Six Facts About Racism and Housing, Part Two: Predatory Practices and Urban "Development"
Image by David Woo
This post originally appeared in Fran Quigley’s blog Housing Is A Human Right.
Thanks for checking out Part Two of a three-part series on racism in housing. It is telling that it takes three separate posts to chronicle the longtime and ongoing legacy of how racism shapes our nation’s housing—it’s a lot. Last week, we reviewed the first two facts: The Systemic Theft of Black Labor Has Created Housing Disparities, and Our Government Housing Policy Has Benefitted Whites and Excluded Blacks. This week, we cover two more facts: Predatory Housing Practices Disproportionately Harm Black Americans, and Urban “Development” Disproportionately Harms Black Americans:
Fact 3: Predatory Housing Practices Disproportionately Harm Black Americans
When racist government housing practices prevented Black families from obtaining the household stability and financial advantages from homeownership that whites received, a crew of shady actors stepped in to take advantage. The seminal account of this nefarious government-capital partnership is Keeanga-Yamahtta Taylor’s Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership. Blocked from FHA and other government-backed loans, Black and brown people who sought the advantages of homeownership had no choice but to enter into deeply exploitative purchase agreements and/or loans. Taylor calls the phenomenon “predatory inclusion.”
That predation often came in the form of home contract purchases, known as rent-to-own, land sales contracts, or other names. These contract purchases are still widespread in communities where access to favorable credit is not available. The common denominator is that the contract terms are skewed at all turns in favor of the seller. The purchaser is required to provide a large down payment and high monthly installments but denied any equity until the contract is completed. The seller retains the deed. If a single payment is late or missed, the seller promptly strips the Black families of both the home and their investment in it—and often re-sells the house to yet another contract purchaser.
One analysis by researchers from Duke University and the University of Illinois-Chicago estimated that these contracts accounted for as many as 95% of homes sold to Black families in Chicago during the 1950’s and 1960’s. Contract prices were routinely marked up more than 80% from the true value of the homes, and Blacks paid almost $600 more per month in current dollars than they would have under a conventional mortgage. The researchers estimated that these rapacious housing contracts stripped Black families in Chicago from as much as $4 billion in wealth.
For many of the Black families who could get a mortgage, the exploitation continued. As of the beginning of the 21st century, Black homeowners were 50% more likely than their white peers to be holding a subprime loan, which features higher payments and interest rates that can spike significantly. These loans’ predatory terms set the stage for Black victimization in the 2008 foreclosure crisis, when more than half of the wealth accumulated in U.S. Black and brown communities was devoured. In 2012, Wells Fargo Bank, the largest residential home mortgage originator in the United States, paid $184 million to settle a Justice Department suit alleging that during 2004-2009 it pushed Blacks and Hispanics into predatory loans even when they qualified for more favorable terms. The year before, Bank of America’s Countrywide Financial had settled similar litigation for $355 million.
Again, the government was complicit in this outcome: the U.S. had for decades prior to 2008 been deregulating the banking and finance industries, incentivizing subprime mortgage lending. And when the crash happened in 2008, the government sold foreclosed homes to private equity corporations at discount prices.
The saga continues. Just as wage gaps and exclusionary zoning ordinances endure as more veiled successors to the overt racism of past generations, government-sanctioned racial capitalism in the housing market is alive and well. Federal government and Brookings Institution research estimates that, controlling for other factors like housing and neighborhood quality, homes in Black neighborhoods are typically valued at 23% less than similar homes in white neighborhoods. That disparity robs an average of $48,000 in value from each of these Black neighborhood homes. That leaves their owners vulnerable to the latest iteration of real estate exploitation: mass investor purchases of single family homes.
The current record-breaking surge of investor home purchases is heavily concentrated in Black-majority neighborhoods. In 2021, 30% of home sales in those neighborhoods were to investors, more than double the rate of investor purchases in white neighborhoods. An analyst from the realty company’s Redfin explained why to the Washington Post: “We know historically that places where minorities live are undervalued or lower priced.”
