Center for Responsible Lending Issues Public Comment on HUD Proposed Rule
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The
HUD's proposed revision of the 2015 AFFH rule is a complete renunciation of efforts to undo historic, government-sponsored patterns of housing discrimination and segregation. The revision would permit jurisdictions receiving HUD financial assistance and HUD itself to ignore the racial desegregation obligations under fair housing law. The proposed rule is patently inconsistent with the AFFH statutory mandate, includes misguided and ambiguous metrics, and erroneously equates a focus on increasing housing supply with fair housing.
I. A robust AFFH rule is important to help address the racial wealth gap.
Discrimination in our nation's lending and housing markets has a long and sordid history, driven by the federal government, state and local governments, private industry, and individual actors./1
The homeownership rate gap and wealth gap between whites and people of color is in large part due to historic federal housing policy choices. These policy choices deliberately excluded people of color from being able to build wealth through homeownership. Indeed, today's homeownership disparities can be traced back to New Deal housing programs that amounted to a "state-sponsored system of segregation."/2
From its inception in 1934, the
FHA relied upon color-coded metropolitan maps to indicate where it was considered "safe" to insure mortgages. These maps denoted "risky" areas in red--areas that included African-Americans or where African-Americans lived nearby./4
In FHA's 1936 Underwriting Manual, a multitude of provisions indicated that "inharmonious" racial groups should not live in the same communities./5
The manual also recommended that "natural and artificially-established barriers will prove effective in protecting a neighborhood and the locations within it from adverse influences."/6
FHA's redlining policies granted whites the ability to build wealth through homeownership while denying equal opportunities for families of color to build similar home equity over the same period.
As a result, whites amassed an economic advantage in the form of home equity that has been passed on to future generations through intergenerational wealth transfers. In 2016, the median white family had more than ten times the wealth of the median Black family./7
In fact, the racial wealth gap between Black and white families grew from about
The median white family gained significantly more wealth, with the median increasing by
The racial wealth gap contributes to the fact that in the 46 largest housing markets in the country, a median income Black household can only afford 25 percent of homes on the market last year in comparison to the 57 percent that a median income white household could afford./10
Today, disparities in homeownership are a key contributor to the ongoing racial wealth gap and home equity still plays a central role in shaping family wealth for the middle class. Furthermore, discrimination and segregation harm the entire national economy.
Jurisdictions have broad authority to make decisions affecting housing and urban development - decisions that impact peoples' ability to access fair, safe, and affordable housing. Jurisdictions' public policy tools can be used to achieve beneficial or nefarious ends. For example, historically, localities employed racially restrictive zoning requirements that combined economic and racial bigotry. In 1910,
Similar racial zoning policies spread throughout the country. After race-based zoning was struck down by the
This included policies such as exclusively requiring single-family homes in neighborhoods, minimum lot sizes, or minimum square footage requirements. Many of these zoning requirements exist to this day. The 2015 AFFH rule set out a process that helps jurisdictions exercise intentionality in identifying fair housing barriers and strive to rectify them.
There is an urgency to undo the unjust systems that local, state, and the federal government helped create. It is critical that jurisdictions robustly examine their policies and practices to ensure they are not perpetuating ongoing discrimination and segregation. In addition, they must use their authority and tools to dismantle the segregation that they helped form, or that remain as vestiges from their policies.
II. The proposed rule does not satisfy the section 3608 AFFH statutory mandate.
The Fair Housing Act includes a mandate to dismantle segregation, but the proposed rule creates a system where jurisdictions will inherently fall short of their AFFH statutory mandate. Section 3608 of the Act mandates that all executive departments and agencies - including HUD - administer their programs and activities relating to housing and urban development in a manner affirmatively to further the purposes of the Fair Housing Act./14
It also requires HUD specifically to administer federal housing funds to affirmatively further the purposes of the Act./15
The 2015 AFFH rule adhered to this statutory mandate, providing HUD program participants with a planning framework and data tools to enable them to take meaningful actions to overcome historic patterns of segregation and foster inclusive communities free from discrimination. The 2015 rule's Assessment of
HUD's proposed rule will dramatically weaken the federal government's ability to address a legacy of residential segregation that it helped to create.
Prior to enactment of the Fair Housing Act, numerous members of both the
Indeed, early court decisions on section 3608 confirmed that the provision was meant to push HUD and entities receiving HUD financial assistance to take action to dismantle segregation.
In Shannon v. HUD, the Third Circuit upheld a challenge to HUD's financial support of a public housing project in a community of color in
With respect to HUD's duties under section 3608, the court found that the provision is intended not only to promote nondiscrimination, but also to promote racial integration for the benefit of the entire community. Subsequent court decisions made similar determinations. In Otero v.
Moreover, in
And in 2007, in
Yet, the proposed rule disregards long-established legal precedent that defines the AFFH statutory mandate to require efforts that dismantle racial segregation in housing. Instead, the proposed rule sets out a process in which a jurisdiction may certify compliance with its AFFH obligation without considering or addressing issues of discrimination, segregation, or access to opportunity. Indeed, as part of the process proposed in the rule, HUD encourages jurisdictions to pick three goals from a list of 16 pre-approved goals. The proposal does not explain HUD's reasoning for requiring jurisdictions to choose three items to address and there is no guidance about how to demonstrate progress toward the goals during the program cycle. It is also unclear what HUD would consider to be acceptable progress. Moreover, none of the goals - except one regarding availability of accessible housing units - specifically relate to protected classes under the Fair Housing Act. This approach is a drastic departure from the 2015 AFFH rule, which created a data-driven approach that defined the AFFH process as a way to address disparities, integrate communities, eliminate concentrated areas of poverty, and encourage compliance with civil rights and fair housing laws.
