Deep Dive Episode 266 – The Evolution of HUD’s Affirmatively Furthering Fair Housing Rules: A Look at the Latest Proposed Regulation
The United States Department of Housing and Urban Development’s Affirmatively Furthering Fair Housing rules have careened wildly back and forth as administrations have changed. Most recently, on February 9, 2023, the Department of Housing and Urban Development published in the Federal Register a proposed regulation entitled “Affirmatively Furthering Fair Housing.” Under this version, HUD would require recipients of federal financial assistance to do more than simply stamp out discrimination, but rather to take affirmative action to overcome disparate racial outcomes in housing.
HUD first proposed detailed regulations concerning AFFH during the Obama administration, and ultimately adopted final regulations in 2015, which required more than 5,000 program participants, including states, municipalities, and public housing authorities to develop plans, utilizing a computer based geospatial mapping and data tool and a template of required questions to address “fair housing issues” such as perceived disparities in access to areas of opportunity. Implementation was delayed under the Trump administration, but the first attempt at an alternative regulation, which would have focused grantees’ efforts on the dismantling of regulatory barriers to housing production, was never finalized, and, instead, a final regulation that replaced the 2015 rule with a barebones certification requirement was implemented at the end of his term. That regulation, in turn, was repealed early in the Biden administration before it then published the proposed rule this February. Under it, communities must affirmatively address any existing patterns of adverse impact by providing housing for them in better areas or, alternatively, transforming the community. It focuses on state and local jurisdictions preparing “equity plans” that describe how they will incorporate procedures, not only with respect to housing but also education, transportation, and other local planning considerations, to advance more racially balanced communities. The comment period on the regulation ended on April 10, 2023.
In this webinar, a panel of ideologically diverse experts will discuss the latest proposal of HUD’s AFFH requirements for state and local governments.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Sarah Bengtsson: Good afternoon and welcome to this Regulatory Transparency Project webinar. My name is Sarah Bengtsson, and I’m Associate Director of RTP here at The Federalist Society. Today, May 9, 2023, we are pleased to host a discussion entitled “The Evolution of HUD’s Affirmatively Furthering Fair Housing Rules: A Look at the Latest Proposed Regulation.” After the discussion, our panel will take audience questions, so please submit your questions into the Q&A function at the bottom of your Zoom window. Please note that, as always, all expressions of opinion on today’s program are those of the speakers.
I’m going to briefly introduce our panelists and our moderator, but you can read the full and impressive bios for each of our speakers at regproject.org. Today, we are joined by Paul Compton, founding partner at Compton Jones Dresher. Paul’s practice focuses on affordable housing and tax credit supported community development projects. From 2018 to 2020, Paul served as general counsel of the United States Department of Housing and Urban Development.
We are also joined by Thomas Silverstein, Associate Director of the Fair Housing & Community Development Project at the Lawyers’ Committee for Civil Rights Under Law. Thomas oversees the project’s impact litigation docket using the Fair Housing Act. He also provides technical assistance to states, local governments, and public housing authorities seeking to comply with the duty to affirmatively further fair housing.
Our moderator for today’s discussion is Braden Boucek, Director of Litigation at the Southeastern Legal Foundation where he manages a variety of litigation focused on constitutional issues. Previously, Braden served as Vice President of Legal Affairs at the Beacon Center of Tennessee and as an Assistant United States Attorney for more than nine years. Thank you all so much for joining us today and now I will hand it over to you, Braden.
Braden Boucek: Thanks, Sarah, and thanks for the kind introduction. I’m really excited to host this panel today. HUD’s Affirmatively Furthering Fair Housing rules have been an object of profound discussion for several years now. This is the unfortunate characteristic of being a type of rule that has ping ponged back and forth from administration to administration. And just recently HUD issued its latest iteration of the rules.
I’m looking forward to a lively panel where we can really talk about all dimensions of the rule, what it does, its legal and constitutional components, and what it means for the future of American cities. I’ve got two great guests with us today who know a heck of a lot more about it than we do. And before getting into it, I want to give both panelists a chance to briefly introduce their position and outline them for the panelists. Paul, why don’t you go first? Tell us what we need to know about the rule and what your thoughts are on it.
Paul Compton: Yeah. Well, thanks, Braden. I think the first thing to come off of what you said is that this rule has ping ponged back and forth across every administration essentially going back to Nixon. And what we can generally say is that Democratic administrations have tried to push this forward in an aggressive way and Republican administrations have been more reticent about that.
And I think what that derives from is that ultimately this is just a policy question that’s buried in this rule. It is that when you go back to the statutory mandate for this, it is literally 22 words that are kind of buried in a paragraph in a subsection in a section of the Fair Housing Act. And it says that “The secretary of HUD shall administer the programs and activities relating to housing and urban development in a manner affirmatively to further the policies of this subchapter.” And so that is hardly kind of a ringing direction to HUD to try to remake all American cities in a way that at least in the current iteration of the rule really follows some economic and social theory that came about through the work of Professor Chetty of Stanford in 2012.
