The council was served with a non discrimination notice in 1989 and has still not addressed its recommendations, says the commission.
Sukhdev Sharma, CRE acting chief executive, said: 'We have been pretty reasonable with the city council in trying to get them to comply with the terms of our non discrimination notice and that is why we are proceeding'.
One of the council's first moves on receiving news of the action was to suspend a principle officer in the housing department race equality unit. About eight workers in the department walked out in support and she was subsequently reinstated.
A spokesperson for Unison's black workers group said the suspended officer had been made a scapegoat for the failings of the directorate. The race unit was set up two years after the non discrimination notice was issued.
The CRE will be entering into discussions with the council over the next few days. Mr Sharma said there were two options open to the commission - ask the council to lodge an undertaking with the high court that it will comply, or start a full court case.
He says an undertaking is much quicker and was successful when the CRE pursued Tower Hamlets LBC for failing to act on a non discrimination notice.
The commission cannot comment on the detail of how the council has failed to comply but one of Liverpool's own reports shows progress to combat housing discrimination has been slow.
Evidence of discrimination against black people by the city council was first drawn up in a report in 1985 when the commission, then the Merseyside Community Relations Council, and Liverpool 8 Law Centre carried out research into its housing allocation policy. Inequality had been identified as early as 1982, according to Maria O'Reilly, co-ordinator of the Liverpool 8 Law Centre.
A spokeswoman for Liverpool said this week: 'At the moment we are trying to ascertain what the commission is unhappy about. The authority has carried out a lot of work in this field'. BHowever, either chief executive Peter Bounds nor council leader Harry Rimmer were prepared to comment until after a meeting with the CRE, she said.
Liverpool was due to report back to the CRE in January this year but the spokeswoman said: 'To my knowledge it didn't. I think the very last report produced was November 1992'.
That report, which analyses records for 1991, says: 'Black applicants did worse than white applicants. The directorate offered and let them fewer properties than they were entitled to.
'Black applicants would have increased their share of offers and lets dramatically if they had received their entitlement. The directorate offered and let white applicantsmore properties than they were entitled to'.