HUD’s Power Grab

President Obama may have been distracted by Syria, but his domestic presidency proceeds apace, seeking what he heralds as “the transformation of the United States.” Especially is this true at the Department of Housing and Urban Development, which aims to remake neighborhoods all across America, starting, as we’ll see, in Westchester County, N.Y.

Established in 1965 at the height of the last unambiguously progressive presidency, HUD enforces, among other laws, the Fair Housing Act of 1968, which forbids discrimination in housing on the basis of race and ethnicity. That act, together with other statutes, says HUD, also directs “program participants”—local governments and states that receive federal housing grants, and also public housing agencies—to go beyond simply combating discrimination. They are to take “proactive steps” to “address significant disparities in access to community assets, .  .  . overcome segregated living patterns and support and promote integrated communities, [and] .  .  . end racially and ethnically concentrated areas of poverty.” HUD has a name for all this proactive step-taking: Affirmatively Furthering Fair Housing, also known in HUD circles by its acronym, AFFH.

It so happens, however, that the transformation of America by means of AFFH has been a bit too slow in coming. Says HUD: “The current practice of affirmatively furthering fair housing as carried out by HUD grantees .  .  . has not been as effective” as it should have been. Indeed, housing secretary Shaun Donovan has called it “a meaningless paper exercise without any teeth,” a difficult metaphor to conceptualize, but you get the point.

Under Donovan, HUD has now crafted a toothier AFFH policy. It can be found in a proposed rule that was published on July 19 in the Federal Register (not on my list of recommended reading, but still where you often have to go to find out what government is planning). The 60-day period for public comment ended last month, and by December the rule likely will have entered the Code of Federal Regulations. It’s titled—what else?—“Affirmatively Furthering Fair Housing.”

Bear with me as I report the basics of the new policy, beginning with the purpose of AFFH, which the rule says is “to improve fair housing choice for all.” People possess improved choice when they “have the information, options, and protection to live where they choose without unlawful discrimination and other barriers related to race, color, religion, sex, familial status, national origin, or handicap.” And while “all” people should have such choice, the focus of the rule is on accomplishing better choice for blacks and Hispanics in particular.

Grantees—the states, localities, and public housing authorities mentioned above—are required to improve choice, through “planning, strategies, and actions.” And HUD promises to help by providing data on “patterns of integration and segregation; racially and ethnically concentrated areas of poverty; [and] access to education, employment, .  .  . transportation, and environmental health, among other critical assets.”

From the data, statistically expressed in terms of race and other protected classes, grantees are directed to identify “fair housing issues” in their communities. “Fair housing issue” is a technical term for a segregated living pattern, a racial concentration of poverty, or disparate access to some community asset. Grantees are to determine what accounts for the “fair housing issues” they have identified as they prepare, under a process involving community participation, an “assessment of fair housing” (AFH, by the way).

And that’s what they are to submit to HUD for approval. The AFH is to include goals that “will inform housing and community development policy and investment planning.” The proposed rule gives as an example of such a goal “promoting greater mobility and access to areas offering vital assets such as quality schools, employment, and transportation.” A program participant whose AFH is not approved could lose its federal housing dollars. In other words, you satisfy HUD, or you do without your grants.

Its tedious terminology notwithstanding, the proposed rule signals a momentous change in policy. When the Fair Housing Act was passed, “fair housing” meant “non-discrimination” in the various transactions that housing encompasses, from selling a house to securing a home mortgage loan. Over the years, however, fair housing has evolved in the law such that it now means something far more ambitious: “fair housing choice,” with its focus on “fair housing issues,” which include not only “evidence of illegal discrimination” but also, and more important, various “barriers” that the rule says are “related” to race, color, and national origin, and explain segregated living patterns.

In an interview, Paul Compton, chair of the Affordable Housing and Community Development group at the law firm Bradley Arant Boult Cummings, summarized the change in policy this way: “It’s a real shift in emphasis from ensuring that the private sector and participants in federal programs don’t unlawfully discriminate to defining the existence of racially and ethnically ‘segregated’ neighborhoods to be in themselves a violation of fair housing.” Likewise, “if a neighborhood is not integrated in some vaguely defined ratio, then that in itself is a fair housing issue.”

Programs affecting neighborhoods must be “reoriented,” as Compton put it, in order to make them more integrated and also more livable—incubators of opportunity, in HUD’s vision of America.

As Secretary Donovan told the NAACP at its annual convention in July, “It’s about more than .  .  . access to the housing itself. It’s also about giving every community access to important neighborhood amenities that can make a tremendous difference in a person’s life outcome. I’m talking about good schools, safe streets, jobs, grocery stores, health care, and a host of other important factors.”

