Banking Law

Trump Administration Repeals Obama-Era Fair Housing Rule (1)

July 23, 2020, 7:00 PM; Updated: July 23, 2020, 7:46 PM

The Trump administration officially repealed an Obama-era rule requiring communities receiving federal housing grants to take steps to eliminate housing segregation, and replaced it with a weaker standard that would allow municipalities to self-certify their efforts.

The U.S. Department of Housing and Urban Development on Thursday announced the termination of the 2015 rule, which it called “complicated, costly, and ineffective.” The new final rule isn’t open for public comment because HUD obtained a waiver from the Office of Management and Budget that exempts rules related to grants from Administrative Procedure Act requirements.

The Obama-era rule required that any community that gets federal block grants from HUD to complete a comprehensive Assessment of Fair Housing. A poor review could have led to reductions in those block grants, potentially costing communities billions of dollars in withheld funds if they did not put in place an effective anti-segregation plan.

HUD’s new rule, called Preserving Community and Neighborhood Choice, changes the definition of fair housing to be “affordable, safe, decent, free of unlawful discrimination and accessible under civil rights law.”

Any community would have access to federal housing grants if it self-certifies that it has gone above statutory minimums on any of those factors. HUD would still be able to terminate funding if it discovers that a community has not lived up to that self-certification, the rule said.

HUD’s new rule comes amid a heated 2020 presidential campaign, where President Donald Trump has specifically targeted the 2015 rule.

“The suburb destruction will end with us,” Trump said in a statement issued by the White House.

Jesse Van Tol, the CEO of the National Community Reinvestment Coalition, said the new rule removes “any real enforcement or any real oversight of affirmatively furthering fair housing.”

“The president was pretty transparent about his goals, and his goals are political,” Van Tol added.

Former Vice President Joe Biden, the presumptive Democratic presidential nominee, has said he will reinstate the 2015 rule should he win the 2020 election.

Skipping Steps

The Trump administration has long worked to repeal the Obama administration rule, which was required by the 1968 Fair Housing Act.

HUD in 2018 suspended a 92-question test that communities had to answer in order to get access to federal housing funds, effectively putting the 2015 regulation on hold.

In January, HUD released a proposal to further revamp the Obama-era rule, but that rulemaking effort has been scrapped in favor of repealing the regulation.

The rule issued Thursday is final despite not going through the regular notice and comment procedures. That could open it up to legal challenges from states and fair housing groups.

“There are quite a few rulemaking procedural irregularities here, all of which make me strongly believe that there was a predetermined decision by HUD and the Trump Administration to rush this rule out,” said Amit Narang, the regulatory policy advocate at Public Citizen.

HUD’s use of the the waiver process would likely survive a legal challenge, even though it’s a step rarely taken by federal regulatory agencies, said Kent Barnett, an administrative law professor at the University of Georgia School of Law.

But it could make it easier for opponents to argue that the new rule is arbitrary and capricious, he said.

“By not having engaged with notice and comment here, the agency may leave itself open to the objection that it failed to consider important aspects of the problems that its new approach seeks to correct,” Barnett said in an email.

(Updates with comments from community advocates in paragraphs 8,9 and 15. )

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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