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HUD Archives: News Releases

HUD No. 98-600
Further Information:For Release
In the Washington, DC area: 202/708-0685Monday
Or contact your local HUD officeNovember 16, 1998


ASHINGTON - Housing and Urban Development Secretary Andrew Cuomo today announced the most comprehensive and sophisticated nationwide audit ever conducted to test for and evaluate housing discrimination in urban, suburban and rural communities around the nation.

"This historic audit will help us fight housing discrimination more effectively," Cuomo said. "By determining the extent and scope of housing discrimination in greater detail than ever before, the audit will help us give all American families the opportunity to exercise their legal right to move into any neighborhood and any home they can afford."

"It is disturbing that after 30 years of fair housing enforcement, we still need to fight this fight, but report after report, complaint after complaint, only confirms for us the need for this comprehensive, nationwide audit," Cuomo said.

Cuomo said the audit, which will cost $7.5 million in the current fiscal year, will include 3,000 to 5,000 tests for housing discrimination. It will use African Americans, Hispanics, Asian/Pacific Islanders, and Native Americans to examine and evaluate patterns and trends in housing sales, rentals, and mortgage lending to minorities.

Noting that this year represents the 30th anniversary of the Fair Housing Act, which outlaws housing discrimination, Cuomo said: "Housing discrimination is much more insidious today than it was two to three decades ago. Minorities not only face slammed doors but revolving doors as well; doors that keep them moving in circles that lead nowhere but to confusion and frustration. If we are serious about ending housing discrimination, then we must understand and recognize its complexities and subtleties."

The audit will be the nation's most expansive, thorough, and sophisticated examination ever conducted of minority discrimination in the economic marketplace, Cuomo said. He said it comes at an important time in the nation's history, as society becomes more diverse and the number of minorities grows at a rapid pace.

The HUD audit was endorsed by the Mortgage Bankers Association. MBA Executive Vice President Paul Reed said: "The Mortgage Bankers Association of America welcomes this initiative by Secretary Cuomo to conduct this comprehensive audit. As the leading source of mortgage loans for homeowners in America, MBA supports all efforts to open the doors of homeownership."

In response to a request from President Clinton, Congress increased HUD's fair housing budget by 33 percent for current fiscal year to $40 million, after Cuomo drew national attention to the problem of housing discrimination through a number of fair housing enforcement actions brought under the Fair Housing Act. A sampling of these actions appear below and in a booklet included in the press packet.

  • Monetary penalties against a landlord who segregated blacks and whites in an apartment building with two swimming pools, one for blacks and one for whites.

  • Criminal and civil penalties against a man who threatened to kill a landlord and any of her minority tenants if she rented to any African Americans or Puerto Ricans.

  • $4.4 billion in settlements against four lenders who had been accused of lending discrimination but agreed to settle to avoid further prosecution. The settlements, which were the largest in the history of the Fair Housing Act, required the $4.4 billion to be used for mortgage loans to low-income and minority families.

As part of his One America Initiative, President Clinton also directed Cuomo to double enforcement actions brought against perpetrators of housing discrimination by the year 2000. HUD is now doubling its enforcement actions at a rate of 60 to 70 enforcement actions a month, compared with 25 to 30 enforcement actions during the Clinton Administration's first term.

Today's announcement marks the beginning of a bidding process to select one or more non-partisan, non-affiliated organizations, experienced in scientific sampling and surveying to conduct the audit. To ensure the relevance and integrity of the historic study, HUD will recruit a panel of experts - including builders, lenders, real estate agents and other leaders in the public, private and nonprofit sectors involved in the housing market nationwide - to work with HUD on the audit.

Along with a team of leading researchers, scholars, and social scientists, the lead organization conducting the audit will select communities based on criteria that include all major regions of the country, different population sizes (small, medium, and large), as well as states, urban, suburban, and rural communities. The final report of the study will be released within a year.

Using well-established, objective testing methods developed over the last two decades and sanctioned by the Supreme Court, the audit will determine if housing industry professionals treat racial and ethnic minorities differently than whites as they seek homes.

A few examples of specific patterns and trends that will be evaluated in the audit include: steering minorities to certain neighborhoods and lending institutions; discriminatory treatment of low-income minorities versus higher-income minorities; and discriminatory comparisons of one race or ethnic group versus another.

HUD has developed testing methods for housing discrimination over the past 20 years. The type of testing that will done in the audit announced today will use testers of all racial and ethnic backgrounds who will pose as prospective renters or homebuyers. The tests will approach the same set of rental and sales firms, responding to the same newspaper ads. Testers are matched on background and education characteristics, differing only by racial/ethnic background. The ads are randomly selected from the most recent Sunday newspaper, and each tester inquires about the same specific housing unit, whether home or apartment. Using standardized forms, the testers then record the specifics of their interactions with agents: the types of assistance offered, the number and locations of units shown, terms and conditions, and more. Statistical analysis is then used to determine major patterns of discrimination.

In the past, such testing has found, for example, that African Americans and Hispanic homebuyers are likely to experience "steering" away from predominantly white neighborhoods about 20 percent of the time-typically, to be shown homes in more racially segregated neighborhoods than the homes shown to the white testers-and to be offered less favorable credit assistance. Prospective minority renters are treated differently from whites more than 40 percent of the time-for example, given different information on housing availability and quoted higher security deposits and fees when seeking to rent in neighborhoods in which minorities had been historically underrepresented.

While the homeownership rate has risen to an all-time high of almost 67 percent in 1998, there remains a huge gap in the homeownership rate between whites and minorities: 72.5 percent of white households are homeowners, compared to just 45.3 of African Americans and 43.9 percent of Hispanics. This year, several reports from housing experts illustrate continuing concerns about housing discrimination. These include reports by Harvard's Joint Center for Housing Studies, the U.S. Conference of Mayors, the Federal Financial Institutions Examination Council, the Fair Housing Council of Greater Washington, as well as HUD's own State of the Cities report.

The latest data on mortgage denial by race and ethnicity, made available under the Home Mortgage Disclosure Act (HMDA) for 1997, shows denial rates for conventional mortgages of 53% for black applicants, 52% for Native American Indians, 38% for Hispanics, 26% for whites, and 13% for Asian-Americans. Differences among the groups remain even after income levels are accounted for. Last year, upper income black and Hispanic applicants were denied conventional mortgages more than twice as often as whites at that income level. Previous studies that account for income and credit risk-most notably that by the Federal Reserve Bank of Boston-suggest that discrimination explains a significant part of the gap.

Evidence of any likely discrimination uncovered by the study will be referred to appropriate parties for possible enforcement actions.

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