So the driving force for a rule that has its origin in a statute from 1968 didn’t actually come about until more than 40 years later. And so I think there is just quickly kind of the background of this. And of course we have the Fair Housing Act in 1968 which prohibited discrimination and at that time was limited to what we would call disparate treatment. Disparate impact later came about, and I think that that is crucial because it in a sense is the intellectual underpinning of the AFFH rule.
But as I mentioned and you alluded to this has ping ponged back and forth over the years. George Romney, who was the secretary of HUD, got fired by Richard Nixon for trying to be too aggressive and turning off grant funds to municipalities who weren’t being aggressive enough in his view about enforcing the Fair Housing Act. In 1998 we had what we referred to at HUD as AFFH lite, which is analysis of impediments, which required jurisdictions to do some study and some paperwork about what they were trying to do to affirmatively further fair housing without any real parameters about what this as some courts have referred to the obligation to do more. I think that is at the heart of where we are trying to define “more.”
The Clinton administration took up regulations in the late ‘90s. Those died within just a month or two after being put forward because cities and states said that they were too burdensome. Once again, the Obama administration put forward the rule, which is essentially with some technical differences what the current proposal in 2023 is. The Obama rule came out in 2015, which was intended to kind of take up this theory that what was really needed was to move disadvantaged populations to “high opportunity” areas. And so in a sense what you could look at the AFFH in its current form as being is something akin to busing for housing. And so if you’re in favor of that, you like the new rule, and if you think maybe that turn out so well, you might not like this rule.
Braden Boucek: Thanks, Paul. Thomas, why don’t you give us your run down?
Thomas Silverstein: Thanks, Braden. And thanks for having me here today. I think I’ll start with where I think there’s some common ground and shared understanding of the history and of the facts and then go to where I think there’s going to be some robust dialogue and difference of opinion. So first, Paul correctly identified where in the statute this obligation comes from and I think also the key question about what it is we’re really talking about, what it is we’re really arguing about when we argue about what that section means. And that is I think it’s clear from the statutory text and also the case law that more than simply not discriminating is expected of HUD and is expected of HUD’s grantees.
The question is how much more and what kind of additional activity fits the bill and under what circumstances is HUD’s interpretation of what that more is — under what circumstances is that reasonable in legal context and in what sense is that good policy. So I think where I agree is we can have a shared understanding of what the statute speaks to and also that the question is how much more? I think there’s a couple of points of difference that are good to get on the table from the start.
One is that while I think that it’s true that aspects of this proposed rule, as well as the Obama administration’s rule, incorporate concepts from Raj Chetty’s research, and from this conceptual framing of moving to opportunity, this is also a process, the Equity Plan process. And we’ll talk about the details of it momentarily. But it is a process that is not outcome determinative from HUD’s standpoint. It’s a process driven requirement that focuses on data analysis and community engagement that based on varying local circumstances can result in quite different and varied policy solutions depending on those inputs rather than saying every jurisdiction has to do X, Y, and Z actions in order to foster mobility from highly segregated low income communities of color to highly resourced predominately white communities. That’s not the way that operationally the rule actually works. It is more process driven.
The other thing I would say which I think is important to ground us in is that the language is sparse, and indeed the legislative history is sparse. The legislative history is sparse because the Fair Housing Act was enacted under extremely unusual circumstances in our society. The Fair Housing Act is a bill that was stymied for several years. It was sort of the unfinished business of the Civil Rights movement, with the Voting Rights Act having been passed three years prior, the Civil Rights Act of 1964 having been passed four years prior.
And the Civil Rights Act of 1968, Title VIII of the Civil Rights Act, it was stalled. And it was stalled in part because the coalition that would ultimately cause it to pass didn’t exist really for a few years because, unlike the Civil Rights Acts of 1964 and 1965, there was a lot of disagreement amongst northern and midwestern moderate members of Congress about the Fair Housing Act because it hit closer to home. There was an ability for a moderate member of Congress from, say, the suburbs of Chicago in 1967 to say, well, the Voting Rights act doesn’t really affect me. It’s not really relevant to my constituents, and I’ll vote for it in 1965 watching pictures of the protests in Selma on TV, fire hoses and dogs and all of that. But the Fair Housing Act as proposed hit home.
But then when Dr. King was assassinated in 1968, Congress sprung into action extremely quickly as the uprisings in response to his death proliferated across American cities. And so you don’t have the kind of legislative history that might be instructive for thinking about what this duty means. And I think that’s part of what leaves us in this sort of contested policy train.
But the last thing I’ll say in opening is just that the backdrop and the reason for the inclusion of the language, notwithstanding the relative lack of legislative history, is that over the proceeding third of a century prior to the enactment of the Fair Housing Act the federal government directly played a considerable role in fomenting residential segregation and disinvestment of communities of color through explicit race conscious, intentionally racially discriminatory policy action. So part of what Congress was doing in including this spartan language in the bill was responding to an atmosphere, an environment in which the federal government had directly done a lot of harm and state and local governments had done a lot of harm as well in ways that I think we can actually agree across the political spectrum was harmful.
