Magazine | July 20, 2015, Issue

Washington Takes On the Zoning Board

The administrative usurpation of housing policy

Nearly lost in the uproar over end-of-term rulings on Obamacare and same-sex marriage, the Supreme Court’s surprise decision in a “disparate impact” housing case may soon be seen as being every bit as consequential as the term’s major newsmakers. The Court’s 5–4 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project has green-lighted one of the Obama administration’s most transformative and controversial initiatives, and probably injected a major new issue into the 2016 presidential campaign.

The Fair Housing Act of 1968 prohibits intentional discrimination on the basis of race, color, religion, sex, familial status, or national origin. The question before the Court in the Texas case was whether housing policies that are not clearly discriminatory, but neutral on their face, can nonetheless be outlawed because they have “disparate impacts” on various groups. A bank, for example, can condition its home loans on a certain credit rating, with no discriminatory intent. But a disparate-impact suit could target this policy for its disproportionate effect on minority home-buyers.

Similarly, the Texas Housing Department can allocate its share of federal low-income-housing tax credits to neighborhoods where the poor already live, as a way of improving the places that need the credits most. As an added benefit, neighborhoods where property is the most affordable can permit the maximum amount of new housing to be built. The disparate-impact suit before the high court sought to overturn this rational and facially neutral housing policy as discriminatory, because its effect was to limit the amount of low-income housing occupied by minority residents in wealthier, mostly white suburbs.

While purporting to combat discrimination, disparate-impact theory actually facilitates it. A business that requires a high-school diploma as a condition of employment might junk its rule and make race-based hires just to ward off a disparate-impact suit. Advocates for minorities can’t agree among themselves on whether low-income housing is best situated in poor neighborhoods or wealthy suburbs, so states and developers face disparate-impact suits no matter the site they choose. Disparate-impact litigation could actually make for less low-income housing.

At its root, disparate-impact theory is an offense against the classical-liberal principle that we are all to be held to the same standards. It amounts to a kind of affirmative action in housing. Not only has the Texas case added force to disparate-impact thinking in all areas of law, but Justice Kennedy’s majority opinion has now expanded disparate-impact theory by introducing the pernicious concept of “unconscious prejudice.” Like its elder cousin from the era of socialism, “false consciousness,” the notion of a legally cognizable unconscious prejudice is incompatible with both personal liberty and democratic decision-making.

Justice Kennedy’s “unconscious prejudice” formulation is extremely vague and amounts to a license for activists and bureaucrats to impute bigotry to any policy they dislike. Once a state ruling or local law has been stigmatized as a product of unconscious prejudice, the federal government is empowered to engineer a remedy. By the way, is there any policy favored by conservatives that the Left doesn’t already attribute to — at minimum — unconscious prejudice?

By themselves, these legal innovations suffice to make the high court’s decision in the Texas housing case both distressing and consequential. But the effect of the decision is magnified by the Obama administration’s planned finalization of its “Affirmatively Furthering Fair Housing” (AFFH) rule.

AFFH is a sweeping initiative, every bit as transformative as Obamacare. In effect, AFFH gives the federal government a way to reengineer nearly every American neighborhood, imposing a preferred racial and ethnic composition, densifying housing, transportation, and business development in suburb and city alike, and weakening or casting aside the authority of local governments over core responsibilities such as zoning, transportation, and education.

Implicitly, the legal justification for AFFH rests on the principle of disparate impact in housing. The Fair Housing Act of 1968 not only forbids housing discrimination, it also effectively obligates the federal government and any municipality that receives federal housing funds to “affirmatively further fair housing.” In the past, that meant maintaining vigilance against overt discrimination. The Obama administration, however, has redefined “affirmatively furthering fair housing” to mean preventing racially or ethically disparate housing outcomes, even when the causes of those outcomes have nothing to do with prejudice.

Precisely because housing discrimination is both illegal and unacceptable to most Americans, the suburbs in recent years have become multiethnic and multiracial. Nowadays, if some municipalities are home to greater or lesser proportions of various ethnic, racial, or religious groups, this is largely owing to some combination of income level and choice. From the Obama administration’s perspective, however, whether active and conscious discrimination is at work or not, disproportionate residential clustering by race or ethnicity constitutes a civil-rights violation that must be remedied by government fiat.

