff alleged that the city's approval four separate multi-use housing projects within a one-mile radius in Hollywood would have a disparate impact on minority residents of the area by causing housing prices in the area to rise to the point where existing residents would no longer be able to afford to live there.
The appellate court ruled that the complaint failed to state a cause of action based on a disparate impact theory of liability. The theory requires that a city policy be an artificial, arbitrary, and unnecessary barrier to fair housing. The approvals create housing. That alone is not an absolute shield from disparate-impact liability. But the policies also do not prohibit the construction of affordable housing, and do not physically remove affordable housing to make way for more expensive housing or other uses. All of the housing projects included low-income housing. Three of the projects would not displace any existing housing. The fourth would involve demolishing 84 rent-stabilized units, but would replace them with 105 units restricted for very-low-income households. Forty of the units will be reserved for former tenants of the demolished building. Although gentrification might cause owners of existing housing to raise their prices, that would be the act of third parties, rather than the city. The FHA and FEHA cannot be used to force housing authorities to reorder their priorities. That is what the suit attempted to force the city to do. Because the plaintiff failed to show how the complaint could be cured by additional specific factual allegations, the trial court acted within its discretion in sustaining the demurrer without leave to amend.