So then the question is can you remedy that harm simply by stopping the harmful behavior, or does it take some proactive action on the part of government to remedy that harm? And I think that’s also one of the points of sort of tension and potential dialogue and debate for us going forward is to what extent is discontinuing the policy alone the right action versus to what extent do we need to be a little bit more intentional about trying to make up for its continuing consequences?
Braden Boucek: That’s great. So I want to take a quick minute here and try and make sure our listeners are as oriented about what this rule does and how it works as our experts are. So, Thomas, let me begin just by asking a couple of quick questions so we understand what the rule is. First off, to whom does the rule apply?
Thomas Silverstein: So the rule applies to states that receive grant funding through four — five actually principle grant funding programs that I believe actually every single state in the country receives funding through as well as the District of Columbia and insular areas — so territories in insular areas, Guam, Puerto Rico, and so forth. So it applies to jurisdictions at that level of geography. It also applies to local governments that receive funding through four principle grant programs. The Community Development Block Grant program is the largest of them.
That is not every local government in the country. I think the total — and Paul may know the number better than me. I think it’s somewhere in the ballpark of around 1,500 municipalities. That in some ways is a little bit of an underestimate of its impact in the local government level because a good number of those local governments are counties that may have towns or villages or cities within them that are sort of in the orbit of the counties’ compliance obligations. These are principally suburban and urban jurisdictions.
Because of population size thresholds for qualifying for the grants, rural areas are for the most part addressed through the state government’s compliance efforts rather than with the rural local governments having to comply directly. And then lastly public housing authorities, so the local entities set up — and sometimes state entities set up to administer the public housing and housing choice voucher programs. Those are the entities to which this applies.
Braden Boucek: Yeah. So quick —
Paul Compton: That’s exactly right. And I was just going to add I don’t know the exact breakdowns among those groups, but the total number of jurisdictions directly affected is about 5,000. Although that probably understates it a little bit because typically a jurisdiction that then suballocates such as a state to a smaller unit typically has somewhat kind of back to back obligations. So they’re going to have to require their grantees to do the same thing.
Braden Boucek: Okay. So a quick point of clarification, if you’re one of the municipalities that does not accept the four funds of grants, is there any way that you’re susceptible to the rule because your state or your county is?
Thomas Silverstein: So if you don’t accept the funds directly from HUD and if you also do not accept the funds as a subrecipient of a state or the county, you are not subject to the sort of process oriented obligations of the rule. However, what I would say to sort of flesh that out is if a state in analyzing sort of fair housing issues across the state or a county in analyzing conditions within a county identifies that the policies and practices of a town that’s not participating are in some ways problematic, that might through that analysis become a reason why a state would say, look, such and such town is acting badly. They’re acting maybe even outright discriminatorily, maybe in a way that not just is an AFFH issue but is actually a Fair Housing Act compliance issue.
So that type of analytical process where the county or the state might trigger some sort of policy response that has implications for the nonparticipating jurisdiction. But as far as writing an equity plan, which we’re about to speak more about what an equity plan is, they wouldn’t have to do that.
Braden Boucek: Okay. So as we go into equity plans here, let me ask you one more question, Thomas. Paul put in his introductory remarks that this a rule that would remake American cities by moving disadvantaged populations to high opportunity areas. Therein I think lies the heart of why this rule triggers such strong reactions from people. Do you accept that framing? Do you think that’s accurate, or is there anything else you want to say about that?
Thomas Silverstein: I think it’s an overstatement. I don’t think that the —
Paul Compton: It is a generalization. I agree.
Thomas Silverstein: So yeah. I think as I said it’s a process oriented requirement. It’s also a requirement that there can be collaboration by multiple jurisdictions within a region. There will be, and there should be. It’s not a bad thing to do. But oftentimes jurisdictions are also doing this on their own. So they’re confronting the issues and challenges within their territory.
And frankly, just to give an illustration of how that sort of moving to opportunity frame may not be feasible within the context of one jurisdiction’s equity plan, if you are a city that does not have any higher opportunity areas within its bounds, you can’t build affordable housing in a high opportunity neighborhood and then affirmatively market it to residents who would be moving there. Depending on your state law landscape, if you have a housing authority, your housing authority may not have the ability to operate outside your jurisdiction’s territorial bounds. So you can’t necessarily encourage voucher mobility to some of these areas.
So these sort of territorial constraints in terms of the frame of analysis can mean that a lot of jurisdictions aren’t going to be focusing their sort of planning, their goal setting on moving to opportunity related goals because they’re going to have to focus on the goals that are actually within their control. So to pick an example, East St. Louis, Illinois, is not a city in which it is possible for really the city of East St. Louis local government to actually sort of effectuate a policy regime that facilitates moves to opportunity. They can do things to improve quality of life within low income communities of color in East St. Louis. They can do things to try to improve housing quality maybe through code enforcement, maybe through incentives.
