Restrictive land use regulation has thwarted the upward mobility of many Americans, particularly Americans of color. Local restrictions imposed by affluent municipalities have limited access to safe neighborhoods, better housing, and good schools. Racism and economic self-interest have both played a role in exclusionary practices which have contributed to high housing costs that place a strain on the entire economy.

Fair Housing Act litigation has been one weapon in the fight against these practices. Despite the Supreme Court’s decision in Inclusive Communities, disparate impact litigation faces significant obstacles that limit its value as a tool to fight exclusionary zoning. First, because restrictive zoning ordinances have such widespread economic effect, it will generally be difficult to prove that their impact on members of protected classes is disparate. Second, municipalities are likely to have successful defenses against disparate impact claims arising from restrictive zoning – including the “business necessity” defense that zoning restrictions are necessary to minimize the tax burden on local residents. Third, litigation sets up an adversarial dynamic that leads municipalities to resist housing initiatives rather than embracing them.

By contrast, incentives are better calculated to induce local co-operation in the development of fair housing. HUD made some use of incentives during the Obama administration, but those efforts were not ideally designed to promote buy-in by recalcitrant municipalities, and were abandoned during the Trump Administration. States, however, are well-positioned to use the real property tax system to create substantial incentives for municipalities to abandon exclusionary practices. Using tax incentives rather than mandates would enlist municipal self-interest as a weapon against exclusion.