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Disparate Impact Helps, Not Hurts, Fair Lending

In this, the 400th year since the first enslaved Africans were brought to the shores of Jamestown, Virginia, many Black Americans have noted the many changes and advances that our forefathers were denied. A series of 1960s federal legal protections collectively known as civil rights legislation addressed the ills of discrimination in education, employment, public accommodations, voting rights, and fair housing.

Despite decades of legal assurances, discrimination still continues, encouraged with a one-two punch of regulatory rollbacks and dwindling enforcement. Particularly when it comes to fair housing, regressive assaults are attempting to diminish, if not eliminate many hard-won rights.

For example, disparate impact, a long-standing protection that is deeply rooted in the law holds that landlords, real estate companies, municipalities, banks, and insurance companies should choose policies that apply fairly to all consumers. This protection has played an essential role in enforcing the Fair Housing Act, helping to ensure that harmful, inequitable, and unjustified policies are either prevented or recognized

For all housing stakeholders, disparate impact has resulted in fairer outcomes but must also be preserved if we as a nation are to continue along this progressive path towards fair housing.

An April 11 op-ed penned by Rep. William Lacy Clay noted the importance of disparate impact to achieving real fair housing.

“At a time of increasing racial division, a rise in hate crimes, and persistent disparities in the housing market, we must recommit to the promise of the Fair Housing Act to prevent discrimination and open housing opportunities for all,” wrote Rep. Clay. “This is precisely why the Trump administration’s attack on a critical fair housing enforcement tool is so problematic.”

Weeks later Nikitra Bailey, an EVP with the Center for Responsible Lending, noted in testimony delivered on May 8 at a Capitol Hill hearing, “Today, African-Americans have the same rates of homeownership as they did in 1968.” Bailey added that “the white homeownership rate is 73.2% compared to 41.1% for African-Americans and 47.4% for Latinos.”

“The federal government’s role in fostering mortgage lending discrimination significantly contributes to the differences in today’s homeownership gaps between whites and people of color”, continued Bailey. “Strengthening our nation’s fair lending laws are a necessary step to address these disparities and close the racial wealth gap.”

Beyond homeownership’s racial disparities, the National Fair Housing Alliance (NFHA) found that more than a half million housing discrimination complaints have been processed since 2006, and further that most instances of housing discrimination are unreported. NFHA asserts, “[t]he biggest obstacle to fair housing rights is the federal government’s failure to enforce the law vigorously.”

“Homeowners have used disparate impact to successfully challenge policies that redlined communities of color”, said Lisa Rice, NFHA’s President and CEO, in a recent op-ed column. “Mortgage applicants of color have benefitted from its use in preventing discriminatory lending criteria. This protection has helped victims of domestic violence to retain housing when nuisance ordinances threaten to evict them for making calls to law enforcement to report abuse.”

With Rep. Clay, Ms. Bailey and Ms. Rice agreeing that disparate impact is an important component of fair housing, modifying or weakening this proven approach would be as ill-advised as it would be unnecessary. Further, it is a standard that has been in place under the Fair Housing Act for more than 40 years and was later affirmed by the U.S. Supreme Court in 2015.

In short, disparate impact is accepted and respected as settled law. Turning HUD’s existing civil rights regulations backward would bring costs and broad uncertainty that will not help consumers, lenders, or the nation. Lenders already comply with the measure, agreeing that it is an important fair lending tool.

“Racial disparities in education, employment, healthcare, transportation, the environment, and policing will be more difficult to challenge if this tool is weakened,” concluded Rep. Clay. “It is important to first stem the damage to fair housing enforcement, because other areas of civil rights are next in this administration’s sights.”

Charlene Crowell is the communications deputy director for the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

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