There’s all sorts of things that they can do to help ease the disproportionate burdens of housing insecurity by race, by disability, by sex. But they can’t necessarily effectuate moves to opportunity. So I think there are some places based on the analysis that makes sense for that jurisdiction where that’s what you’ll see, and I think that’s not a negative. I think it’s a positive. But I think that will co-exist along with a lot of other strategies that meet a range of sort of nuanced local circumstances.
Braden Boucek: And Paul, before we get into equity plans, Tom I think accurately pointed out that in many cases the federal and state and local governments were actually responsible for a lot of the harm that had been done resulting in segregated or de facto segregation in housing options. And then he says that the point of the rule is to do more than just stopping to discriminate. Do you agree with that? And if you do agree, what is allowable if not equity plans which we’re going to talk about next?
Paul Compton: Well, I guess where I would go back — this is not exactly your question, Braden. But one of the concerns that I have with the current rule is that I think that it may actually continue that terrible federal practice that went on in the 30s and the 40s in particular at what was at FHA. It wasn’t the board of HUD. HUD didn’t exist then, but FHA had redlining that should’ve never occurred.
And given to what Thomas said is that there are equity plans, and there are some other avenues. And there certainly are exceptions. But I think still the main thrust of the 2023 rule, as with the 2015, is this idea of trying to desegregate living patterns through moving protected classes to high opportunity areas. And I think that’s the biggest thrust.
But when you look beneath the surface of that, what’s that really saying? That’s saying, oh, okay, we want you to use federal dollars not in low income or low opportunity areas but instead let’s go build housing in high income areas which looks an awful lot to me like redlining once again. We’re sending resources to upper income communities, and it’s a zero sum game from year to year. The budget is what the budget is. And if we spend more in one place, we spend less in another.
Braden Boucek: Okay. So this is a good opportunity to talk a little bit about equity plans. Thomas, what are equity plans? How are they incorporated into the rule, and what do they require?
Thomas Silverstein: Thanks, Braden. So equity plans are HUD’s sort of newest terminology or iteration of the fair housing planning process. So the important thing to note here is that HUD has through two previous rules, one in 1995 which was extremely bare bones and which Paul alluded to is the analysis of impediments to the fair housing choice regime — that was the first time that HUD required some sort of fair housing plan from its grantees. I’ll quickly flag that that requirement to do an analysis of impediments didn’t apply to public housing authorities. So it applied to the other categories of grantees that we’re talking about, but public housing authorities were not completing their own analyses of impediments. And then in 2015 you have the Obama administration’s rule, which created something called the assessment of fair housing.
The basic idea behind any of these is that you are on a periodic basis — and with the 2015 rule and with this rule the idea is really over the long haul. But they would be done every five years. Every five years is a timeframe that’s of some significance because of the other regular planning requirements of grantees in terms of documents called the consolidated plan or the five year PHA plan for public housing authorities. So you’re syncing up with the regular planning cycle that already exists. In the 1995 rule the timing of every five years or in conjunction with the consolidated plan was sort of advisory or in guidance rather than in requirement. But it was suggested.
So we have a fair housing plan, the sort of descendant of two previous requirements. You’re doing it every five years. What does it mean to do a fair housing plan? So there’s the analytical component, and then there’s sort of the action planning or goal setting component. So the analytical component is basically you’re looking at your jurisdiction and also your jurisdiction as sort of situated in the region in which its located because housing markets tend to be regional and have lots of intermunicipal sort of patterns and consequences. And you’re figuring out what are the patterns of special segregation, what is the data saying in terms of disproportionate housing needs by race or disability or sex, familial status? Are people of a particular background paying a higher percentage of their income in rent? Are people of a particular background more likely to be living in homelessness?
Also, particularly through the 2015 rule and the most recent notice of proposed rulemaking also thinking about how place and where people live connects to access to opportunity across all the different sort of facets of life that are often influenced by where people live in terms of access to quality schools and transportation for instance. So you’re taking a pretty wide ranging look at data, EIS mapping, community input, talking to folks in the community, talking to stakeholder groups, doing some research, and figuring out what’s the landscape.
And then the step two really is what are the policy solutions in light of that landscape that advance the purpose of the Fair Housing Act, which as we discussed could be policy steps that facilitate moves to opportunity? They could also be policy steps that improve housing quality where people live. They could be steps that improve neighborhood quality where people live. They could be steps that prevent displacement in the face of gentrification. There’s a range of different possible outcomes.
As far as what distinguishes an equity plan from these prior rules, so first off with this notice of proposed rulemaking — and I might sometimes say the notice of proposed rulemaking does such and such when what I really mean is if a rule is finalized along the lines of what is in the notice of proposed rulemaking because obviously it’s not operative at this point. The most sort of important differentiating factor between it and the 2015 rule is that the notice of proposed rulemaking itself incorporates the questions that jurisdictions have to answer when they’re doing their plan. So the 2015 rule sort of directed HUD to develop a separate assessment tools as a sub regulatory sort of document that would be the questionnaire. Whereas here, the questionnaire that jurisdictions have to go through is built into the rule itself.
