Tag Archives: AFFH

The Republican Housing Platform

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The Republican Party adopted its platform earlier this week.  The short housing platform is worth reading in its entirety:

Responsible Homeownership and Rental Opportunities

Homeownership expands personal liberty, builds communities, and helps Americans create wealth. “The American Dream” is not a stale slogan. It is the lived reality that expresses the aspirations of all our people. It means a decent place to live, a safe place to raise kids, a welcoming place to retire. It bespeaks the quiet pride of those who work hard to shelter their family and, in the process, create caring neighborhoods.

The Great Recession devastated the housing market. U.S. taxpayers paid billions to rescue Freddie Mac and Fannie Mae, the latter managed and controlled by senior officials from the Carter and Clinton Administrations, and to cover the losses of the poorly-managed Federal Housing Administration. Millions lost their homes, millions more lost value in their homes.

More than six million households had to move from homeownership to renting. Rental costs escalated so that today nearly 12 million families spend more than 50 percent of their incomes just on rent. The national homeownership rate has sharply fallen and the rate for minority households and young adults has plummeted. So many remain unemployed or underemployed, and for the lucky ones with jobs, rising rents make it harder to save for a mortgage.

There is a growing sense that our national standard of living will never be as high as it was in the past. We understand that pessimism but do not share it, for we believe that sound public policies can restore growth to our economy, vigor to the housing market, and hope to those who are now on the margins of prosperity.

Our goal is to advance responsible homeownership while guarding against the abuses that led to the housing collapse. We must scale back the federal role in the housing market, promote responsibility on the part of borrowers and lenders, and avoid future taxpayer bailouts. Reforms should provide clear and prudent underwriting standards and guidelines on predatory lending and acceptable lending practices. Compliance with regulatory standards should constitute a legal safe harbor to guard against opportunistic litigation by trial lawyers.

We call for a comprehensive review of federal regulations, especially those dealing with the environment, that make it harder and more costly for Americans to rent, buy, or sell homes.

For nine years, Fannie Mae and Freddie Mac have been in conservatorship and the current Administration and Democrats have prevented any effort to reform them. Their corrupt business model lets shareholders and executives reap huge profits while the taxpayers cover all loses. The utility of both agencies should be reconsidered as a Republican administration clears away the jumble of subsidies and controls that complicate and distort home-buying.

The Federal Housing Administration, which provides taxpayer-backed guarantees in the mortgage market, should no longer support high-income individuals, and the public should not be financially exposed by risks taken by FHA officials. We will end the government mandates that required Fannie Mae, Freddie Mac, and federally-insured banks to satisfy lending quotas to specific groups. Discrimination should have no place in the mortgage industry.

Zoning decisions have always been, and must remain, under local control. The current Administration is trying to seize control of the zoning process through its Affirmatively Furthering Fair Housing regulation. It threatens to undermine zoning laws in order to socially engineer every community in the country. While the federal government has a legitimate role in enforcing non-discrimination laws, this regulation has nothing to do with proven or alleged discrimination and everything to do with hostility to the self-government of citizens. (4)

Here are some of the policy proposals that I think it gets right: abolishing Fannie and Freddie in their current form as hybrid public/private corporations; implementing regulation that promotes responsible underwriting and protects against predatory lending; and banning discrimination in the credit markets.

There is a lot of coded language in the platform, however. And that coded language may be inconsistent with some of those goals. For instance, the opposition to the Obama Administration’s attempts to reduce de facto segregation in the housing markets through such initiatives as the Affirmatively Furthering Fair Housing regulation undercuts the claim that the party opposes discrimination in the housing market.

It will be a long, strange trip to the November election. The direction of federal housing policy must be counted as one of important issues at stake.

White-Segregated Subsidized Housing

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The  University of Minnesota Law School’s Institute on Metropolitan Opportunity has issued a report, The Rise of White-Segregated Subsidized Housing. While the report is focused on Minnesota, it raises important issues about affordable housing program demographics throughout the country:

  • To what extent do the populations served by programs match those of their catchment areas?
  • To what extent do the served populations match the eligible populations of their catchment areas?
  • To what extent do the served populations match the demographics of those who have applied for the programs?
  • To what extent do variants among those metrics matter?

The Executive Summary opens,

Subsidized housing in Minneapolis and Saint Paul is segregated, and this segregation takes two forms – one well-known, and the other virtually unknown.

At this point it is widely recognized that most Minneapolis and Saint Paul subsidized housing is concentrated in racially diverse or segregated neighborhoods, with few subsidized or otherwise-affordable units in affluent, predominately white areas. Because subsidized units are very likely to be occupied by families of color, this pattern increases the region’s overall degree of segregation.

