The Hill: The federal government wants to micromanage the nation’s housing

April 03, 2023 | By ETHAN BLEVINS

In the early 2000s, the city of St. Paul, Minn., cracked down on landlords who ignored rat problems, bad sanitation, poor heating, and so on. But instead of shaping up, the landlords sued the city for violating the federal Fair Housing Act. They argued that St. Paul’s insistence upon habitable homes hurt minorities by forcing the landlords to raise the rent. A federal court of appeals let the lawsuit go forward — holding that killing rats and fixing toilets could indeed violate the law if it somehow unintentionally displaced minorities.

When a similar case reached the Supreme Court, Justice Samuel Alito quipped, “Something has gone badly awry when a city can’t even make slumlords kill rats without fear of a lawsuit.” Now the Department of Housing and Urban Development (HUD) — the federal agency that enforces the Fair Housing Act — has proposed policies that will make it even harder for cities to kill rats or do much else without the federal government’s blessing.

HUD has embraced a flawed approach to preventing discrimination called “disparate impact.” When a landlord rejects an applicant because of their race, we call that “disparate treatment,” which the Fair Housing Act forbids. But HUD has decided the law also prohibits “disparate impact,” where an action or policy might unintentionally harm a minority. This shifts the emphasis of anti-discrimination laws from protecting individuals to protecting groups, which tends to justify bloated and counterproductive regulations.

For example, a low-income housing project in the Dallas inner city was said to cause a disparate impact. Why? Because placing low-income housing in the inner city rather than in suburbs perpetuated segregation. Ironically, other housing advocates in the lawsuit made the opposite argument, that subsidizing affordable housing in wealthier suburbs would cause a disparate impact because it neglected the needs of inner cities.

HUD has recently doubled down on its position on disparate impact. Early this year, HUD proposed a rule requiring all counties and cities that receive HUD funding (thousands do) to fix segregated housing patterns, even if such patterns are not the result of discrimination. HUD defines racial segregation as “a concentration of persons of the same race, regardless of whether that race is the majority or minority of the population in the geographic area of analysis.”

Taken literally, this would apply to almost every neighborhood in the United States. Boston’s charming Chinatown, with its lovely hodgepodge of restaurants and shops south of the Boston Common, is, under HUD’s theory, not a rich cultural tableau but a social ill to eradicate. HUD could simply pull funding from communities it believes have not done enough to end segregation — defined by HUD to mean anything besides carefully curated racial balancing.

Worse yet, in March, HUD adopted a “discriminatory effects” rule that makes it easier for plaintiffs to win disparate impact lawsuits, who need only to show that a given policy or action may predictably have a disparate impact. A defendant then faces liability unless they can show that the challenged practice “serves a substantial, legitimate, non-discriminatory interest.” And who decides if there’s a good reason for whatever is causing the disparate impact? HUD does.

The trouble is that almost any land-use or housing policy has a disparate impact. Urban growth boundaries that preserve green space limit housing development that could ease housing costs. Policies allowing a landlord to reject applicants with housing vouchers have a greater impact on minorities, who tend to rely more on such vouchers. Crime-free housing programs impact minorities because they are more likely to be arrested than white Americans and to have criminal records. Even attempts to help the vulnerable can get cities in trouble, as Dallas discovered. Low-income housing in the inner city: disparate impact. Low-income housing in the suburbs: also, disparate impact. Local governments will always operate in the shadow of a federal regulator.

Urban development involves complex, competing priorities. For good reason, our federal structure leaves this labyrinth to states and local governments to manage, not distant federal bureaucrats.

Disparate impact liability and stringent conditions on federal funding place tremendous power in the hands of a federal agency to manage housing across the nation. When almost any local housing or land-use policy could run afoul of fair housing laws, federal regulators have a bullwhip to cow local governments into adopting the federal government’s policy preferences. Housing is a perpetual challenge. But the answer is not to concentrate power in a partisan federal agency.

This op-ed was originally published at The Hill on April 3, 2023.