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60 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT In the Zone A Harvard study analyzed legislative efforts to remove barriers to homeownership and found a correlation with land-use laws. A new study from Har- vard University's Joint Center for Housing Studies analyzed the efforts over the past five decades to remove barriers to home- ownership, and certain zoning regulations that have harmed affordability. The author, Michael Stegman of Harvard University, said there have been at least five efforts to alleviate or lift housing barriers. "Each is based on the proposi- tion that unnecessary land use regulations drive up production costs and drive down hous- ing supply, especially for starter homes and affordable apartments," Stegman said. "Generally, regula- tory barriers include such things as 'land use restrictions that make developable land much more costly than it is inherently, zon- ing restrictions, off-street parking requirements, arbitrary or anti- quated preservation regulations, residential conversion restrictions, and unnecessarily slow permitting processes.'" The most recent attempt to cure affordability issues is President Donald Trump's White House Council on Eliminating Regulatory Barriers to Affordable Housing, which is chaired by Ben Carson, Secretary of the U.S. Department of Housing and Urban Development. The council was created by an executive order in June 2019. Stegman wrote that the council has a year to "identify practices and strategies that most suc- cessfully reduce and remove burdensome federal, state, local, and tribal laws, regulations, and administrative practices that arti- ficially raise the costs of housing developments, while highlighting actors that successfully implement such practices and strategies." According to the report, the number of state-level regulatory barriers increased by nearly half between 1980 and 2010. Also, HUD estimates that the effects of 40 years of housing regulations have added anywhere from $850 million to $2 billion in addi- tional yearly costs to the Housing Choice Voucher Program. "In my judgment, the ineffec- tiveness of these previous federal initiatives is in large part due to underestimating the national implications of not addressing the problem, and to policymak- ers' collective judgment that the political pain associated with these initiatives considerably ex- ceeds the benefits that might flow from the modest policy agendas that have resulted from them," Stegman said. What lies ahead? Stegman said there is a "ideological and political consensus" emerging that exclusionary zoning and related development barriers decrease housing affordability by halting supply and increasing prices. The cities of Chicago, Seattle, Sacramento, and Tacoma, as well as the state of Massachusetts, have begun removing restrictions, thus fostering more affordable housing opportunities, and implementing transit-oriented zoning ordinances, and speeding up permitting and construction processes. However, markets in Oregon and Minnesota have passed measures prohibiting single- family zoning in an effort to build affordable housing through duplexes, triplexes, or housing clusters. Analyzing Algorithms HUD plans to address the role of algorithms in providing mortgage loans through an amendment to the Disparate Impact Rule. A s technology begins to play a more important role in the hous- ing market, the U.S. Department of Housing and Urban Development (HUD) has proposed to address the role of algorithms used by industry businesses in an amendment to is Disparate Impact ruling under the Fair Housing Act. The amendment is based on a 2015 Supreme Court ruling in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The Supreme Court had interpreted that under the ruling, the policy identified must be an "artificial, arbitrary, and unneces- sary barrier" to fair housing. HUD's proposed rule, therefore, aims to provide a framework for establishing legal liability for facially neutral practices that have unintended discriminatory effects on classes of persons protected under the Fair Housing Act. The rule has no impact on determina- tions of intentional discrimination, the agency clarified in a statement. In its 2015 decision, the Supreme Court upheld the use of a "dis- parate impact" theory to establish liability under the Fair Housing Act for business policies and local ordinances even if the policy or ordinance is neutral in intent and application if it disproportionately affects a protected class without legally sufficient justification. "The goal of this proposed amendment is to bring more clarity to the disparate impact rule," said Paul Compton, General Counsel of HUD. He added that the amendment has "nothing to do with the intentional discrimi- nation" rules under the Act. Compton said that HUD was interested in hearing more about the impact of the proposed amendment on the role of new technology such as algorithms that used artificial intelligence to assess factors such as risk or creditworthiness. In its proposal, HUD said that many commentators wanted these algorithms to be provided with a "safe harbor," under the amended rule. HUD explained that while the disparate impact rule provided an important tool to root out factors that "may cause these models to produce discriminatory outputs, these models can also be an invalu- able tool in extending access to credit and other services to other- wise underserved communities." The agency, therefore, proposed under the amended rule parties using these algorithms could be pro- vided with methods of defending their models in cases where they could prove that these algorithms achieved "legitimate objectives." "They are intended to ensure that disparate impact liability is 'limited so employers and other regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system,'" HUD said in its ruling. Additionally, the proposed amendment clarified that the sec- tion intended to merely recognize that additional guidance was necessary to respond to the com- plexity of "disparate impact cases challenging these models."