So racism’s impact on valuations causes these homes to be identified as bargains for investors to buy and then rent or flip. Multiple investigations and lawsuits report investors are using deceptive practices and target elderly or desperate homeowners to buy their houses at a fraction of their value.
In eviction court, we see the end result of these predatory practices. Locked out of the value of homeownership, Black families are more than twice as likely to be renters as white families. That does not mean their housing is inexpensive: many of our clients are paying more each month in rent than the lawyers representing them do for their home mortgages.
Black families are not only more likely to rent, they are more likely than white renters to live in substandard conditions. The typical scenario we see is a renting client who lives in an unsafe, unhealthy home, and has been unable to reach anyone representing their landlord to request repairs. Why? Because the landlords are out-of-state investors incentivized to keep maintenance and staffing costs as low as possible. Often, these absentee landlords have snatched up these now-rented homes from a Black homeowner.
Fact 4: Urban “Development” Disproportionately Harms Black Americans
The eviction court where we work is located on the far east side of Indianapolis. When I was growing up in this community a half-century ago, the far-eastside area was far more predominately white than it is today. But this became the side of town where many Black families ended up after the gentrification of strong Black neighborhoods in the center of our city, along with the bulldozing of entire blocks of Black communities to make way for interstate highways, an urban university campus, and a medical complex. The campus where I teach and the urban highway loop I travel to get to court are both built on the land of displaced Black families.
Our clients’ parents and grandparents used to live in stable communities in the center of our city. Their descendants now live at the city edges, clinging to apartments infested with rodents or rental homes where mold spreads and the wiring may be deadly. Sometimes they lose their grip on even those sketchy homes: 54% of our community’s homeless individuals are Black, almost double the Black overall population by percentage.
Across urban America, this is a sadly familiar story. Starting with the 1949 Housing Act, the federal government spent over $13 billion on a series of programs informally known as urban renewal. But in Black neighborhoods, the programs were more commonly known as “Negro removal.” And for good reason: Black Americans made up the majority of the quarter-million families displaced by urban renewal, even though Blacks made up less than 15% of the nation’s population at the time. For example, the largest dislocation project was Cincinnati’s Kenyon Barr, where 97% of the nearly 5,000 families who lost their homes were Black. As University of Pennsylvania urban historian Brent Cebul has written, displaced renting families sometimes received relocation assistance of a few hundred dollars; sometimes they received only a flyer listing the names of real estate brokers.
Like with labor theft, redlining, and predatory lending, Black victimization led to white profit. As was the case in many cities, our city’s Black displacement led to our urban areas being reshaped into “meds and eds” complexes that were now easily accessible by the newly-built highways, which allowed white suburbanites to smoothly commute to the new high-paying jobs. Local historian and activist Wildstyle Paschall wrote for New America about the leveling of the Indiana Avenue community anchored by thriving Black-owned businesses, including Madam C.J. Walker’s beauty supplies empire, and hundreds of acres of multi-generational Black neighborhoods:
The destruction of the Indiana Avenue neighborhoods amounts to the decimation of 100 years of Black neighborhoods and culture. Many one-time Indiana Avenue-area Black homeowners and business owners couldn't relocate for the price of their original investments. And so business owners became employees, homeowners became tenants, and both groups were robbed of their ability to leave intergenerational capacity, stability, or wealth to their children. . . . And it happened as a result of a plan coordinated by universities, hospitals, city leaders and state government. All of these are public institutions, making it a cruel twist of irony that the Black community had helped finance their own annihilation simply by participating in the American economy.
Urban renewal did not take every neighborhood from the Black communities. But the ones left standing were often highly segregated and stripped of access to public and private services like health clinics, good-paying jobs, and grocery stores. That segregation also leaves the Black communities as easy targets for the environmental racism of so-called “sacrifice zones” where toxic-waste dumps, chemical plants, and landfills proliferate. Black families being forced into sub-standard housing has led to Black children having on average twice the level of lead in their blood compared to white children, exposure that often has severe consequences for cognitive development.
