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AFFIRMATIVELY FURTHERING FAIR HOUSING: A NEW RULE IN TOWN

Affordable_Housing_Clackamas_CountyLast September, the comment period on a federal Department of Housing and Urban Development’s (“HUD”) proposed rule closed. That rule portends a very different course in the expectations of state and local governments in dealing with affordable housing.  While retaining the prohibitions on housing discrimination, the new rule (now being reviewed by the Office of Management and Budget) requires taking proactive steps “to address significant disparities in access to community assets, to overcome segregated living patterns and support and promote integrated communities, to end racially and ethnically concentrated areas of poverty, and to foster and maintain compliance with civil rights and fair housing laws.”

Most local governments take federal funds for housing or urban development, which implicates the new rules.  Those funds take the form of loan guarantees, urban renewal grants, homelessness programs, disaster relief, transportation and other infrastructure funds and a variety of other means.  A state or local grantee is “required to submit a certification that it will affirmatively further fair housing (“AFFH”), which means that it will (1) conduct an analysis to identify impediments to fair housing choice within the jurisdiction; (2) take appropriate actions to overcome the effects of any impediments identified through that analysis; and (3) maintain records reflecting the analysis and actions in this regard.”  The AFFH obligation extends to all housing and housing-related activities in the grantee’s jurisdictional area whether publicly or privately funded.

One effect of the new rule, which is likely to be challenged in the federal courts, is that housing issues will not be treated in isolation, but in a relationship with other drivers of urban development.  Thus, the connections between affordable housing and transportation or zoning, community expenditures in public services and facilities, racial or ethnic segregation and residency preferences or requirements are relevant issues for analysis and action.

Potentially, the new rule is not another effort at paper shuffling to deal with housing needs.  Receipt of federal housing funds requires repeated AFFH certifications of compliance with the analysis, action and records obligations noted above.  The rule requires action to deal with problems identified, in part, by the use of uniform data.  A state or local government may thus be sued for doing nothing in the face of an identified problem.  Moreover, for those public agencies that certify compliance and do nothing or which support efforts to thwart affordable housing, litigation may be brought under the False Claims Act and if the AFFH certifications were false, treble damages and attorney fees may be awarded, with a possible share going to a “relator,” one who “blows the whistle” on a non-complying government.

The case of Westchester County, New York, even though brought under current law, is instructive.  Although certifying that it was affirmatively furthering fair housing when it received over $52 million in federal grants over the years, the County did not consider race-based impediments to fair housing choice even though it was part of one of the most segregated regions in the country.  The County made no mention of housing discrimination or residential segregation and was successfully sued by a nonprofit activist organization under the False Claims Act.  The federal government joined the suit and a settlement was ultimately reached under which 750 affordable housing units must be built within 7 years in the “whitest” neighborhoods of the County, the County must return $30 million to HUD because of its false certifications, $21.6 million of which was to Fund Integrative Units (which was supplemented by another $30 million from the County), which was also required to pay $7.5 million to the “Relator” for ferreting out false claims and another $2.5 million in attorney fees and costs.  While the racial overtones of the County’s actions were extreme, the new rule raises the bar for reporting, actions and records required of state and local governments in housing matters.

Because the new rule does not depend on federal funding for enforcement, it is likely that nonprofit affordable housing organizations will follow the lead of their environmental brethren to undertake enforcement activity, using the “bounty” provided by the False Claims and Civil Rights Acts to fund further enforcement.  If the rule is enacted and survives OMB review and court challenges, the national housing picture will be very much changed indeed.  In Oregon, the new rule may spell the end on the statutory provision against inclusionary zoning and Metro’s prohibition on forcing higher densities in existing neighborhoods.  We all may be in for a very bumpy ride indeed.

 

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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