Research

Congress has acted, now the Trump administration and HUD must act to rescind the Affirmatively Furthering Fair Housing regulation

, Author

By Robert Romano

The omnibus spending bill signed into law by President Donald Trump in February prohibited the use of funds to a key aspect of the Obama era Department of Housing and Urban Development (HUD) regulation, Affirmatively Furthering Fair Housing. [1]

This was the rule enacted in 2015 that allowed HUD to order more than 1,200 cities and counties [2] that accepted any part of $3 billion of annual community development block grants [3] to rezone neighborhoods along income and racial criteria. This was always a vast overreach, where the federal government could come in and tell communities what must be built and where. Now, it’s over.

Under Division L, Title II of the Consolidated Appropriations Act of 2018, Section 234, it states, “None of the funds made available by this Act may be used by the Department of Housing and Urban Development to direct a grantee to undertake specific changes to existing zoning laws as part of carrying out the final rule entitled ‘Affirmatively Furthering Fair Housing’ … or the notice entitled ‘Affirmatively Furthering Fair Housing Assessment Tool’ …” [4]

This provision utterly guts the HUD regulation, which had already been delayed by HUD Secretary Ben Carson earlier this year until 2020. [5] He has already rescinded the Affirmatively Furthering Fair Housing Assessment Tool. [6] Now, with the backing of Congress, Carson needs to go the extra mile and either rescind this regulation completely, or revise it to comply with the new law.

Congress has spoken on this issue under its Article I power of the purse, and is now saying that the Fair Housing Act, community development block grants and this regulation can no longer be used to direct communities to undertake any changes to zoning. This is a game changer. But to be long-lasting, the Trump administration must now follow through and rescind the regulation and take advantage of the window of opportunity Congress has afforded.

Background

In 2015, the Department of Housing and Urban Development (HUD) finalized its “Affirmatively Furthering Fair Housing” rule that empowers the government to condition eligibility for community development block grants on redrawing zoning maps to achieve racial and income integration by building high density, low-income housing in middle-class neighborhoods. In 2016, HUD dispersed about $3.26 billion of these grants [7] to almost 1,200 municipalities. [8] To continue receiving those grants, zoning plans will now need federal approval that they met with the government’s new guidelines.

This was a tremendous power grab by HUD, in effect claiming authority over local zoning decisions in an effort to redraw every neighborhood in America — to advance an unachievable, utopian vision of forced community development by the least effective manner possible. In effect, an end to local government as we know it.

Remarkably, the government pretended in its rulemaking that “This rule does not impose any land use or zoning laws on any local government. Rather, the rule requires HUD program participants to perform an assessment of land use and zoning to evaluate their possible impact on fair housing choice.”

Yet later on, in the very same regulation it clearly states:

This final rule, and Assessment Tools and guidance to be issued, will assist recipients of Federal funding to use that funding and, if necessary, adjust their land use and zoning laws in accordance with their existing legal obligation to affirmatively further fair housing [emphasis added].”

This deception was not limited simply to the regulation. Former HUD Secretary Julian Castro, a former mayor of San Antonio, Texas, saying at a House Financial Services Committee hearing in 2015, “This is not about changing zoning laws, planning laws — anything like that.” [9] This was a lie.

Even as the Senate was voting in 2016 on an amendment to the Senate Transportation and HUD appropriations bill that would have blocked funds from being “used by the Department of Housing and Urban Development to direct a grantee to undertake specific changes to existing zoning laws as part of carrying out the final rule entitled ‘Affirmatively Furthering Fair Housing’ or the notice entitled ‘Affirmatively Furthering Fair Housing Assessment Tool,’” [10] senators openly discussed that the only reason for the amendment was to assuage critics of the regulation who were simply reading what it said.

Sen. Susan Collins (R-Maine), who sponsored the amendment, which passed 87 to 9, [11] told her Senate colleagues that the amendment was merely a “clarification.” She stated, “This amendment prohibits HUD from intervening in local zoning matters. This is an important clarification that should take away any fear that there is any possibility of using HUD funds authorized by this bill to intervene in local zoning decisions.” [12]

So, in Collins’ view, the vote was merely to address a fear and not the reality of HUD dictating zoning regulations even though the regulation calls on municipalities to “if necessary, adjust their land use and zoning laws…” This disconnection from reality has highlighted the debate itself. Fortunately, although Collins’ text is what became the prohibition on the use of funds that passed in 2018, it is the terms of the legislation itself that courts will review, and not her intent, which was simply ill-informed at best or purposefully misleading at worst.