So then if you take another step comparing those sub regulatory assessment tools from back in the late Obama administration to what is in this proposed rule, the bottom line is that there is a lot of similarity. There’s a lot of overlap. But in general and typically kind of in small ways across the board this set of questions is a little bit less extensive than the set of questions that were in the assessment tools that spun off in the 2015 rule.
So really it appears from the outside what HUD is attempting to do is to strike a balance between a 1995 rule with the analysis of impediments that was underdefined, extremely loose, and resulted in GAO findings of widespread noncompliance on the one hand versus a 2015 rule that many critics thought was overly burdensome and required too much staff time or too expensive consultants on the part of local governments and other grantees such that they’re trying to find that sweet spot where you have enough rigor and concreteness to the planning process that there should be a basis for meaningful compliance on the one hand versus on the other hand not going too far, demanding too much staff time on planning, demanding too much expense on consultants, so trying to find that sweet spot. Whether the notice of proposed rulemaking will do that perfectly, perfectly is a high bar. There may be some need for further tinkering down the road. But what HUD is really trying to do here I think is find a sweet spot in terms of the tradeoff of accountability versus reasonable burden.
Braden Boucek: Okay. I want to throw it to Paul here to comment on equity plans as well. Before I do, I want to let the listeners know that if you want to start putting your questions into the chat, we’ll do our best to get to those at the end. Your questions are very important because that allows our experts to address what it is you think they’ve left you wanting to hear more about the rule. So I encourage you to go ahead and start putting those in. Well, Paul, let me throw it to you real quick. Tell us more in concrete terms what equity plans are, what they require, and how they’re folded into the proposed rule. Thank you, Thomas.
Paul Compton: Well, and I don’t disagree with anything that Thomas has said in terms of describing this and what the structure is. I really come at this from a little bit more of a realistic standpoint as Thomas mentioned. The 2015 rule HUD’s career staff had really concluded was going to overwhelm the agency in terms of just trying to assess these.
The first 50 or so AFFH’s that were received I think averaged 800 pages long. There are only 400 employees in all of the Office of Fair Housing and Equal Opportunity. When you take 50 and multiply it times 100 to get the 5,000 that were eventually going to come in, there just weren’t nearly enough people to read and process them.
And so I agree that the 2023 is dialed back, but I would I guess a little cynically say that was really more for the administrative reasons rather than to get to a different policy outcome. And while on its face I think that there is flexibility for a jurisdiction to try to chart its own course in this, this reminds me a little bit of the old joke, if anyone has ever heard it, about the Grey Elephant in Denmark, which is you can ask a series of questions about what animal starts with E and what country starts with D and what color starts with G. And the answer about 95 percent of the time always comes out to well, it’s a Grey Elephant in Denmark. It’s a mind reading trick.
And I think that’s really what HUD’s proposal really is going to be about is that even though, yes, you could come up with different answers is that I think that in practice it’s going to come back to an answer which is still this moving to opportunity consideration. I think that we’re going to spend an inordinate amount of time in local jurisdictions — remember, we’re talking about just on the city side 1,500 or so cities. Again, I don’t remember the exact number.
So this is not just New York, Los Angeles, and Chicago. This is Fable and Peoria where staff time is going to be at a premium. And their goal is going to be to draft something that will make HUD happy quickly. And the equity plan lays out examples of things that will make them happy quickly.
And I think it’s worth mentioning that for this we are devolving a great deal of power for this planning process into officials in HUD, perhaps not even Senate approved officials currently. I don’t think the administration even has an Assistant Secretary for Fair Housing. And so we are putting an awful lot of power in places that are unlikely to be directly accountable. And so I guess I just have a jaundiced view of what the equity plans really can produce other than a lot of paper, and they’re all going to come up with very similar answers.
Braden Boucek: In your introductory comments you referenced the difference between disparate impact and different actions. How is that a part of this rule?
Paul Compton: Yeah. I guess not to go too far down the rabbit hole, but I have always thought of AFFH as being kind of — having its intellectual support at least in its current form, certainly in the 2015 and the 2023 rules but frankly to an extent during my tenure at HUD that we proposed is that it relates to disparate impact. And disparate impact is really a theory of remedy under the Fair Housing Act where otherwise facially neutral policies have a disparate impact which can result in liability for those policies. AFFH is really kind of on the front end saying, well, what we want you to do is to plan to have policies that you know will avoid any disparate impact. And so it is really the affirmative case if disparate impact itself is the remedy.
And I think one of the things that’s really interesting in the rule proposal is the seminal case, of course the only case at the Supreme Court on disparate impact in a fair housing sense is Inclusive Communities Project v. Texas Department of Community Affairs I think it is. And interestingly, this proposal never cites that case at all in terms of the limits that it suggests that are appropriate in a disparate impact context.