The Obama administration’s AFFH rule contains an analysis of the Fair Housing Act that echoes the arguments made by the plaintiffs in the Texas housing case. Had the Court gone the other way and denied that disparate impact was cognizable under the Fair Housing Act, the Obama administration’s AFFH rule would probably have fallen to a legal challenge. Now, however, AFFH is more than in the clear. The Supreme Court has turbocharged it.

Up to now, the force behind Obama’s proposed AFFH rule has been money. Any municipality that wants to continue receiving grants from the Department of Housing and Urban Development will have to fall in line with Obama’s transformative housing vision. Leftist civil-rights groups have worried that this is not pressure enough. After all, some well-off communities might choose to preserve their freedom by surrendering their grants.

In authorizing a wave of disparate-impact lawsuits by the federal government and civil-rights groups, the Supreme Court’s housing decision will greatly intensify pressure on local governments. Westchester County, a wealthy suburb in New York State, has served as the Obama administration’s dry run for AFFH. The Obama administration was invited in by the county to manage the settlement of a civil-rights lawsuit based on disparate-impact principles and filed by leftist activists. Westchester wasn’t accused of overt housing discrimination. Instead it was found to have not done enough to counter racial disparities in housing — disparities caused largely by the fact that relatively few minority buyers could afford a home in some of the county’s more expensive neighborhoods. So Westchester has been hit with the one-two punch of a lawsuit and a cutoff of federal funds (it is now trying to win back the funds). This is what municipalities across the country now face in the wake of the Supreme Court’s housing case and the imminent finalization of AFFH.

It’s true that Justice Kennedy’s opinion in the Texas housing case attempts to limit the reach of disparate-impact claims by allowing defendants to prove that their housing policies serve legitimate ends unrelated to ethnicity or race. It is even conceivable that with the case now remanded to the lower courts, the Texas Housing Department might ultimately win on the merits. Kennedy’s opinion also disallows housing remedies that amount to racial targets or quotas. Optimists believe that these limitations will soften the blow of the decision. There is reason to doubt that they will, however.

To achieve its social-engineering goals, the Obama administration will surely treat rational and non-arbitrary policies as unreasonable. And, for the most part, lower courts will agree with the administration, as they have long been more sympathetic to disparate-impact theory than the high court’s conservative justices have been.

Given Justice Kennedy’s lack of sympathy for affirmative action, it was widely assumed that he would reject disparate-impact principles in the Texas housing case. Why, then, should we now believe that he will draw a hard line against abusive disparate-impact litigation? Obfuscated surrender to pressure from liberals is his modus operandi.

And for all of its qualifications, Kennedy’s opinion approvingly identifies zoning law as the “heartland” of legitimate disparate-impact litigation in housing. Even in a mono-racial and mono-ethnic world, wealthy bedroom communities would move to limit apartment construction and other urbanizing development within their borders. Local zoning authority is the No. 1 target of the Obama administration, which favors stack-and-pack housing near metro stations and minimal public parking. Kennedy’s opinion can easily be used by any judge who wants to upend zoning laws on the basis of disparate-impact principles. It will be years and acres of reurbanization before this issue reaches the Supreme Court again. Should Kennedy still be there when it does, don’t expect him to reverse the federal takeover of local zoning authority.

That leaves politics as the only practical recourse. When Obama’s AFFH rule is finalized and his transformative ambitions become evident, they will raise a firestorm of protest on the right. Faint-hearted Republican politicians will hesitate to attack AFFH for fear of being called racist. Running away from this issue would be a mistake, however.

Fundamentally, AFFH is an attempt to impose economic integration. Race and ethnicity are being used as proxies for class, since they are the only means of social engineering provided by the Fair Housing Act. But in a recent Rasmussen poll, 83 percent of respondents said it was not the government’s job to diversify neighborhoods by income level, while only 8 percent said that it was. This is why the Obama administration and its allies have been so reluctant to talk about AFFH. If Republicans have the will to fight it, they can win.

With Hillary Clinton in line to entrench AFFH if elected, and with the rule set to be announced and administered by HUD secretary Julian Castro, widely touted as Clinton’s most likely running mate, Obama’s ambitious and controversial housing policy is set to become a significant issue in the 2016 presidential campaign. Only a Republican Congress working with a Republican president can stymie Obama’s transformative housing rule and limit the reach of disparate-impact theory by amending federal housing law. As with Obamacare, the ultimate decision on the president’s proposed restructuring of America has been remanded to the people.

– Mr. Kurtz is a senior fellow at the Ethics and Public Policy Center.

Stanley Kurtz is a senior fellow at the Ethics and Public Policy Center.

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