The Dream Revisited

The Unintended Consequences of Fair Housing Laws

by Richard A. Epstein | April 2015

Alan Jenkins, the Executive Director of the Opportunity Agenda, has written an all too one-sided defense of the Fair-Housing Laws.  His major error is to assume that the goals of the law, however laudable, can be achieved by the coercive means that the government wishes to launch against it. The legal issue at stake in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, is whether it is possible to prove a violation of the Fair Housing Act of 1968 without producing any evidence of an intention on the part of government authorities to engage in acts of discrimination.

I have written at length of the technical aspects of this case elsewhere, and the complex statutory framework in which the federal government closely monitored the distribution of federal funds into certain low-income areas. It simply challenges credibility to think that the Texas Department violated the Fair Housing Act because of its good faith effort to comply with the complex dictates of The Low-Income Housing Tax Credit Program.  Yet, imposing any comprehensive federal judicial oversight on how Texas should run its program would require a huge expenditure of state and national funds that could be spent far better in dealing with the housing needs of the poor. It is simply false to assume that a statement of laudable ends of social and racial integration insulates the means chosen from criticism by those on the other side. 

Indeed in Inclusive Communities, the real culprit is the US Department of Housing and Urban Development (HUD) whose key regulations make hash of the much narrower statutory language. Even if Mr. Jenkins were correct on the need for a disparate impact standard, which he is not, it would not be appropriate for HUD to unilaterally change the law. That responsibility lies with Congress. Yet before acting, Congress should ask whether the Fair Housing Act has had the unambiguously favorable consequences that Jenkins attributes to it.  On that score, the picture is more complex than his glowing defense of the law suggests.

Here are some of the complications.  The first question is whether the Fair Housing Act has in fact been able to do two things:  break patterns of segregation and increase the levels of affordable housing for working class families.  It is hard to give a clear verdict on the first of these questions because wholly apart from the passage of the Fair Housing Act, there have been major changes in social attitude on a wide range of questions that operate independently of the law. Allocating the influence that each of these sources has on changes in residential patterns is difficult to do. That task becomes especially demanding over time, given that the major gains from the enforcement of the Fair Housing Act occurred during the early years after its passage.  The questions of de facto segregation, its causes and effects, is much more difficult to disentangle.

Second, there is no reason to think that any affordable housing program works to achieve its intended goal of expanding housing opportunities for poor and working class families.  These programs are beasts to run because they require extensive and continuous oversight of rental units to see that the right applicants are slotted into the right groups.  Indeed it is uncertain whether the Fair Housing Act has led to any, let alone significant, increases in the level of affordable housing for low-income families. It is hard to believe that these low-income housing programs will crank out more affordable housing units if they are saddled with an additional layer of rules and regulations.

The situation is only more difficult because a rigorous affordable housing regime requires that resumes be updated to take into account shifts in income and family status after the individual units are rented. The entire process slows down the renting of new units, and thus the willingness of developers to expand the total supply of housing units. There is no more congested housing market than New York City, where aggressive enforcement of affordable housing programs tends to drive developers from the residential real estate market into the commercial market, where these restraints are not present.

There is a clear moral from the unhappy experience of skyrocketing rents in New York, which imposes heavy burdens on new arrivals to the City’s tight housing market.  Yet Mr. Jenkins does not have a kind word to say about the ability of markets to expand housing opportunities.  In so doing, he ignores the most powerful change agent in society.  What is needed is for heavily regulated communities like New York City to cut back on their ornate approval processes so that new housing projects can start with a minimum of time and effort.  There are all too many efforts to deride “trickle-down” housing. But that unfortunate epithet should not be allowed to conceal this essential truth.  The best and surest way to drive down housing costs is to increase the available supply of housing units, which in a place like New York City means an elimination of rent stabilizationprograms and slimming down the permitting process. The race-targeted initiatives championed by Mr. Jenkins come in a distant second place.

Richard A. Epstein is the Laurence A. Tisch Professor of Law at the New York University School of Law, The Peter and Kirsten Bedford Senior Fellow, the James Parker Hall Distinguished Service Professor of Law (Emeritus) and Senior Lecturer at The University of Chicago, and the Director of the Classical Liberal Institute at New York University. He tweets at @RichardAEpstein.

More in Discussion 13: The Future of the Fair Housing Act