There is no stronger bulwark of racism than the segregated housing system that has long persisted in virtually every metropolitan area in the United States.
The proposal would require a consumer to go through a five-step framework to claim disparate impact discrimination under the Fair Housing Act. In doing so, the proposal virtually eliminates the long-standing disparate impact doctrine under which a housing provider’s policies or practices can constitute unlawful discrimination, even if there was no intent to discriminate. The HUD proposal would significantly weaken the housing act, leaving far more families vulnerable to housing discrimination.
There has been some important progress on the fair housing front but a wealth of social science research demonstrates the persistence of discrimination and segregation in the U.S. housing markets.
In 2012, HUD in partnership with the Urban Institute documented that homeseekers of color were told about and shown fewer homes than equally qualified white consumers. In 2018, Black mortgage applicants were twice as likely as whites to be denied, according to data required by lenders for the Home Mortgage Disclosure Act.
More recently, the Joint Center for Housing Studies reported earlier this year that the persisting Black-white gap in homeownership rates is higher than it was 30 years ago. And while nationwide Black-white segregation has declined since its peak in the 1970s, it persists at hyper-segregated levels in the large cities where Black homeownership is concentrated, with the typical Black family living in a neighborhood that was 35 percent white in 2010, compared with 40 percent in 1940.
These gaps can’t be explained entirely by discrimination. But as expert testing and analysis confirm, it remains a central feature of the nation’s housing markets.
The segregated housing patterns that persist today are not simply demographic curiosities. They affect the lives of virtually all residents, and the people most greatly affected by discriminatory practices are those who often end up living in neighborhoods with the lowest-performing schools, higher incidents of crime, lower access to good healthcare and safe and clean environments.
The Urban Institute reported in 2017 that more segregated metropolitan areas have lower rates of economic growth, higher criminal justice expenses, and other costs placed on the entire community.
Harvard economists have demonstrated that the neighborhood in which a young child is raised dramatically affects adult income and other quality of life measures. Their research, reported in the American Economic Review in 2016, found that the higher level of segregation was a key factor contributing to the challenges children face in lower-opportunity areas.
The Fair Housing Act was designed to dismantle this structure, in part, by using disparate impact as a key tool to weed out unintentional discrimination in housing and housing finance. This doctrine goes back to the Nixon administration and has long held bipartisan support throughout presidential administrations.
The Trump administration has proposed replacing an Obama administration disparate impact rule with one that would create a high hurdle that few, if any, plaintiffs could use and succeed in proving an unlawful disparate impact. Plaintiffs would have to show that a housing provider’s particular policy or practice is arbitrary and serves no legitimate business purpose. And respondents could defend their policy if it was an industry standard.
Proving a negative is virtually impossible, and permitting a discriminatory practice because everyone else does it is inconsistent with effective fair housing enforcement.
For example, under the proposal, a mortgage lender could charge excessive fees that adversely affect racial minorities or women with relatively lower incomes. Insurance companies could refuse to cover lower-valued homes, excluding disproportionately those in communities of color. And landlords could reject applicants who do not hold full-time jobs, disproportionately excluding seniors, people with disabilities, and others with lower incomes. These practices are prohibited by the current rules.
There are many shortcomings to HUD’s proposal, all of which would make it far more difficult to eliminate many discriminatory practices that persist in the housing market.
HUD claims it is simply trying to clarify how the agency will implement the disparate impact doctrine in light of a recent Supreme Court decision; that there is no intent to weaken enforcement or create further discrimination or segregation. But that is precisely the disparate impact this proposal would have: helping to leave in place the structure of discrimination in virtually all metropolitan areas in the U.S.
A version of this article originally ran on AmericanBanker.com on Aug. 23, 2019.