HUD is on the way to better fair housing accountability

The Department of Housing and Urban Development (HUD) is revising the “Affirmatively Furthering Fair Housing” rule implemented under the Obama administration. This is a contentious move in the housing world, but one with the potential to do more to make housing access fair than the original rule has done. 

The 2015 rule required localities that receive HUD grants to study segregation in their housing markets, schools and transportation systems and to create plans for improving integration. It didn’t require any concrete actions or policy changes. So long as localities came up with good reports about how they would do better in the future, they could continue receiving HUD funding. A better rule would judge jurisdictions by real outcomes.

Local zoning rules are the primary cause of housing affordability problems and segregation in high-cost areas. Zoning limits the amount of housing that can be built and constrains the supply of relatively low-cost housing, like multifamily housing and manufactured housing. Rather than requiring localities to merely study and plan, HUD’s new approach will draw attention to the current state of local housing markets and monitor how much housing is actually being built in American cities. It will create incentives to relax zoning, which is contemporary local governments’ principal mechanism of exclusion. 

Permitting land to be put to its highest and best use often leads to multi-family housing in desirable locations, because this allows the cost of expensive land to be spread across many units. But most cities’ zoning restricts residential density on much of its prime land to exclusively single-family development, limiting the number of households that can live in the most in-demand locations. With limited supply and high demand, zoning can guarantee that only affluent households move in. Without once whispering the word “segregation,” cities exclude a disproportionate share of minority families. 

At the federal level, the need to reform local zoning restrictions is a matter of bipartisan consensus. The Obama and Trump administrations both released reports on the importance of liberalizing local land use restrictions for improving housing affordability and economic opportunity.

HUD is rightly limited in its ability to influence local zoning decisions. But it can divest the federal government from supporting the most egregious regimes of local exclusion and hold all localities accountable for meeting the statutory conditions for receiving federal grants. To this end, the best tool at HUD’s disposal is its Community Development Block Grants (CDBG), which go to local government policymakers who have wide discretion about how to spend them. The popularity of CDBG funds among mayors make them a good lever to encourage change at the local level. 

Statute requires that CDBG money primarily benefit low- and moderate-income households and that recipients “affirmatively further fair housing.” But the most strictly zoned jurisdictions are clearly not affirmatively furthering fair housing. HUD should identify and scrutinize these localities and call into question their statutory eligibility to receive CDBGs.

In a public interest comment submitted to HUD on the new proposed rule, we – along with Ed Pinto and Tobias Peter of the American Enterprise Institute – suggest that HUD rank jurisdictions based on the extent to which they further fair housing by permitting new residential construction and allowing the market to keep prices low. Data-driven metrics would allow HUD to appropriately focus its fair housing scrutiny and enforcement efforts. A systematic approach to the thousands of grantee jurisdictions is the beginning, but not the end, of an accountable relationship between HUD and the localities that take its funds. Our comment provides a detailed formula that HUD could use to do just that.

This ranking gives HUD the opportunity to name and shame the most exclusionary jurisdictions – Cupertino and Palo Alto, Calif. and Greenwich, Conn., among others – for implementing land use regulations that shut out nearly all new housing, causing extraordinarily high house prices and furthering segregation. These are all jurisdictions that espouse progressive values. Perhaps drawing extra attention to their exclusionary policies would encourage them to reform. 

On the positive side of the ledger, a ranking would also identify places with best practices that others can study and emulate. Unlike the list of worst performers (which are all elite coastal suburbs), we identified praiseworthy outcomes in localities as diverse as Williamson County, Texas, Denver, Colo. and Milpitas, Calif.

While HUD has neither the authority nor the neighborhood-level knowledge to enact local zoning reform, it can draw attention to the worst performers, apply extra scrutiny to how these jurisdictions spend their CDBG grants and withhold funds those that fail to reform going forward. 

By focusing on real-world results like the supply of new housing, HUD will no longer give exclusionary jurisdictions a pass for simply writing a report that will never be implemented.

Emily Hamilton and Salim Furth are co-directors of the Urbanity Project with the Mercatus Center at George Mason University.