Action was urgently needed to rein in not just regulation, but the law

As Westchester County Executive Bob Astorino can readily attest, this HUD regulation originated as a consent decree against Westchester County, N.Y. in 2009 requiring affordable housing units to be built in the county. The court ruling in a case brought by the Anti-Discrimination Center preceded any rulemaking from HUD, instead deriving its justification from the same sections of the U.S. code itself that the regulation does, including 42 U.S.C. 3608(e)(5),[13] 42 U.S.C. 5304,[14] 42 U.S.C. 12705(b),[15] and 42 U.S.C. 1437c-1.[16]

On April 10, 2017, Westchester County received another denial of its plan from the Trump administration’s HUD, “Westchester County Analysis of Impediments Supplement to Chapter 12- Zoning Analysis,” from HUD for alleged failure to comply with the 2009 settlement. A simple reading of HUD’s April 10 denial illustrates how Affirmatively Furthering Fair Housing is being implemented:

“Nearly half of the acreage in the Village is dedicated to ‘high-density single-family’ housing, while only 8% is dedicated to multifamily housing. Almost all of Larchmont- 90% of the Village’s acres- is zoned for single family residential use and has an African American population of less than 1%. This indicates that African American residents are barely represented while white residents are overwhelmingly represented. Yet, the County fails to analyze whether zoning is a factor.” [17]

The overreach evident in these broad statements should be self-evident. Here, HUD is stating that as a matter of law, all municipalities participating in HUD programs will be judged noncompliant based on whether local zoning results in desirable outcomes from HUD’s arbitrary perspective. Zoning plans can be rejected if neighborhoods appear to be “too white,” or “too black,” in HUD’s view. This is applying so-called disparate impact analysis to where every house will ultimately be built in America.

Misleading 14th Amendment “equal protection” claims must be resisted in this very sensitive area. The law already outlaws real housing discrimination, that is, refusing to sell a house or rent a room based on race when the person is able to pay.

A focus on outcomes pretends that the zoning scheme led to the so-called disparate impact, but this is a false narrative. Building nice, safe neighborhoods where those with the means can live is not discrimination. It may exclude those of certain income brackets, but that is not racist. Anyone regardless of race who has the money to afford the nice house gets to buy it. That is equal protection of the laws.

The challenge for Westchester is this: Because the 2009 settlement was based on implementation of the U.S. code, legal obligations by HUD participants to affirmatively further fair housing, it is clear that merely rescinding the regulation under the terms and conditions of the Administrative Procedures Act will do nothing to help out Westchester County.

Fortunately for Westchester, HUD under the Trump administration has now settled the case in July 2017. But to be fully relieved of future obligations under the regulation, it must be fully rescinded by HUD.

Legislative action superior to ending Affirmatively Furthering Fair Housing

The challenge with rescinding any rule, or any harmful regulation, for that matter, is that doing so under current Supreme Court precedent is harder than it sounds. In 1983, the Supreme Court unanimously decided in Motor Vehicle Manufacturers Association v. State Farm Mutual [18] that in rescinding any regulation, an agency is obligated to supply a reasoned analysis. While perhaps well-intentioned, in determining that the National Highway Traffic Safety Administration and thus every other agency had to provide a basis for rescinding any of its regulations — just as it must for issuing them — the outcome is that it is functionally more difficult to rescind an existing regulation than it is to either modify it or never have issued it in the first place.

This leaves every single regulatory rescission enacted via executive action under the APA subject to judicial review, where ultimately, the rescinding agency will have to argue not only that rescinding the regulation in question is rational based on the statutory scheme, but prove that enacting it was irrational to begin with. In the least, rescinding agencies must be prepared for that argument to come up in court, as surely it will. The problem with that proposition is that in the administrative state regulations almost always have some basis in law for being enacted. Affirmatively Furthering Fair Housing was no exception, as noted above.

