Trump’s fair housing repeal roils multifamily developers

This summer, President Donald Trump put low-income people on notice: The suburbs would be off-limits to them.

His administration repealed an Obama-era rule known as Affirmatively Furthering Fair Housing — a moment amplified by a series of tweets from the president declaring victory for suburbs across the country.

“I am happy to inform all of the people living their Suburban Lifestyle Dream that you will no longer be bothered or financially hurt by having low income housing built in your neighborhood,” President Trump tweeted in July. “Your housing prices will go up based on the market, and crime will go down. I have rescinded the Obama-Biden AFFH Rule. Enjoy!”

The move was a long time in the making. Federal regulators first suspended the rule, which created a framework for local governments to eliminate discrimination and segregation in their jurisdictions, in January 2018.

The primary reasons for the change, according to the Department of Housing and Urban Development, was that AFFH was “overly burdensome and costly” and overstepped the federal government’s authority over localities’ zoning and land-use decisions.

Trump’s tweet revealed what many have suspected is behind the resistance to multifamily development in the suburbs — an aversion to low-income housing and the racial integration that comes with it.

“We knew this was coming,” said Elaine Gross, founder of ERASE Racism, a Long-Island based organization that works to combat racism in local housing policy. “In the proposed rules, HUD was already giving a nod to municipalities that basically said, ‘Don’t worry, we won’t do anything to force you to integrate.’”

HUD, under Secretary Ben Carson’s watch, supplanted AFFH with a measure that allows localities to self-certify that they are abiding by fair housing laws. Opponents to the change argue that it could further embolden governments to keep exclusionary policies on the books. That could put multifamily developers at odds with the White House as they seek to build in suburban areas — at a time when demand for housing outside urban centers is on the rise.

The Trump administration’s fair housing rollback also puts some developers on the same side as Rep. Alexandria Ocasio-Cortez, usually an ardent opponent of the real estate industry. Ocasio-Cortez swiftly decried the fair housing rollback, and introduced legislation in the House of Representatives to block the change.

“We must hinder President Trump’s efforts to segregate communities and to discriminate against Black and brown homeowners and renters,” Ocasio-Cortez said in a statement. “We cannot return to the days of redlining and white flight.”

No as of right, out of luck

Localities around the country have long argued that the AFFH requirements were onerous and just created more red tape for communities to slog through.

Westchester County, for example, has long faced scrutiny for exclusionary housing practices, which culminated in the county repeatedly submitting reports to the federal government laying out how it solved the issue. The reports were rejected by the Obama administration, and then accepted by Trump’s in 2017.

In a recent interview with Fox News, President Trump called Westchester “ground zero” for Democrats’ efforts to “destroy the suburban, beautiful place.”

Under the 2015 rule, HUD required localities receiving federal funds for housing to analyze patterns of racial bias in their neighborhoods using data provided by the agency. Localities were required to make those findings public and then lay out plans to further reduce barriers to fair housing.

The position [Trump’s] taken seems contrary to everything I’ve seen and heard in my 50-year career.
Alan Hammer, Brach Eichler

“This idea that the federal government wouldn’t stand behind the efforts to upzone neighborhoods, to provide a mix of housing, to me is really heartbreaking,” Glenn Kelman, CEO of the national brokerage Redfin, told The Real Deal in August. “There’s just no way you can argue that schools, jobs, groceries, everything, can be separate but equal.”

Affordable housing developer Eli Weiss acknowledged that federal involvement in land-use decisions could delay projects and create additional costs. He also said he can understand why localities would want control over creating policies that encourage affordability and diversity.

“That all works in theory,” Weiss said. “But if we look at it historically, we wouldn’t have the affordable housing crisis that we’re in if everyone had looked closely at the issue.”

New York State’s policy of home rule means that each locality — there are 782 in New York’s Metro region — is responsible for its zoning. As a result, very few municipalities allow as-of-right multifamily development.

“It’s always been difficult to create low-income housing in the suburbs,” said Alan Hammer, who practices law at Brach Eichler and owns about 12,000 multifamily units in the Tri-state area. He added that Trump’s decision to rescind Obama’s fair housing requirement would further constrain low-income housing.

“The position he’s taken seems contrary to everything I’ve seen and heard in my 50-year career,” said Hammer, a close confidant of Charles Kushner and former acting chairman of Kushner Cos. “He’s taken that position for political reasons.”

This is 2020. People accuse the president of a white suburban dog whistle. There are minorities who live in the suburbs and outnumber whites in the suburbs in very many instances.
Lynne Patton, HUD

But Lynne Patton, head of HUD’s New York office, told TRD she doesn’t believe eliminating the AFFH rule will deter affordable housing development. She said HUD analyzed the country’s top 100 metro areas, by population and size, and found that 52 percent of African Americans, 60 percent of Hispanics and 62 percent of Asian Americans live in suburbs.