And I guess if I would expand a little bit on that, in my view — I’m kind of a “houser.” I think that the solution to our worst problems is usually more housing, which means it’s less expensive. And in the January 2020 rule, not what the Trump administration ultimately put out, but in the January 2020 rule which I was involved in our goal was really to take to heart that the thing that has the most disparate impact on protected classes is the high price of housing and to try to come up with ways through the rulemaking to encourage the production of housing. And I think to the equity plan side, we kind of took the view that local professionals in community development really didn’t need us to tell them how to analyze what the issues were in their communities.
Braden Boucek: Okay. You mentioned Inclusive Communities. Now is a good time to get into it. I don’t think we can have a discussion about this rule without talking about the Inclusive Communities case. That case was issued in 2015, and it considered a prior iteration of this rule. Paul, tell us what the case held and how it has any ramifications on the proposed rule that we’re talking about today.
Paul Compton: Yeah. Well, the rule in a 5-4 decision authored by Justice Kennedy found that under the Fair Housing Act there did exist a cause of action for disparate impact. And that is an otherwise neutral policy which has a statistically adverse effect on persons in protected classes. In the specific case, the facts of Inclusive Communities, a local Texas advocacy organization somewhat ironically in the context of this rule had brought suit saying that Texas did not allocate enough low income housing tax credits to high income communities. And thus, more affordable housing through the benefit of the tax credits was being placed in lower income communities rather than higher and that that was, again, under something of the Chetty theory, having a disparate impact on those persons in protected classes because they didn’t have the life opportunities they would have had if that affordable housing had been in high opportunity areas.
The Supreme Court said yes, there exists a cause of action, but it has to be one that is kind of cabined within constitutional concerns. And merely a statistical difference can’t be the basis for a claim. It kind of had some wobble words about the burdens to be carried. Under prior law it had essentially been that if a practice is challenged and there is found to be an adverse impact, basically the defendant had to prove that there was no other way they could achieve their ends through a different means that wouldn’t have that disparate impact. The Court said we’re not really sure about that but didn’t really give a prescription on how to do it.
And ironically when the case goes back down on remand both the district court found that there was no disparate impact in that case. And so I think that that in a sense draws in the question the aim of what AFFH is doing which is at least in some unspecified ways seeking to desegregate communities which means that there has to be some ratio of racial mixing that is better than the existing ratio. And I think Inclusive Communities suggests that that approach has serious constitutional questions.
Braden Boucek: Thomas, do you see Inclusive Communities as placing any constraints on the proposed rule?
Thomas Silverstein: No, not directly. I think one of the things that’s important to just identify to flesh out what Paul just spoke about, which I think was mostly accurate — there might be a few things I would quibble with. But a background fact that I think is actually important here is that the Court didn’t grant cert on the question of what the standard for disparate impact claims under the Fair Housing Act should be when it granted cert in Inclusive Communities Projects, that case. So there were two questions presented in the cert petition. One was whether disparate impact claims were cognizable. The second related to the standard.
And they only granted cert on the first, which meant of course that you didn’t have briefing and argument about what the standard could be, which teed us up I think as a perfect storm because you had that combined with the notable propensities of Justice Kennedy, which probably folks across the ideological spectrum are well familiar with, whether you agree with the outcome that he arrives at in a case or not, to use a lot of language that can be confusing and not really bring light to the situation. So we had a situation where the Court, yes, expresses a lot of what’s sometimes called cautionary language about, I don’t know, three, four different sort of doctrinal issues related to disparate impact claims but without having granted cert on that question and without being particularly precise about what it meant and what the implications would be, which I think set up a situation where there right now at this point is a lot of sort of difference in the lower court adjudication of disparate impact claims following Inclusive Communities.
But as far as the implications for this rule, I don’t see direct implications. I do think that there are indirect implications. So when I was speaking about the equity plan earlier, I referenced things like when you’re doing this analysis of what the landscape is, you’re looking at things like are groups paying higher housing costs disproportionately based on race, as an example. Well, there has to be a context for that being relevant.
And there are multiple options for why it’s relevant. One option for why it’s relevant is something grounded in the disparate impact theory that if folks are paying higher rent as a proportion of their income based on race that maybe there’s some contemporaneous policy driver of that or practice that could be the subject of a disparate impact claim. And if that’s the case, then we should be thinking about ways to do away with those policies or practices theoretically, especially if they’re not justified. So in that sense, you can be thinking about AFFH very much in line with disparate impact.
But on the other hand, you could also be looking at disparities and disproportionality without necessarily having it tie to a disparate impact framework. And here I go back to the history because one of the reasons why there could be disparate outcomes could be because there’s some contemporaneous policy that could be challenged through a disparate impact claim. Another could be as the long term legacy of redlining, in which case what you’re doing is not necessarily remedying a potential disparate impact violation of the act. You are conceptually thinking about how you remedy a past instance of intentional discrimination that manifests in disparities in society. Of course, there’s also the possibility of yet other drivers of those disparities that are neither of the basis of a potential disparate impact claim nor the legacy of segregation or redlining.
