President Obama's Department of Housing and Urban Development issued new data reporting regulations in July that some commentators worry could turn into a massive social-engineering project by the federal government. It remains to be seen whether the proposal will fulfil this gloomy prognosis, but it clearly provides another example of federal bureaucrats working in concert with housing activists and allied developers to manipulate the regulatory process to their benefit.

At first glance, the "Affirmatively Further Fair Housing" rule seems innocuous enough despite its Orwellian name. Pursuant to the 1968 Fair Housing Act, the new regulation directs HUD to provide "data on patterns of integration and segregation" to grant recipients so they can "set forth fair housing priorities and goals." In other words, the regulation gives local governments more data to use in making urban planning decisions that encourage more economically, socially and politically diverse communities.

But on closer examination, the potential for mischief becomes clear. The data would be made available to liberal housing activist groups looking for new tools with which to sue local governments for allegedly failing to satisfy the 1968 Fair Housing Act. For a preview, consider New York in 2006 when the Anti-Discrimination Center brought suit against Westchester County for "making false claims" on its Community Development Block Grant application to HUD.

The ADC did not allege that Westchester County actively discriminated against anyone based on race because the Fair Housing Act does not require such a claim. Instead, the ADC alleged that Westchester County "failed to consider race-based impediments to fair housing choice and failed to overcome such impediments." In other words, the county failed to do something it didn't think of doing. Westchester County settled out of court by agreeing to spend $51 million to build 750 subsidized housing units in neighborhoods with miniscule underprivileged populations.

Then HUD intervened in the lawsuit and told Westchester County to identify its "above average" public schools and build affordable housing units near them. This is exactly the type of top-down planning that HUD has been practicing for decades with miserable results. Just take a look at America's inner cities.

As the American Enterprise Institute's Ed Pinto recently told Fox News concerning the new HUD regulations, "it started with public housing and urban renewal, which failed spectacularly back in the '50s and '60s. They tried it again in the '90s when they wanted to transform housing finance, do away with down payments, and the result was millions of foreclosures and financial collapse."

This new HUD shakedown regulation won't be stopped by the present Congress. Conservatives have tried for years to abolish worthless federal programs like CDBGs that do little besides making communities more dependent on government and vulnerable to lawsuits by activist groups and opportunistic developers. Conservative House members proposed cutting $2.2 billion from CDBG this spring, but pork-barreling moderate Republicans refused to go along. Unless the moderate Republicans reconsider such votes, their constituent mayors and county council members can expect costly new lawsuits fueled by HUD data soon.