For this vision of America to become a reality, Donovan emphasized to the conventioneers, HUD must “maximize the impact [that federal grants] have on communities.” Municipalities may find that they have to modify zoning and other land-use decisions in order to accommodate construction of affordable housing units in the communities, mostly white, that HUD wants remade. And because HUD is seeking to leverage decisions involving a community’s assets, it appears ready to intrude far more deeply than it already has into state and local governance.

This intrusion from Washington is one reason to take issue with the rule. And there are others. The rule states that “tenant selection and assignment policies should be designed to reduce racial and national origin concentrations, including racially or ethnically concentrated areas of poverty, and to reduce segregation and promote integration.” (Emphasis added.) In 2009 the Supreme Court struck down as unconstitutional race-based public school assignments made in order to achieve or maintain integration. It’s hard to see how race-based tenant selection and assignment decisions, made for similar reasons, could survive judicial review.

In a letter sent to Donovan last month, three members of the U.S. Commission on Civil Rights—Abigail Thernstrom, Peter Kirsanow, and Todd Gaziano—point out that the rule repeatedly uses the term “segregation” to describe housing patterns in which members of racial or ethnic groups are concentrated in particular areas. They observe that legal segregation was ended more than 40 years ago. In consequence, “geographic clustering of racial and ethnic groups is not in and of itself an invidious phenomenon.” The rule takes the opposite view of such clustering and fails to recognize that multiple factors usually account for it. The rule also makes the dubious assumption that people who live in a racial or ethnic cluster will be eager to exercise “fair housing choice” and escape to what HUD considers a better neighborhood.

That assumption is open to doubt, because—quoting the three commissioners—“many members of racial and ethnic minorities prefer to live in communities predominantly peopled by fellow members of their racial or ethnic group.” The reasons are evident: They have family and friends there, and they may work and have other involvements there—in churches and community groups. The commissioners write that the common preference for not moving out of a racially or ethnically clustered area “is particularly likely in communities primarily comprised of recent immigrants.”

With its new policy, HUD is seeking to use the power of the national government to create communities of a certain kind, each having what the department regards as an appropriate mix of economic, racial, and ethnic diversity. But HUD may be frustrated in this effort if only because, as Abigail and Stephan Thernstrom wrote in America in Black and White: “Neighborhoods are not arbitrary packages of housing whose occupancy benevolent social engineers can rearrange with predictable and positive consequences.”

Here, perhaps, it is worth noting that in undertaking such a massive, neighborhood-engineering policy, HUD will require the submission of AFHs by 4,550 municipalities, counties, and states, and by 3,400 public housing authorities. HUD concedes that it cannot quantify the benefits and costs of policies influenced by the rule, identifying only annual compliance costs on the part of program participants, which it estimates at $3 million to $9 million.

Now, let us move from the Federal Register to a real place: prosperous Westchester County, just north of New York City, population 941,113, the fourth most racially and ethnically diverse county (out of 62) in the state of New York, where housing patterns historically have been driven by economics, with people living where they can afford to live, and “moving up” as they are able and want to.

In 2006, however, a “whistleblower” suit was filed against Westchester, alleging that since 2000 the county had received federal housing grants and thus was obligated to “affirmatively further fair housing” but hadn’t done so, thus rendering false the certifications the county made to Washington to receive those funds.

This false claims suit seemed weak, especially since none of the county’s submissions to HUD regarding its fair housing efforts during those years had been disapproved or rejected. Moreover, in 2005 HUD officials hailed the county for its grant-management practices. Eventually, the county, wanting a more reasonable party at the table, asked HUD to intervene, and it did. With Westchester admitting no wrongdoing, the parties settled in August 2009 on terms agreed to by Democrat Andrew Spano, then the county executive.

At the press conference announcing the settlement, HUD  deputy secretary Ron Sims hailed it as the “way forward” for AFFH. “[T]here has been a significant change in the Department of Housing and Urban Development,” he said. In retrospect, it’s apparent that the “change” would be fully expressed four years later in the new AFFH rule. “We’re going to ask [other jurisdictions] to pursue similar goals as well,” declared Sims.

Under the settlement, Westchester agreed to spend $51 million to build, in 31 mostly white communities and by the end of 2016, some 750 affordable-housing units, 650 of which would be located in municipalities with fewer than 3 percent African-American residents and fewer than 7 percent Hispanic residents. HUD sees the construction and location of those units as measures that will reduce patterns of racial and ethnic segregation and help overcome discrimination, of which, by the way, the county has not been accused, neither by the party that brought the false claims suit nor by the government. What the settlement will achieve, if nothing else, is the location of more minority renters and homeowners than otherwise might be the case in communities that currently have few minority residents.

Toward that end, the settlement requires the county to “affirmatively market affordable housing” not just within the county but also “in geographic areas with significant non-white populations outside, but contiguous with or within close proximity to, the county.” The county thus must spend some of its marketing budget for the benefit of people who don’t live in Westchester. The outside-county marketing represents a wider casting of the net, to increase the likelihood that applicant pools are more diverse than they might be otherwise.