It’s a complex sort of factual landscape out there. But I think there are pieces of this where not necessarily the Inclusive Communities Project case itself but the ways in which disparate impact doctrine gets further clarified in the courts will have ripple effects for AFFH that are definitely relevant. But I don’t think the ways in which the courts deal with disparate impact, rather, sort of seals the deal one way or the other for how AFFH has to be rolled out as well.
Braden Boucek: To your point on kind of some of the lack of specifics in the Inclusive Communities case, one of the things that Justice Kennedy warned about where “potentially abusive applications of disparate impact theory.” What did he mean by that? And I take it from your comments that you don’t think that the current iteration of the proposed rule strays into that territory. Can you explain?
Thomas Silverstein: I don’t and nor do I think that the relatively recently finalized disparate impact rule at HUD, which sort of recodified the 2013 disparate impact rule, does either. There’s one very clear example that I think probably most people can agree about what Justice Kennedy meant. There’s a case called Magner v. Gallagher where the Supreme Court had actually granted cert a couple of years prior. This was a case where a slum lord in St. Paul, Minnesota, was suing the city of St. Paul arguing that the city of St. Paul’s code enforcement activities were having a disparate impact on I think largely black tenants because by shutting down his housing because of code violations they were restricting the amount of housing available to black tenants.
And this is probably the textbook example, maybe a consensus example of an abusive application of disparate impact because — and there’s multiple ways of thinking about why it’s so abusive. But probably the bottom line is and maybe the consensus point is that the justification is just so compellingly obvious. So a disparate impact framework involves the defendant positing a justification, step two. The possibility of a less discriminatory alternative that would still sort of serve the justification, that’s step three. But here the justification is just overwhelmingly obvious.
The other point probably is that for a disparate impact to be actionable — and this is something that I think people can also disagree about what this looks like in a particular case, and maybe Paul and I might have slightly different views about the underlying dispute in Texas Department of Housing and Community Affairs v. ICP. But in Magner v. Gallagher there’s a question of the impact has to be adverse. We say disparate impact. We really mean disproportionate or disparate adverse impact.
A disparate positive impact or disparate neutral and irrelevant impact isn’t really the basis for a lawsuit. And in the case of this case in St. Paul, the impact of the city’s code enforcement activities on Black tenants was not negative because the benefit to the tenants in terms of actually fixing up their housing, fixing broken windows, getting rid of mold, those types of things, far overwhelmed any negative aspect in terms of access to housing. So that’s definitely I think what we probably can agree about. Maybe Paul will quibble. I don’t know.
But as an example, I think there’s a lot of cases we’ll disagree about what an abusive example is, but Magner v. Gallagher is the canonical example of one that I think we can agree about. I do think Magner v. Gallagher raises another question, though, which is also a tough doctrinal question, which is in avoiding abusive cases or potentially abusive cases, how important is it to avoid those cases at the pleading stage versus at summary judgment or at trial? Because the Eighth Circuit decision that held that the plaintiff in Magner had stated a claim, this was overturning a motion to dismiss if my memory serves me right.
I don’t actually think there’s a lot of people out there who think that if that case would’ve gone forward to summary judgment and certainly not to trial that the plaintiff would’ve actually won. So the question that begs is if this is an abusive case, and we can agree it is, how important is it that it go away at the motion to dismiss stage versus summary judgment versus trial?
Braden Boucek: Paul, I want to give you a chance to weigh in here. What do you think the Court meant when it talked about potentially abusive applications? And is that something that potentially has relevance to the current version of the proposed rule?
Paul Compton: Well, I think, Braden, as Thomas recognized, we probably are going a little more into disparate impact. As I mentioned, I think that disparate impact is intellectually an underpinning for AFFH. But I agree that it is not in all cases directly relevant. And I would agree with Thomas with respect to the Magner case. I think that’s kind of the poster child in terms of an abusive use of the disparate impact theory.
I think, though, that what we see there generally is just a question of where do you want to place the burdens for defending yourself? And I’m always mindful of I don’t know if it was Disraeli or Mark Twain or someone else that said “There are lies, damn lies, and statistics.” And so with the computing power we have today, it is easy to find disparities.
And as Thomas mentioned, those have to be identified as, well, what really is adverse? For instance, two sides of the coin on what you do even if you take the 2023 proposal and say, okay, this is not about moving people from this community to a high opportunity or high income community but rather is about redeveloping this community, well, that is often in some contexts referred to as gentrification. And is that something that we want to encourage? And will that process as we have seen — I remember several years ago there was a case brought in D.C. that challenged D.C. efforts to revitalize a community because it was said to be gentrification and was going to break up the neighborhood character.
