'Fair' housing or 'social engineering'? HUD proposal stirs controversy.

America's central housing authority has long sought, at Congress's behest, to "affirmatively further fair housing." But a new rule proposed by HUD is a bridge too far in that direction, say small-government proponents and other critics, who see it as an effort by the Obama administration to force communities to diversify in ways that may hurt local property values, their tax bases, and their overall economies.

The rule itself, proposed by the US Department of Housing and Urban Development, merely authorizes HUD to send to local zoning bodies more data about racial and economic disparities in their communities. It does not prescribe policy, but it does say that municipalities should use the data to guide zoning, land use, transportation planning, and financing so as to "proactively ... overcome historic patterns of segregation ... and foster inclusive communities for all." HUD is currently accepting public comments about the proposed rule.

The new rule is intended “to provide municipalities with data about who lives there, how segregated an area is, whether there are good schools, transportation networks, is it friendly for families with children – all kinds of data that pertain to protected classes under the Fair Housing Act,” says Lisa Alexander, a housing policy expert at the University of Wisconsin Law School. “If we have an area of concentrated poverty, we want to encourage more middle-class people to come in, and we might be able to use that data to create some middle-income housing or do mixed finance housing with some market-rate units, some low-income units.”

In some ways, the tack is nothing new. In a succession of housing laws since the early 20th century, Congress has given HUD broad power to shape how and where Americans live, in large party by how it administers so-called Section 8 housing benefits to low-income Americans. But critics say that it's one thing for the federal government to root out existing housing discrimination, and quite another to pressure cities and counties to create, at the onset, communities or neighborhoods that are more inclusive and diverse.

At the root of the issue is poverty, and specifically where poor people live. A chief common denominator of poverty is socioeconomic segregation, and HUD officials say the proposed rule will allow it and local governments to address such segregation more deeply and seriously.

"Unfortunately, in too many of our hardest-hit communities, no matter how hard a child or her parents work, the life chances of that child, even her lifespan, is determined by the ZIP Code she grows up in. This is simply wrong,” HUD Secretary Shaun Donovan said last month.

The proposed rule comes as the US Supreme Court is set to hear next term a Fair Housing Act case out of New Jersey that could broaden HUD’s authority to demand that local housing policies not have a disproportionately negative impact on poorer communities.

In addition, the change comes amid an ongoing controversy over a desegregation settlement stemming from a 2009 lawsuit between the Obama administration and New York's Westchester County, in which the county agreed to build 750 affordable houses and flats in majority-white communities and market them to nonwhites currently living in New York City. Earlier this year, HUD threatened to withhold $7.4 million in low-income housing funds from the county, accusing officials there of ignoring the settlement and continuing with a pattern of housing discrimination against poor minorities.

Fair housing advocates say Westchester County, whose residents boast one of the highest average incomes in the nation, has failed to meet the broader goal of the agreement – to change the racial and socioeconomic ratios in middle-class neighborhoods. But local officials and critics say HUD is seeking to impose its will by making “outrageous demands” outside the original agreement.

“Washington bureaucrats, who you will never see or meet, want the power to determine who will live where and how each neighborhood will look,” Westchester County executive Robert Astorino said in April, as reported by The New York Times. “What’s at stake is the fundamental right of our cities, towns, and villages to plan and zone for themselves.”

HUD’s approach is problematic, critics say, because it implies that local zoning ordinances are racist and designed to keep the poor down, although the facts may paint a more complex picture. Some communities resistant to incorporating more Section 8 housing, for instance, cite studies that show crime rates go up when large numbers of Section 8 recipients move into new areas, says James Bovard, author of the book “Freedom in Chains.” That can pull down property values – the foundation of many Americans’ wealth and a cause of constant concern.

Moreover, causes of poverty go far beyond ZIP Codes, critics say. Sub-par schools, draconian drug-war laws, and welfare programs that split up families “should all be considered long before we start blaming a ZIP Code for poverty,” says Jim Babka, president of Downsize D.C., which lobbies for less centralized government.

“HUD has often acted like it somehow received a right from God to dictate how Americans should live, and this latest edict is one more example of that,” says Mr. Bovard, a libertarian author and commentator. “This is a great example of how they’re trying to change the rules and get a whole new definition of fairness that will give them far more arbitrary power.”

The larger questions are how much would the new rule actually change the racial and economic composition of American neighborhoods? And, would zoning and investment decisions continue to be made by local elected officials or, rather, by regional appointed officials, whom critics decry as "central planners" (evoking the bygone era of central planning by the now-defunct Soviet Union)?

“I can’t even begin to imagine the kind of corruption in a system like that,” says Mr. Babka.

Others say such concerns are alarmist poppycock. America is already comfortable with a government role in setting everything from housing to business patterns, say some housing experts who see a necessary interplay between private markets and government strictures.

HUD's proposed new rule is “not mandating outcomes and telling people they have to live somewhere, but trying to create housing options,” says Ms. Alexander, at the University of Wisconsin. “If that’s social engineering, maybe it’s social engineering. But it’s no different from the way in which a municipality may try to attract businesses through tax incentives. It seems consistent with that kind of planning.”