One county official explained to me the way the pools are expected to work: “If you create a diverse pool of candidates [for the affordable-housing units] having a preponderance of blacks and Hispanics in it, then you’ll get a similarly diverse group of applicants when they pull balls out of bins in the lottery,” which is used by Westchester County (and endorsed by HUD), the point of a lottery being to ensure a random selection. But, this official added, “We all know that there are anomalies in the law of probability. So what happens if we have this pool that’s highly diverse but we randomly select a pool that’s not as diverse as HUD likes? That’s not our fault.”

It’s not, but were that to happen, the county might have to develop new, even more targeted marketing plans, which could discriminate against those lacking the “right” race or ethnicity, though finding a plaintiff, and bringing a case, would not seem an easy task.

A notable irony of the marketing and pool-making efforts is not lost on Westchester County officials. “A classic discriminatory practice in housing,” said one, “is where realtors ‘steer’ people from one neighborhood to another depending on where the realtor thinks they should live, based on race.” In its way, “HUD is trying to steer people to certain neighborhoods. Their social engineering is just another form of steering.”

And it may be steering in the wrong direction, from the standpoint of many of those whom it seeks to help. In an interview, Stuart Gerson, who represented the county in the false claims case, said, “The demand in Westchester [from minorities] has always been not just for better housing but that it be placed in or contiguous to the neighborhoods where minorities are living now—and not in the far suburban or semi-rural places where the federal government wants it.”

Not that the settlement units have failed to attract comers. As of this writing, 10 of the new affordable housing developments have effectively completed their marketing. They include 180 rental units and 60 houses. Of the 2,215 applicants for the rentals, 41.5 percent were black, 34.7 white, and roughly 24 percent were Hispanic. Of the 165 applicants for homes, 32.2 percent were black, 40.6 white, and 23.8 Hispanic. Finally, of the 122 units that have been built and are now occupied—105 rentals and 17 homes—60 of the occupants are white, 46 African American, 4 multiracial, and 8 declined to indicate their race. Twenty-two of the occupants said they were Hispanic.

And Westchester is ahead of schedule. Of the 750 units the county agreed to build, 300 were to have financing by the end of the year. Already some 395 have it. The number of units now occupied—122—also exceeds the year-end goal.

HUD, though, is hardly satisfied with Westchester’s effort. Indeed, the county and the agency have sharp differences. Last month county executive Robert Astorino, the Republican who defeated Spano in 2009 and is seeking reelection this fall, wrote a column in the Wall Street Journal with the provocative headline: “Washington’s Fair Housing Assault on Local Zoning.”

HUD wants—to use the language of the new AFFH rule—more “fair housing choice” for more minorities. Specifically, it wants more affordable housing units built in mostly white communities—some 5,000 more. For those additional units to be built, more land would have to be zoned to accommodate them. And that means localities, which under the New York state constitution are empowered to make zoning decisions, would have to change ones still in force and, going forward, make ones that otherwise they would not make, under common zoning practices, which place limits on the size, type, height, and density of buildings.

 HUD regards such limits as standing in the way of progress. For HUD, they are racially and ethnically “exclusionary” and must be opposed on that ground. Indeed, the department has told the county to sue localities over exclusionary zoning—which the county has declined to do. “Not a good way to build good will,” Astorino wryly observed, in an interview.

In February 2012, in response to a HUD request, the county analyzed all of its 853 local zoning districts for evidence of exclusionary practices based on race and ethnicity, and found none. Since then, it has made seven more such analyses, each time including consideration of more data, as requested by HUD. And each time the county has found no evidence of exclusionary practices, a conclusion supported by an independent authority. HUD, however, has disagreed with the county. And in 2011 it began cutting off housing grants. The total amount withheld through this year amounts to $17 million.

In the Journal, Astorino recounted how last month HUD “finally demanded—without presenting any facts—that the county accept its conclusion that there is exclusionary zoning in Westchester as a condition of releasing the funds.” The county declined, but neither will HUD withdraw its demand.

“Until we reach the conclusions they give us,” Astorino told me, “which have no relationship to actual facts, they will continue to deny our analysis .  .  . and continue to watch everything we do. And withhold money. It’s not about 750 units. That’s the starting point, not the ending point. It’s about changing the world.”

And so it is.

And what Westchester County has been experiencing in its dealings with HUD is what other housing grantees can expect once the new AFFH policy begins to be enforced. Will that enforcement effort also ignite state and local opposition? Will it lead jurisdictions to consider doing without federal housing money entirely—as is happening now in Westchester County? In three years we’ll find out.

Terry Eastland is an executive editor at The Weekly Standard.