Breaking Down Barriers: HUD Proposes New Fair Housing Rule

Communities May Face an Opportunity to Advance Equity through Planning, the Second New Fair Housing Rule in Less Than 10 Years.

On February 19, 2023, the U.S. Department of Housing and Urban Development (HUD) published a Notice of Proposed Rulemaking (NPRM) for a new Affirmatively Furthering Fair Housing (AFFH) rule intended "to remedy the effects of the long history of discrimination in housing" and "fully enforce the Fair Housing Act."1  The proposed rule includes several components similar to the previous 2015 AFFH rule, requiring any jurisdiction receiving federal HUD funds to study and report on the barriers to fair housing and to identify strategies to reverse housing inequity in their communities. Fundamental changes relate to streamlining and simplifying compliance, partly in response to criticism that the 2015 rule was too cumbersome for jurisdictions. Jurisdictions will be required to undertake significant planning, analysis, policy, and solutions development to effectively comply with the rule and ensure equitable outcomes for all residents, though the new rule intends to streamline these activities. HUD proposes to restore much of the structure of the 2015 AFFH rule while streamlining the required data analysis for participants as well as adding features that are intended to enhance the effective implementation. HUD requested feedback from the public on this draft rule through April 2023, but the expected timeline for the completion and implementation of the rule has not been set.


History of HUD's Fair Housing Rule

The AFFH mandate of Section 808(e)(5) of the Fair Housing Act of 1968 requires that the Secretary of HUD administer the agency's programs in a manner that affirmatively furthers fair housing. The Fair Housing Act prohibits housing discrimination and promotes desegregation. The Act also requires, through the AFFH mandate, that federal agencies and funding recipients take proactive steps to address long-standing segregation, discrimination, and disinvestment patterns. As the provider of federal housing and community development dollars (including entitlement programs Community Development Block Grant (CDBG), HOME Investment Partnership Program (HOME), Emergency Shelter/Solutions Grant, and Housing Opportunities for Person With AIDS), HUD is required by law to ensure that its grantees are affirmatively furthering fair housing. The proposed 2023 AFFH Rule is HUD's second significant approach to executing the Act's AFFH mandate.

In 1995, HUD adopted a rule requiring that grantees — state and local governments —  conduct an Analysis of Impediments (AI) to Fair Housing Choice. The AI is a required submission through the planning processes necessary for entitlement communities to access formula funds from HUD. The Obama Administration instituted a more robust AFFH Rule in 2015 in response to a Government Accountability Office finding for HUD related to the effectiveness of enforcement. 

Among other provisions, the 2015 AFFH Rule required that jurisdictions receiving HUD funds open a public process to assess how they planned to address fair housing issues and to target federal resources to increase access to housing choice and opportunity. However, in 2020 the Trump Administration suspended the 2015 Rule and issued the “Preserving Community and Housing Choice” Rule, which the Biden Administration rescinded in 2021. 


Connection Between the AFFH Rule and HUD Funding

The 2015 AFFH Rule received some criticism from advocates for being too onerous for municipalities and, in some cases, for not having sufficient enforcement power to execute on its purpose. In response, the proposed 2023 AFFH rule will now require grantees to develop an AFFH Equity Plan every five years. The proposed rule also requires jurisdictions to incorporate their AFFH Equity Plan goals into their HUD-required Annual Action Plans, 5-Year Consolidated Plans, and Public Housing Agency Plans. These plans are all required for jurisdictions to receive HUD funds. Grantees must demonstrate to HUD that they are proactively working toward achieving their stated fair housing goals – or risk the loss of critical HUD funding. The Action Plans include certifications for consistency across plans, including Public Housing Agency Plans and, if finalized, the Equity Plan. While the 2015 AFFH rule created a framework for HUD to deny federal entitlement funds to jurisdictions that did not sufficiently complete the Assessment of Fair Housing, HUD received feedback that its enforcement mechanisms were unclear. This rule intends to correct for this issue by clarifying enforcement provisions.   