Furthermore, the proposed rule's definition of AFFH is inconsistent with the law. The AFFH statutory mandate requires jurisdictions to consider how public and private barriers impact segregation. In that vein, the 2015 definition of AFFH required "meaningful actions" to address housing needs and replace "segregated living patterns with truly integrated and balanced living patterns, transforming racially and ethnically concentrated areas of poverty into areas of opportunity." The proposed rule completely redefines AFFH by focusing on reducing obstacles within program participants' "sphere of influence" to provide individuals and families' housing choice "within their means." As described above, the proposed rule does not require jurisdictions to consider the impact of discrimination and segregation on protected classes. Additionally, by focusing on obstacles within the "sphere of influence" and housing choice "within [families'] means," the proposal suggests that jurisdictions are constrained in their ability to address enduring issues of segregation and discrimination and need not make a durable effort. It is also a veiled attempt to reclassify the AFFH mandate as a class-based remedy rather than its intended goal as a solution for protected classes identified under the Fair Housing Act. While a protected class such as race is inextricably linked with a families' financial wellbeing, the Fair Housing Act was enacted to dismantle discrimination based on protected class status of race and the vestiges thereof.
III. The proposed rule utilizes flawed metrics.
To evaluate how jurisdictions are carrying out their AFFH obligation as a threshold matter, the proposal uses a series of data-based measures to determine whether a jurisdiction (1) is free of adjudicated fair housing claims; (2) has an adequate supply of affordable housing throughout the jurisdiction; and (3) has an adequate supply of quality affordable housing. Jurisdictions that score highly would be eligible for various incentives in HUD programs.
These methods of measurement are problematic in numerous ways. First, it is misguided to focus on a jurisdictions' "adjudicated fair housing claims," as this is not relevant to whether a jurisdiction has identified fair housing issues. Generally, there are very few adjudicated claims.
Public and private fair housing enforcement often result in settlements - avoiding any adverse court or administrative ruling for the jurisdiction.
Additionally, the proposal disregards the AFFH statutory mandate to foster racial integration. HUD proposes to rely on metrics that are unrelated to housing access for protected classes. As detailed in analysis from the
Expanding affordable housing without accounting for disparate treatment or disparate impact on protected classes "risks disproportionately benefiting historically advantaged groups and perpetuating patterns of disadvantage rather than correcting disparities caused by structural racism or discrimination."/24
Under the proposed rule, a jurisdiction engaging in the AFFH planning process would not be required to examine or address historic and ongoing patterns of discrimination, segregation, or disinvestment based on race or other protected classes. HUD's proposed approach flouts the very purpose of the Fair Housing Act.
IV. The proposed rule erroneously conflates fair housing and affordable housing.
The proposed rule operates under the false assumption that eliminating regulations will expand housing production and this increased supply will somehow solve the affordable housing crisis.
First, even if jurisdictions create more affordable housing, this does not improve fair housing concerns. As described in section II above, the AFFH provision in the Fair Housing Act requires jurisdictions to consider barriers that perpetuate discrimination and segregation. The proposed rule ignores a jurisdiction's policies and practices affecting people in protected classes. It also rejects any focus on overcoming historic patterns of housing segregation. Moreover, removing alleged regulatory barriers will not necessarily result in the construction of a significant amount of new housing or bring greater housing affordability. The affordable housing crisis is vast and multifaceted. It is driven by a shortage of affordable inventory, wages not keeping up with rising housing costs, exclusionary zoning, displacement, the racial wealth gap, lack of fair access to credit, and more. The crisis spans rural, urban, and suburban communities./25
And to the extent that there is increased housing development, it is unlikely to be affordable to low- and moderate-income people./26
Deregulation is not the antidote./27
Rather, the federal government must devote substantial resources to the affordable housing crisis - on both the rental and homeownership side of the equation.
Furthermore, HUD is reinventing the AFFH process to achieve deregulatory ends. As such, the proposed rule opens the door to attacks on important protections. The list of 16 pre-approved goals target rent control, "unduly burdensome wetland or environmental regulations," and "arbitrary or unnecessary labor requirements." HUD must not use the AFFH rule to undermine critical public health, environmental, labor, and tenant protections.
The proposed rule also disproportionately focuses on income to the exclusion of other barriers to fair housing, including those affecting middle- and upper-income members of protected classes. For example, evidence demonstrates that preceding the financial crisis, a large number of borrowers of color were targeted and steered into toxic mortgages even when they qualified for safer and more responsible loans with cheaper costs./28
Also, the recent
The three-year long investigation revealed widespread evidence of unequal treatment by real estate agents in
V. Conclusion
The proposed rule is not a fair housing rule. Rather, the proposed rule disregards established legal precedent and eliminates any meaningful implementation of the
Sincerely,
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Footnotes:
1/
2/
3/
4/ Three out of four neighborhoods marked "hazardous" by FHA 80 years ago are still struggling financially. See
5/
6/ Id.
7/
8/ Id.
9/ Id.
10/
11/
12/ Id. at 43-46.
13/ Id. at 50.
14/ 42 US.C. Sec. 3608(d).
15/ 42 US.C. Sec. 3608(e)(5).
16/ Government Accountability Office, HUD Needs to Enhance its Requirements and Oversight of Jurisdictions' Fair Housing Plans, GAO-10-905 (
17/ 114 Cong. Rec. 3422 (1968).
18/ 114 Cong. Rec. 9559, 9591, 2706 (1967).
19/ Shannon v.
20/ Otero v. Park City Hous. Auth., 484 F.2d 1122 (2d Cir. 1973).
21/
22/
23/
24/ Id.
25/ America's
26/
27/
28/
29/
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The proposed rule can be viewed at: https://www.regulations.gov/document?D=HUD-2020-0011-0001
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