In our last post, we discussed Ta-Nehisi Coates’ essay, The Case for Reparations. In it, Coates matter-of-factly describes the history of racism inflicted on black Americans by American government and society. It was an incredibly long piece, and Tanner touched on it a bit already, so I’m not going into details. Instead, I want to focus on an aspect of the piece which I found most interesting: redlining and housing discrimination.
Redlining, as Coates explains, is when certain groups of people are prevented from getting a home mortgage (or mortgage insurance, which amounts to the same thing). Back in 1934, Congress created the Federal Housing Administration as a means of encouraging Americans to buy houses. The FHA insured private mortgages, which caused interest rates to greatly decline, and also enabled homebuyers to buy houses with a much smaller initial down payment. Predictably, the result was that far more Americans were able to become homeowners. But as it turned out, this was true only for certain groups of Americans; other groups, particularly minority racial groups, where systematically excluded. To determine which mortgages to insure, the FHA rated neighborhoods by its ethnic background:
green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.” These neighborhoods were considered excellent prospects for insurance. Neighborhoods where black people lived were rated “D” and were usually considered ineligible for FHA backing. They were colored in red. Neither the percentage of black people living there nor their social class mattered. Black people were viewed as a contagion. Redlining went beyond FHA-backed loans and spread to the entire mortgage industry, which was already rife with racism, excluding black people from most legitimate means of obtaining a mortgage.
Thus, black Americans could not get mortgages from private banks because private banks wouldn’t give out mortgages which the FHA wouldn’t insure. Black Americans, of course, still needed to buy houses, so an usurious market developed for installment contracts in formerly white neighborhoods near the edges of the ghetto. Coates describes the process by which sellers would “flip” the neighborhoods of white residents and then make a killing off of vulnerable blacks:
Speculators in North Lawndale [Chicago], and at the edge of the black ghettos, knew there was money to be made off white panic. They resorted to “block-busting”—spooking whites into selling cheap before the neighborhood became black. They would hire a black woman to walk up and down the street with a stroller. Or they’d hire someone to call a number in the neighborhood looking for “Johnny Mae.” Then they’d cajole whites into selling at low prices, informing them that the more blacks who moved in, the more the value of their homes would decline, so better to sell now. With these white-fled homes in hand, speculators then turned to the masses of black people who had streamed northward as part of the Great Migration, or who were desperate to escape the ghettos: the speculators would take the houses they’d just bought cheap through block-busting and sell them to blacks on contract.
Selling the houses “on contract” was a truly insidious practice. Installment contracts were “predatory” agreements that “combined all the responsibilities of homeownership with all the disadvantages of renting–while offering the benefits of neither.” In such an agreement, the home-dweller does not build equity as he makes his monthly payments. Instead, if he missed a single payment, or even if he was late a single day, he immediately forfeited his down-payment, all his monthly payments, and the home, as well. What’s more, these pseudo-mortgages charged absurdly high interest rates, and frequently property owners who had evicted their black tenants would simply sign another victim to another installment contract. The result was a devastating cycle:
The men who peddled contracts in North Lawndale would sell homes at inflated prices and then evict families who could not pay—taking their down payment and their monthly installments as profit. Then they’d bring in another black family, rinse, and repeat. “He loads them up with payments they can’t meet,” an office secretary told The Chicago Daily News of her boss, the speculator Lou Fushanis, in 1963. “Then he takes the property away from them. He’s sold some of the buildings three or four times.”
As more and more installment contracts governed home ownership in black neighborhoods, the homes lost more and more of their value, and the neighborhoods rapidly deteriorated. Residents, who in many cases could barely afford the monthly payments, couldn’t afford the upkeep on the houses. When homeowners were evicted, often the properties would remain vacant and further deteriorate. And as time went on, city governments–as Coates illustrates with examples from Chicago–would only approve Section 8 public housing in those black neighborhoods, further intensifying the poverty in those areas.
This is a shallow explanation of how a combination of government policies and predatory local officials and business interests systematically forced black Americans into ghettos. In short, blacks could only buy houses in certain parts of town, and those parts of town had the worst schools, the most poverty, and the highest rates of crime. The effects of redlining are still seen today. The whole cycle, of course, was backed by the American government: it was the FHA who created the neighborhood maps and rated neighborhoods with black residents as ineligible for mortgages.
And what I described, of course, is simply one example of the many ways in which black Americans suffered.