Even when there is no basis in law, as in Massachusetts v. EPA [19] in 2007 when the Supreme Court ruled carbon dioxide could be regulated under the terms of the Clean Air Act even though the law never contemplated doing so, the courts have tended to uphold and expand the regulatory scheme of the administrative state.

This would have put the Trump administration in an uphill situation when it comes to relying solely on executive action and the regulatory process under the APA to rescind regulations. Ultimately, each and every case is subjected to heightened scrutiny, coming down to whether five justices agree that the regulation did or did not rationally rest in the statutory scheme in the first place or agree with the administration’s rational basis for rescinding the rule. And that may just come down to whether they like the regulation or not. It does not matter that the 1983 decision promised this would not mean regulations last forever, writing “we fully recognize that ‘[r]egulatory agencies do not establish rules of conduct to last forever,’” citing the 1967 case, American Trucking Assns., Inc. v. Atchison, T. & S. F. R. Co. [20]

The court added in the 1983 case, “the forces of change do not always or necessarily point in the direction of deregulation. In the abstract, there is no more reason to presume that changing circumstances require the rescission of prior action, instead of a revision in or even the extension of current regulation.”

The point is, the assumption in each of these cases would have been that the original regulation was properly enacted and was rationally based on the statutory scheme Congress enacted, and in rescinding the regulation it would have been up to the Trump administration to prove otherwise in court. That was a losing battle. Fortunately Congress acted, effectively changing the terms of the Fair Housing Act. It is a much better argument in court that the administration lacks funds to implement certain regulations because of steps Congress took via Article I to prohibit their implementation and so must be rescinded.

Current litigation and how the 2018 prohibition plays into it

On May 8, the National Fair Housing Alliance filed suit [21] in the U.S. District Court of the District of Columbia against the Department of Housing and Urban Development for delaying the 2015 Affirmatively Furthering Fair Housing regulation [22] until 2020 or later.

The lawsuit argues that HUD Secretary Ben Carson lacked authority to delay implementation of the rule when it was announced in Jan. 2018.

There’s only one problem. Even if that were true, since the announced delay, Congress has acted via the recent omnibus spending bill, which preempts everything HUD was doing on this regulation, especially in implementing it.

Under Division L, Title II of the Consolidated Appropriations Act of 2018, Section 234, it states, “None of the funds made available by this Act may be used by the Department of Housing and Urban Development to direct a grantee to undertake specific changes to existing zoning laws as part of carrying out the final rule entitled ‘Affirmatively Furthering Fair Housing’ … or the notice entitled ‘Affirmatively Furthering Fair Housing Assessment Tool’ …”

Yet the regulation still directs municipalities “to examine relevant factors, such as zoning and other land-use practices that are likely contributors to fair housing concerns, and take appropriate actions in response” [emphasis added] as a condition for receipt of the block grants.

Meaning, the regulation, as currently written, violates federal law. HUD could not implement it if it wanted to.

“The lawsuit is practically moot since it would be now be illegal for Carson to implement AFFH as currently written. In its present iteration, the HUD rule is illegal, since it still calls for changes to zoning,” Americans for Limited Government President Rick Manning noted in a statement in response to the suit.

Manning added, “HUD should move for immediate dismissal, as it is clear that Congress has preempted whatever vision of AFFH the Obama administration implemented.”

Even the National Fair Housing Alliance, acknowledges that the regulation has been used to address local zoning in its court filing, citing changes to zoning in Austin, Texas and Paramount, California.

The fact is, it will be very difficult for HUD to separate the regulation from its built-in mandate to address zoning issues. Here is what the regulation says about zoning:

