Feds launch probe into Washington program to redress housing discrimination

Washington’s program offering no-interest home loans to residents harmed by historical discrimination has landed in the Trump administration’s crosshairs.

The U.S. Department of Housing and Urban Development announced Tuesday it was investigating the Washington State Housing Finance Commission, which runs the Covenant Homeownership Program.

The state Legislature created the program in 2023 to address generations of racial housing discrimination by offering loans of up to 20% of the cost of a home to help pay for down payments and closing expenses. The maximum state assistance is $150,000.

It serves descendants of people who lived in the state before April 1968 and who were part of a racial group harmed by housing discrimination, like racial covenants. Those eligible include first-time homebuyers who are Black, Hispanic, Native American, Alaska Native, Native Hawaiian or other Pacific Islander, Korean or Indian.

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The program, launched in 2024, is funded through a $100 document recording assessment collected on real estate transactions.

Last year, lawmakers expanded eligibility for the program by raising the income limit from 100% of area median income to 120%. Lower-income borrowers now qualify for loan forgiveness after five years of homeownership.

A similar program in California has been hugely popular. From July 2024 to June 2025, Washington’s version served over 500 households and delivered more than $60 million in down payment loans. The average loan amount was $110,000. Most were for homes in King and Pierce counties, including 129 in Tacoma. Most recipients were Black.

The investigation marks the latest flashpoint in the Trump administration’s targeting of what it sees as discriminatory diversity, equity and inclusion efforts in Democrat-led states.

“DEI is dead at HUD,” Secretary Scott Turner said in a statement Tuesday. “I will not stand for illegal racial and ethnic preferences that deny Americans their right to equal protection under the law. HUD will work to ensure Washington state follows the law and provides equal opportunity for all citizens seeking assistance under the Commission’s programs.”

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Gov. Bob Ferguson, a Democrat, called the latest investigation “another day at the office for us dealing with the federal government.”

“Federal government investigates a lot these days, and we’ll treat it the same as we do everything with the federal government. We’ll be thoughtful about our response,” Ferguson told reporters Wednesday.

“We would not have adopted that unless we felt confident” it could withstand a legal challenge, the governor added.

In a letter to the commission, Craig Trainor, assistant secretary for fair housing and equal opportunity at HUD, wrote that “illegal discrimination on the basis of race is morally reprehensible, socially perverse, and destructive of America’s pluralistic polity.

“The Trump Administration will not tolerate it,” he continued. “Not now. Not ever.”

Trainor added that the “publicly available information” about the covenant program “strongly suggests that unlawful discrimination is occurring and, therefore, warrants investigation.”

Specifically, the feds are probing the program’s compliance with the federal Fair Housing Act.

The law, enacted in 1968, prohibits discrimination in housing based on race, religion, sex, national origin, familial status or disability. It followed decades of bans on selling or renting to certain racial groups through restrictive covenants, including in Washington, and redlining that left people living in certain areas unable to get home loans. These practices resulted in racial disparities in homeownership that persist today.

Before creating the program, the state commissioned a study examining its history of housing discrimination that served as a blueprint for how to structure the effort.

The feds specifically noted people of European, Arab and Jewish descent don’t qualify for Washington’s program.

After the investigation, the Department of Housing and Urban Development could file a discrimination complaint against the commission. It could also refer the case to the Justice Department.

Housing Finance Commission spokesperson Margret Graham said it would respond to the feds’ requests for information, adding that the program was created “after an extensive stakeholder and community engagement process and it is based on rigorous, independent research by a national firm.”

The commission offers an array of other home loan and down payment assistance programs, Graham noted.

The program has faced scrutiny since its inception.

In 2024, the Foundation Against Intolerance and Racism sued the commission to end what the foundation called “state-sponsored racial discrimination.” The lawsuit claimed the program violated the equal protection clause of the Fourteenth Amendment to the U.S. Constitution. The group, known as FAIR, has campaigned against antiracism work.

Last month, a federal judge denied the group’s initial request to block the program but allowed the lawsuit to move forward.

This story was originally published by the Washington State Standard.