Academic journal article Cityscape

Commentary: Encouraging Housing Equity

Academic journal article Cityscape

Commentary: Encouraging Housing Equity

Article excerpt

On the 40th anniversary of the Community Reinvestment Act (CRA)1, it is worth thinking about how federal regulations have worked to address inequities in housing markets. The civil rights movement launched a period of activism and optimism for government intervention into housing discrimination, leading to the passage of The Fair Housing Act (FaHA)2 of 1968 and the 1977 CRA. FaHA and CRA share some common traits; they are both federal regulatory tools that rely on a notion of minimum obligation and encourage innovations that promote greater access by lower-income and protected-class households to housing and economic opportunities. In addition, both statutes employ sanctions to motivate regulated entities toward nondiscriminatory behavior and help establish standards for what is considered responsible behavior in housing markets.

This article reviews the similarities and differences between one significant component of FaHA, the 2015 Affirmatively Furthering Fair Housing (AFFH) rules, and CRA. Substantial evidence suggests that CRA has had a positive impact on home lending practices (Apgar and Duda, 2003; Bhutta, 2008), despite the fact that it has often been laxly implemented over the years (Immergluck, 2004; Silver, 2016). It is too early to say definitively whether or not the 2015 AFFH regulations will generate such an impact. By examining AFFH alongside CRA, however, it is possible to identify a number of structural and design characteristics of the rules that may limit their effects.

Most critically, AFFH is limited by the fact that its primary potential sanction-the withholding of funding from the U.S. Department of Housing and Urban Development (HUD)-may not prove much of a consequence to the local governments against which it is most likely to be applied, a problem exacerbated by continual declines in HUD funding. It is unclear whether such a sanction would ever be exercised, and it is unclear whether the offending localities would be likely to care much if it was. Conversely, CRA's main sanctions-the possible delay or denial of a bank merger or acquisition and also the risk to a bank's reputation for being socially responsible-are significant, if underutilized, consequences that can be used to encourage compliance from most banks and savings institutions.


The AFFH provision, originally part of FaHA, has often been viewed as a dead letter. Until the 2015 AFFH rule was produced, the provision was criticized for weak implementation and enforcement. In particular, the Analysis of Impediments (AI) process, which was supposed to identify barriers to fair and affordable housing in a jurisdiction, has been characterized as ineffective (GAO, 2010; National Commission on Fair Housing and Equal Opportunity, 2008). AIs frequently were issued with minimal critical oversight and effectively no community engagement. AIs were not required to be submitted to or reviewed by HUD, and compliance with the AI process was weak. GAO (2010) examined more than 400 AIs and found that 29 percent of entitlement communities' AIs were more than 5 years old. Many AIs did not include timeframes for implementation, and top officials did not sign off on others. More fundamentally, the sense that the AI process generated improvements in fair housing across the U.S. is scarce.

With the advent of the new AFFH rules in July 2015, the idea that local jurisdictions might take the AFFH provision more seriously holds some promise. However, the AFFH rules suffer from a variety of limitations, some of which are the creatures of the FaHA statute, the result of the structure and design of the regulations, or derived from fundamental issues of power relations between the regulator and the regulated party. Comparing the AFFH process with that of CRA serves to illustrate some of these limitations.

In a general sense, FaHA and CRA have some similarities. Arguably, both statutes have helped promote a more socially responsible business culture that has influenced housing markets in important ways. …

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