So these are really hard questions. And I think where I would go back to is I think HUD is lacking humility in this rule. And we have kind of drawn a rule that says, hey, we’re sitting in Washington, and we’ve got 75 pages in the federal register. And we’re going to tell all you guys how you really ought to be doing this. And we have a pretty good idea, perhaps not a hundred percent idea, but a pretty good idea of how you should be doing it.
And I think that this hubris is really at great tension with one of the strengths of America has been our federalism. And I guess this is The Federalist Society sponsoring this. But that I think is another aspect of it is whether this rule is really kind of going too far in trying to remake cities in the vision that HUD has for them. And to go one more step because it’s a great quote, was Congress really hiding the elephant of desegregating and remaking the cities in the mousehole of 22 words in paragraph E?
Braden Boucek: We’ve got a question come in. I want to make sure we get to it. Thomas, I’m going to pose this one to you. Somebody asked there are poor families who work to allow their next generation a better life. Why should they not get the benefits discussed even if they’re not in a favored group by race, etc.?
Thomas Silverstein: So the bottom line is that they should, and I don’t think that’s the intention with AFFH. So it’s important to know that when we talk about AFFH in the housing context there’s perhaps some conceptual overlap with concepts of affirmative action in other realms. But there are also areas where there’s definitely not overlap with how affirmative action has worked in other realms. And one of the things that’s actually quite clear is that an individual’s race, for instance, is not taken into account in the context of admissions decisions for federally subsidized housing.
AFFH does not allow you to do that. It doesn’t create sort of numerical targets for admissions to housing for getting down payment assistance and so forth. That’s not something that’s effectuated through AFFH. AFFH, and the lingo here I’m going to borrow from I think a relatively recent book The Sum of Us by Heather McGhee. AFFH if anything trades more in the language of targeted universalism. And I think the Fair Housing Act does to some extent as well — that you can design policy with an eye towards how it might affect particular communities, but for actually being a direct beneficiary of a policy, a person’s race is not going to affect their eligibility.
And from sort of a progressive standpoint, I think we actually view this as being a good thing. I don’t think there’s actually necessarily a desire to make these programs more race conscious than that in part because in a sort of progressive view of a robust social safety net, when there’s a wide set of stakeholders who are invested in the success of social programs, the idea is that that actually makes them more durable over time with social security being sort of the ultimate example. So I don’t think anyone on my side of the fence actually wants to restrict the eligibility of low income white households for affordable housing, far from it. It’s more a question of how are we designing policy at a higher level than that. How are we avoiding policies that might disproportionately restrict access for people of color, for instance, through criminal background screening policies that go too far?
Lifetime felony conviction bans where you’ve got someone, say, who has a felony conviction 30 years ago, no data on recidivism that would show that they’re likely to reoffend — is that someone who should never be able to get into housing? Should we get rid of policies like that? But we’re not looking to allocate housing based on individual’s race or national origin.
Braden Boucek: So we’ve only got a limited amount of time left. I want to move into a quick hits segment here. So here I’m going to ask a quick question. I want answers. Try to get them in in 30 seconds or less. First question for you, Paul, this rule, if it becomes final, will or will not be successfully challenged in court?
Paul Compton: Will not.
Braden Boucek: Okay. You want to give us a quick explanation as to why?
Paul Compton: Yeah. I think it will not because it is unlikely to find a good plaintiff who will have standing to challenge it. As you might expect, a city which gets millions of dollars every year from HUD is going to be very reticent to sue HUD. And so I am going at this more on a procedural or a jurisprudential basis than on the merits underlying it.
Braden Boucek: All right. Thomas, what do you think? If the rule gets successfully challenged and they find a plaintiff with standing, will it be successfully challenged in court?
Thomas Silverstein: Probably not. This isn’t the conversation where we’re going to talk about judge shopping. But is there a federal district court judge out there who perhaps would buy some of the arguments against the rule? Possibly. But I think on the balance of the case law, no, I don’t think it would be successfully challenged.
I think the problem here from the standpoint of someone bringing a challenge is simply that it’s pretty clear that HUD has rulemaking authority over this. This interpretation is also not particularly a stretch in relation to HUD’s prior interpretations of the rule. I think there’s a lot of discretion granted to the agency in terms of how to flesh this out. So I don’t think this is a strong challenger for a lawsuit that would succeed.
Braden Boucek: Great. I see Sarah is ringing the proverbial gong, so I know it’s time for me to exit stage left.
Sarah Bengtsson: Right.
Paul Compton: Braden, can I answer one last question you didn’t ask?
Braden Boucek: Absolutely.
Paul Compton: Will HUD cut off all funding for any jurisdiction? No.
Thomas Silverstein: Concur.
Sarah Bengtsson: All right. Well, thank you. I want to thank Braden and Paul and Thomas for sharing your time and your expertise with us today. And thank you to our audience for tuning in. You can find more of our content on our website at regproject.org or follow us on any major social media platform @fedsocRTP to stay up to date. With that, we are adjourned.