But what has been overlooked until today, at least publicly, is that a small but important minority of subsidized projects are located in integrated or even-predominately white areas. Unlike typical subsidized housing, however, the residents of these buildings are primarily white – in many instances, at a higher percentage than even the surrounding neighborhood. These buildings thus reinforce white residential enclaves within the urban landscape, and intensify segregation even further.

What’s more, occupancy is not the only thing distinguishing these buildings from the average subsidized housing project. They are often visually spectacular, offering superior amenities – underground parking, yoga and exercise studios, rooftop clubrooms – and soaring architecture. Very often, these white-segregated subsidized projects are created by converting historic buildings into housing, with the help of federal low-income housing tax credits, historic tax credits, and other sources of public funding. Frequently, these places are designated artist housing, and – using a special exemption obtained from Congress by Minnesota developers in 2008 – screen applicants on the basis of their artistic portfolio or commitment to an artistic craft.

These places cost far more to create than traditional subsidized housing, and include what are likely the most expensive subsidized housing developments in Minnesota history, both in terms of overall cost and per unit cost. These include four prominent historic conversions, all managed by the same Minneapolis-based developer – the Carleton Place Lofts ($430,000 per unit), the Schmidt Artist Lofts ($470,000 per unit), the upcoming Fort Snelling housing conversion ($525,000 per unit), and the A-Mill Artist lofts ($665,000 per unit). The combined development cost of these four projects alone exceeds $460 million. For reference, this is significantly more than the public contribution to most of the region’s sports stadiums; it is $40 million less than the public contribution to the controversial downtown football stadium.

These four buildings contained a total of 870 units of subsidized housing, most of which is either studio apartments or single-bedroom. For the same expense, using 2014 median home prices, approximately 1,590 houses could have been purchased in the affluent western suburb of Minnetonka.

In short, Minneapolis and Saint Paul are currently operating what is, in effect, a dual subsidized housing system. In this system, the majority of units are available in lower-cost, utilitarian developments located in racially segregated or diverse neighborhoods. These units are mostly occupied by families of color. But an important subset of units are located in predominately white neighborhoods, in attractive, expensive buildings. These units, which frequently are subject to special screening requirements, are mostly occupied by white tenants.

As a matter of policy, these buildings are troubling: they capture resources intended for the region’s most disadvantaged, lowest-income families, and repurpose those resources towards the creation of greater segregation – which in turn causes even more harm to those same families.

Legally, they may well run afoul of the Fair Housing Act and other civil rights law. Recent developments have established that the Fair Housing Act forbids public or private entities from discriminating in the provision of housing by taking actions that create a disparate impact on protected classes of people, including racial classes. Moreover, recipients of HUD funding, such as the state and local entities which contribute to the development of these buildings, have an affirmative obligation to reduce segregation and promote integration in housing.  (1-2)

No doubt, this report will spur a lot of soul searching in Minnesota. It may also spur some litigation. Other communities with subsidized housing programs should take a look at themselves in the mirror and ask if they like what they see. They should also ask whether federal judges would like it.

Affirmatively Furthering Neighborhood Choice

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Professor Kelly

Professor Kelly

Jim Kelly has posted Affirmatively Furthering Neighborhood Choice: Vacant Property Strategies and Fair Housing to SSRN (forthcoming in the University of Memphis Law Review). He writes,

With the Supreme Court’s Inclusive Cmtys. Project decision in June 2015 and the Obama Administration’s adoption, the following month, of the Final Rule for Affirmatively Furthering Fair Housing, local government accountability for ending segregation and resolving the spatial mismatch between affordable housing and economic opportunity has been placed on a more solid footing. Instead of being responsible only for overt, conscious attempts to harm protected groups, jurisdictions that receive money from HUD will need to take a hard look at their policies that perpetuate the barriers to housing opportunity for economically marginalized protected groups. The duty to Affirmatively Further Fair Housing, although somewhat aspirational in its formulation, requires HUD grant recipients to engage with fair housing issues in a way that the threat of litigation, even disparate impact litigation, never has.

For cities struggling with soft residential real estate markets, HUD’s concerns about land use barriers to affordable housing may seem tone deaf. Advocates challenging exclusionary policies have often focused on cities with high housing costs. Even a city with large vacant problems, such as Baltimore, was sued primarily because of its location with a strong regional housing market. But, concerns about social equity in revitalizing communities make the Final Rule’s universal approach to AFFH very relevant to cities confronting housing abandonment in its older, disinvested neighborhoods. This Articles has shown that attention to the Final Rule’s new Assessment of Fair Housing (AFH) reporting system is warranted both as a protective measure and as an opportunity to advance core goals of creating and sustaining an attractive and inclusive network of residential urban communities. (30-31)

For those of us who have trouble parsing the contemporary state of fair housing law in general and the AFFH rule in particular, the article provides a nice overview. And it offers insight into how fair housing law can help increase “the supply of decent, affordable housing options to members of protected groups . . .” (2) Not a bad twofer for one article.