  • “[Community Development Block Grant] [p]rogram participants will also assess whether laws, policies, or practices limit fair housing choice, as well as the role of public investments in creating, perpetuating, or alleviating the segregation patterns revealed by the assessment. Examples of such laws, policies, or practices include, but are not limited to, zoning, land use, financing, infrastructure planning, and transportation.” [emphasis added]
  • “Consistent with long-standing judicial guidance regarding AFFH, the proposed rule is designed so that program participants undertake a process that informs and engages the public and allows program participants to make educated judgments regarding the appropriate strategies and actions that are consistent with their obligations to affirmatively further fair housing. In doing so, it directs them to examine relevant factors, such as zoning and other land-use practices that are likely contributors to fair housing concerns, and take appropriate actions in response.” [emphasis added]
  • “Revising the [Assessment of Fair Housing] AFH (§ 5.164). New § 5.164 establishes the minimum criteria that will require a program participant to revise its AFH. Paragraph (a) of this section provides that if a program participant experiences a significant material change in circumstances that calls into question the continued validity of the AFH, then the program participant must revise its AFH…Paragraph (a)(1) provides examples of what a significant material change in circumstances may be, which would include… the jurisdiction has made significant policy changes, such as significant changes related to zoning, housing plans or policies, or development plans or policies…” [emphasis added]
  • “This rule is needed to facilitate efforts to overcome barriers to fair housing choice. There are many different types of impediments to fair housing choice, including building and zoning codes, processes for site selection for low-income housing, lack of public services in low-income areas, less favorable mortgage lending for minority borrowers, and lack of public awareness of rights and responsibilities associated with fair housing. Some of these impediments may prevent people from moving out of racially concentrated areas of poverty and neighborhoods that perpetuate disparities in access to community assets.”
  • On the impact of the regulation: “Finally, in terms of quantifying the effects of the proposed rule, there is uncertainty about the potential impacts of whichever policy is selected by a program participant. For example, inclusionary zoning policies—one potential action that jurisdictions might take in this context—have been implemented by a number of communities across the country, often for the purpose of advancing fair housing goals. Research assessing these efforts is mixed, with some studies suggesting they increase prices and decrease housing stock in the long run, some studies showing they have no effect, and other studies indicating they increase the supply of multifamily housing units. For this example, as well as the other policies program participants might consider in the course of their AFFH planning process, the impact will depend on a complex interaction of a broad set of judgments and decisions by the jurisdiction, other jurisdictions, private and non-profit actors, and families, both in protected classes and not. These can differ across regions and families in ways that are impossible to predict in advance. Accordingly, impacts will be revealed in the months and years following policy implementation.” [emphasis added]

Undoubtedly, the National Fair Housing Alliance will want to cite the 1968 Fair Housing Act as somehow providing a statutory obligation for making zoning changes, but they should beware. By explicitly taking action in the 2018 spending bill to prohibit the Affirmatively Furthering Fair Housing regulation from being used to make zoning changes, Congress has effectively changed whatever effect the Fair Housing Act might have had in this area.

If HUD were to continue implementing the regulation, particularly to make changes to local zoning, it would be doing so in violation of the law. If anything, the only case that should be brought to federal court is one overturning this regulation that still seeks to subvert local governments by usurping zoning authority in violation of federal law. But that would be unnecessary if HUD would just follow through and end the regulation.

Conclusion

Choosing where you want to live is not discrimination, and yet, the Obama administration, through its rule, was saying we have all apparently discriminated against ourselves by determining for ourselves where to buy or rent a home. Never mind that some houses cost more than others, that some neighborhoods have higher taxes, and that not everyone can afford to live in every community — not by design, but simply due to high demand for housing in certain areas. Neither the federal government nor local governments can possibly zone lower prices in a name-your-price system of constitutional property rights. As demand for homes rise, so too does the price. That may lead to certain outcomes, such as pricing particular income brackets out of purchasing homes in more expensive communities, but that is not discriminatory. Real estate markets are volatile, and home values are very much subject to economic conditions.

The fact is, people make individual decisions every day about which neighborhood they want to live in. Every American with access to sufficient credit and an income can already buy a home in any neighborhood they can afford. Yet HUD believes it can tell people where to live based on statistical social engineering. It will fail. And not because of discrimination.

Once nice neighborhoods can degrade. Or, a run-down neighborhood can be rebuilt and experience a renaissance. HUD cannot dictate these outcomes by requiring certain racial or income brackets to live in certain areas, any more than it can control the weather or when the next recession might occur, or when the factory down the road might close. The government could spend the next hundred years redrawing neighborhoods, and the department would find, upon periodic review, that some people had up and moved somewhere else, and that this affected the demographic makeup of those communities.