Key Provisions of the Proposed AFFH Rule

The primary goal of the 2023 proposed AFFH rule is to ensure that federal funds are leveraged appropriately and equitably "to overcome patterns of segregation in housing and give every American family a fair shot," as stated by President Biden. The proposed rule has several key features that are similar to the 2015 rule, but also some new components. Fundamental changes relate to the streamlining of the analysis and clarifying compliance procedures — changes made, in part, in response to criticism that the 2015 rule was too cumbersome for jurisdictions and missing clear enforcement mechanisms. The core provisions of the 2023 proposed rule are as follows:

Enhanced community engagement, consultation, and publication — The proposed 2023 AFFH rule modifies the 2015 obligation to carry out "community participation" that was not strictly defined and was interpreted broadly. The new definition of "community engagement" actively seeks input from all community members in identifying fair housing issues and deciding how available resources are allocated in their community. Grantees will be required to consult with a more specific and diverse range of community members and hold meetings in various settings, formats, and times. The proposed rule also requires that grantees provide more information about community engagement efforts, create a central public website, and allow the public to submit information directly to HUD.

Streamlined analysis The proposed rule simplifies the 2015 requirements regarding the rules of analysis for grantees examining their local fair housing issues. Under the proposed rule, the Equity Plan replaces the Assessment of Fair Housing (AFH) that was required by the 2015 Rule. The Equity Plan consists of fewer questions than previously required by the AFH, and grantees now have a broad framework to leverage setting their own goals vs. a specific set of questions. Notably, the 2023 AFFH Rule eliminates the required Assessment Tool, which included an analysis of 40 contributing factors, which HUD defines as impact barriers to fair housing. This approach aims to reduce the administrative burden on program participants. Equity Plans will be publicly shared, allowing participants to learn from others. HUD reiterates its commitment to providing data and facilitating and providing technical assistance to grantees when developing and reporting on their Equity Plans. 

Greater focus on fair housing goals The proposed rule differs significantly from the 2015 AFFH rule in that it emphasizes HUD's evaluation of program participants' objectives, which are intended to promote fair housing results. The rule requires program participants to answer questions about fair housing issues in their community, and while the questions do not specify the content or length of responses, participants may need to do more analysis to respond adequately. HUD's review of the program participants' answers will entail confirming that the program participants identified the fair housing issues indicated by HUD-provided data and data from community engagement. HUD will also review the participants' fair housing goals and determine whether they are designed to overcome the identified fair housing issues and produce meaningful fair housing outcomes for various protected class groups in the program participant's underserved communities. The review will not focus on the volume of written analysis but on identifying fair housing issues and establishing realistic fair housing goals.

Enhanced flexibility for HUD to improve plans — The proposed rule enhances HUD's flexibility to improve Equity Plans by providing more time to work with program participants and ensure compliance. The 2015 rule’s review option and requirement to link directly to other plans, such as the Public Housing Agency (PHA) Plan, provided only two real scenarios for HUD — acceptance or rejection and cutoff of funding. Given these options, HUD ultimately accepted every plan. Under the new proposed rule, if HUD does not accept a grantee's Equity Plan by the deadline, grantees can provide assurances to revise their plan within 180 days. The proposed rule revises the review timeline to allow HUD 100 days to address noncompliance and approve a Consolidated Plan or PHA Plan without an accepted Equity Plan, though the grantee must provide special assurances that the Equity Plan will be achieved within the timeline. This clarification of timing to resolve deficiencies intends to provide both enforcement authority and flexibility to work with program participants. HUD also requires annual progress reports and a more transparent review process to reduce funding risks and provide technical assistance. 

More direct linkage with other planning documents Consistent with the 2015 rule, the fair housing goals of the Equity Plan must also be incorporated into subsequent planning documents such as the Consolidated Plan, Annual Action Plan, and Public Housing Agency Plan (or any plan incorporated therein), so that program participants can appropriately allocate necessary funding for the implementation of fair housing goals. Grantees will be expected to continue to set goals in subsequent planning cycles to address ongoing fair housing issues in ways that will accomplish the required material positive change. Grantees are also required to report annually on progress toward meeting their fair housing goals. HUD highlights this area as a feature of the 2023 rule, however there is not a material change in linkage to other plans from the 2015 rule.