“I think the racially ignorant assumption by the mainstream media that only suburban whites live in the suburbs, only upscale whites live in the suburbs, is just not accurate anymore,” Patton argued.

“This is 2020,” she noted. “People accuse the president of a white suburban dog whistle. There are minorities who live in the suburbs and outnumber whites in the suburbs in very many instances.”

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The home value proposition

William Case, CEO of Cincinnati-based home lender American Mortgage Service, said the pendulum may have swung too far in favor of allowing localities to hinder affordable, low-income and multifamily development.

“It’s probably weaker than it needed to be,” he said. “I believe that some of the actions being taken are purely political.”

In April, for example, a developer sued the city of Warner Robins in Georgia for blocking a 90-unit rental project funded, in part, by low-income housing tax credits. The lawsuit alleges that opposition to the project was “driven in part by racial animus” and a desire to prevent low-income housing in the community.

The developer, Woda Cooper Companies, maintains that the city failed to adhere to its pledge affirmatively further fair housing — a condition of receiving certain federal funds — when it rejected the project.

In one of several incendiary tweets, Trump suggested that low-income housing depresses property values in the suburbs.

But Katherine O’Regan, who spent three years at HUD during the Obama administration and now teaches public policy and planning at New York University, said there’s no reason to believe that revoking AFFH will increase property values.

In 20 of the least affordable real estate markets around the country, including San Francisco and New York, for example, low-income housing had virtually no effect on home values between 1996 and 2006, according to a 2016 study by Trulia.

Using fear to address housing issues, at a time when communities are figuring out what investments to make while grappling with the pandemic, is “highly problematic,” O’Regan argued.

“Where housing gets created, where you invest in infrastructure, in communities, designing things and changes to schools, all of those come up for grabs,” she said, likening the president’s comments to neighborhood busting and racial steering in the 1960s and 1970s.

Nevertheless, lowering property values “can be a self fulfilling prophecy if you get people very afraid,” O’Regan added. People in such communities could potentially flee, fearing change in their neighborhood because they perceive their property values will be negatively affected.

“It’s a circular logic,” O’Regan said. “If a bunch of people leave a neighborhood, the property values will actually go down.”

Unintended outcomes?

But by making exclusionary zoning more about keeping low-income housing out — rather than having too much paperwork — Trump’s comments could actually boost arguments for fair housing, according to several housing advocates.

The polarizing rhetoric could even drive voters to the polls in November, said Jolie Milstein, CEO of the New York State Association for Affordable Housing.

“I think change is coming,” Milstein maintained. “The current president making those statements is almost helpful to the fair housing movement, because the kimono is open and we’re really seeing what the thinking is.”

Joseph Kriesberg, president of the Massachusetts Association of Community Development Corporations, echoed that sentiment. He said the president’s comments “laid bare what is driving some opposition to affordable housing” and noted that Trump’s remarks could make it easier for advocates to call out opponents of development for using euphemisms such as “preserving the character of the neighborhood.”

“We have a lot of suburban communities that vote very liberally — the stereotype is that they have a Black Lives Matter poster in front of their mansions,” Kriesberg said of residents in the Boston area. “Then they’ll oppose new rental housing.”

While the 2015 AFFH rule was repealed, jurisdictions are still required under the 1968 Fair Housing Act to “affirmatively further fair housing.”

Under HUD’s new measure, local governments fulfill this requirement through “any action rationally related to promoting” fair housing, which is defined as “affordable, safe, decent, free of unlawful discrimination, and accessible under civil rights laws.”

O’Regan noted that this broad definition could expose localities to litigation, since HUD is no longer signing off on their housing practices.

“For those who don’t want any burden, don’t want to do any analysis and simply don’t care about fair housing issues, it might sound like that’s a gift,” she said. “I would be a little bit worried if I was a jurisdiction: What standards am I held to? What kind of a process is supposed to be behind that self-certification?”

O’Regan added that while current leadership at HUD may not challenge problematic self-certifications, future leadership could reverse course. Democratic Presidential nominee Joe Biden has already indicated that he would re-implement the AFFH rule if elected.

Kriesberg argued that AFFH isn’t a silver bullet for resolving policies that perpetuate racism. The rule provided a framework for localities to use federal funding in a way that promoted fair housing. Governments that already strive to be proactive about rooting out segregation will likely continue to do so, he said, while others will maintain the status quo.

“There’s nothing stopping us from changing,” he said. “It is just that HUD isn’t going to push us.”