If Affirmatively Furthering Fair Housing is ever implemented, HUD would periodically and repeatedly find that, given the opportunity, peoples of certain shared ethnic and language backgrounds often chose to live together in the same neighborhoods. It would find that changing economic conditions regionally, and periodic national recessions, would affect the decisions of where people chose to live as employment opportunities shifted.

This is not about racial discrimination. Individual cases of housing discrimination are already illegal and have been for half a century.

Affirmatively Furthering Fair Housing and the federal lawsuit settlement in Westchester County were preliminary attempts by HUD to command the demographic makeup of neighborhoods. Yet the real estate market simply doesn’t work that way.

What HUD did may yet signal an end of local government and a futile attempt to impose racial and income utopian guidelines upon communities. Housing varies in price based on location, demand and thousand other economic and social factors that are constantly changing. Some homes are not affordable for most Americans. Some neighborhoods are nicer than others. Some Americans choose to live in neighborhoods based on shared ethnicity and culture.

It is not “fair,” but there is also nothing the federal government can do about it. It is simply a function of the individual liberty to make a living and live where you want within one’s means.

Now that Congress has acted, the Trump administration must follow through and do away with the regulation once and for all. But in the end, Congress still has more work to do. Not only the regulation, but the law itself must be ripped out by its roots. Right now, it is prohibited for the duration of the fiscal year. The regulation can be rescinded, but majorities change in Congress and the defund could lapse, meaning the next Democrat administration could just come back and issue the same regulation. The Fair Housing Act of 1968, specifically, its obligation on municipalities to “affirmatively further fair housing” is what Congress must ultimately repeal to prevent this from happening again.

Robert Romano is the Vice President of Public Policy at Americans for Limited Government.

[1] http://www.huduser.org/portal/sites/default/files/pdf/AFFH_Final_Rule.pdf

[2] https://www.onecpd.info/resource-library/cdbg-expenditure-reports

[3] https://www.hudexchange.info/onecpd/assets/File/CDBG_Expend_NatlAll.xlsx

[4] http://docs.house.gov/billsthisweek/20180319/BILLS-115SAHR1625-RCP115-66.pdf#page=1729

[5] https://www.federalregister.gov/documents/2018/01/05/2018-00106/affirmatively-furthering-fair-housing-extension-of-deadline-for-submission-of-assessment-of-fair

[6] https://www.hud.gov/press/press_releases_media_advisories/HUD_No_18_044

[7] https://www.hudexchange.info/onecpd/assets/File/CDBG_Expend_NatlAll.xlsx

[8] https://www.hudexchange.info/programs/cdbg/cdbg-expenditure-reports/

[9] http://www.c-span.org/video/?326516-1/secretary-julian-castro-testimony-hud-fiscal-year-2016-budget

[10] https://www.congress.gov/amendment/114th-congress/senate-amendment/3970/text

[11] http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=114&session=2&vote=00080

[12] http://www.washingtonexaminer.com/senate-blocks-mike-lee-effort-to-fight-obamas-housing-rule/article/2591794

[13] http://api.fdsys.gov/link?collection=uscode&title=42&year=mostrecent&section=3608&type=usc&link-type=html

[14] http://api.fdsys.gov/link?collection=uscode&title=42&year=mostrecent&section=5304&type=usc&link-type=html

[15] http://api.fdsys.gov/link?collection=uscode&title=42&year=mostrecent&section=12705&type=usc&link-type=html

[16] http://www.law.cornell.edu/uscode/text/42/1437c-1

[17] https://assets.documentcloud.org/documents/3673178/2017-04-10-Letter-to-K-Plunkett-Re-AI-Supplement.pdf

[18] http://caselaw.findlaw.com/us-supreme-court/463/29.html

[19] http://caselaw.findlaw.com/us-supreme-court/549/497.html

[20] http://caselaw.findlaw.com/us-supreme-court/387/397.html

[21] http://nationalfairhousing.org/wp-content/uploads/2018/05/Filed-complaint-1.pdf

[22] https://www.federalregister.gov/documents/2018/01/05/2018-00106/affirmatively-furthering-fair-housing-extension-of-deadline-for-submission-of-assessment-of-fair