More transparent process for HUD review The proposed AFFH rule will make the Equity Plans development process more transparent by allowing public access to all submitted plans, information on HUD's decision on Equity Plan acceptance, and program participants' annual progress evaluations. This was not part of the 2015 rule. The added transparency is expected to increase public engagement in local fair housing planning and resource allocation. 

Clear tracking for fair housing goals — Under the proposed Rule, there is a requirement for program participants to conduct annual progress evaluations of their fair housing goals and submit them to HUD for public access. The evaluations will help keep the implementation of fair housing goals on track and allow for modifications of goals if circumstances change. With HUD’s permission, the proposed AFFH Rule allows program participants to submit a revised Equity Plan that modifies goals or sets new goals if circumstances change or if the established goal has not been accomplished. However, HUD will not grant permission to alter goals if the program participant is simply choosing not to take necessary steps. This provision is expected to encourage program participants to set ambitious goals and account for contingencies.

Increase accountability through complaint and enforcement — The 2023 AFFH rule permits members of the public to file complaints and for HUD to open a compliance review about a program's failure to comply with the Equity Plan commitment or related activities. The new rule also sets forth a procedure for investigating complaints and compliance reviews, modeled after Civil Rights laws. This is a new element, as the 2015 AFFH rule did not include specific methods for the public to file complaints. In the 2023 AFFH rule, HUD maintains a range of compliance mechanisms to provide a clearer pathway for resolving findings. HUD specifically requests feedback on implementing a complaint and compliance review process most effectively. 


Impact on Communities

It is significant that HUD has reinstated the AFFH rule and is seeking to improve upon the 2015 rule based on feedback from participating jurisdictions. 

The new proposed rule includes several elements that will increase transparency to the public while also creating a higher level of accountability for agencies. Incorporating any significant regulatory change in a time when state and local entitlement communities are stretched thin will require focused and coordinated work. The more extensive engagement requirements are positive for providing input and transparency for the public. They will require a specific capability on the part of local agencies, but also an opportunity for agencies to build on the recent work undertaken to spend federal resources, set up appropriate infrastructure, and support their communities in recovering from the COVID pandemic and related challenges.  

Second, the compliance impacts of the proposed rule will specifically permit HUD to open a compliance review in response to a complaint or on its own initiative and then establish a procedure to investigate and conduct compliance reviews. Opening a clear public complaint process may shift the risk analysis for agencies related to this process, placing workload on agencies to navigate the complex issue. When the 2015 Rule was implemented, communities had not yet experienced the impacts of the COVID-19 pandemic. Now government agencies are managing a large volume of new federal programs with different requirements through programs, including the American Rescue Plan Act (ARPA), the Bipartisan Infrastructure Law, and the Inflation Reduction Act.  

This proposed rule presents both a challenge and opportunity for jurisdictions. The challenge is the addition of complex rules. However, if approached by building on the work communities have undertaken through implementing COVID recovery programs funded by ARPA and others, agencies can leverage this moment to increase public engagement, transparency, evidence-based planning, and collaboration. These efforts will advance the important goals of reducing housing discrimination and can lead to enhanced and focused use of federal dollars.


How Guidehouse Can Help

Guidehouse is a trusted partner of numerous state and local governments, providing comprehensive support with federal grants management and policy support. Guidehouse's team of housing subject matter experts and federal policy experts are equipped to support program participants in developing and implementing community-based housing solutions to comply with the proposed rule. Guidehouse can support with:

  • Planning and strategy for complying with AFFH
  • Data collection and analysis
  • Federal policy support
  • Community and stakeholder engagement
  • Technology and tools for program support
  • Development of Equity Plans
  • Continued assistance with the conformance between Equity Plans, Consolidated Plans, Annual Action Plans, and Public Housing Agency Plans 

We know that successful community-based housing solutions incorporate cross-functional approaches, partnerships, and multiple funding streams, and we work diligently in partnership with our clients to achieve this. AFFH presents challenges but also great opportunities that, if applied right, will strengthen our communities and enhance access to opportunity.


This article is authored by Laura Slutsky.

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