The U.S. Department of Housing and Urban Development (HUD) sent a major rewrite of federal fair housing regulation to Congress in late December.

The proposed rule would ask localities receiving federal housing funding to report on their housing market outcomes and then to propose concrete steps for improving housing affordability. Localities that either have affordable housing or see housing become more affordable over a five-year period could be rewarded with additional grant money and other incentives. The department told Congress it would "focus remedial resources and potential regulatory enforcement actions" against the lowest-performing jurisdictions.

The rule is a marked change from the one issued by the Obama administration in 2015, which required HUD grantees to collect voluminous amounts of demographic data and then use that data to craft plans on combating racial segregation and concentrated poverty. The Trump administration argues that regulation was "overly burdensome" in their requirements and "too prescriptive" in its desired outcomes.

The new rule is light on details, and its early circulation has already provoked intense debate.

HUD's proposal "incentivizes a race to the top among localities based on housing affordability and availability and then offers a chance to put some teeth behind that," says Michael Hendrix, the director of state and local policy at the Manhattan Institute. But others argue it is much too narrow and actually weakens the federal government's enforcement powers. "The proposed rule entirely ignores the essential racial desegregation obligations of fair housing law," Diane Yentel, president of the National Low Income Housing Coalition, told The Washington Post.

Solomon Greene, a researcher at the Urban Institute and a former HUD staffer who helped craft the 2015 rule, says focusing narrowly on affordability misses the many ways that obstacles to fair housing can present themselves. "When talking about affordable housing from a fair housing perspective, you have to look at [what's] affordable for whom," Greene says. "Using a lens that looks at affordability from the perspective of protected classes is absolutely important and seems missing from the proposed rule."

Demanding local governments take specific actions on land-use planning is a huge intrusion of federal authority into a policy area that was once held to be the domain of cities and states, but Hendrix cautions against making the perfect the enemy of the good. So long as these grant programs exist, he says, they should at least be administered in a way that encourages better, freer housing policy. "So much of what this new rule points to is a more market-oriented approach to housing, which is what we should all be pushing for."