A key paragraph from Richard Rothstein’s From Ferguson to Baltimore: The consequences of government-sponsored segregation:
When the Kerner Commission blamed “white society” and “white institutions,” it employed euphemisms to avoid naming the culprits everyone knew at the time. It was not a vague white society that created ghettos but government—federal, state, and local—that employed explicitly racial laws, policies, and regulations to ensure that black Americans would live impoverished, and separately from whites. Baltimore’s ghetto was not created by private discrimination, income differences, personal preferences, or demographic trends, but by purposeful action of government in violation of the Fifth, Thirteenth, and Fourteenth Amendments. These constitutional violations have never been remedied, and we are paying the price in the violence we saw this week.
He gives details of how ghettos are created, including:
Unable to get mortgages, and restricted to overcrowded neighborhoods where housing was in short supply, African Americans either rented apartments at rents considerably higher than those for similar dwellings in white neighborhoods, or bought homes on installment plans. These arrangements, known as contract sales, differed from mortgages because monthly payments were not amortized, so a single missed payment meant loss of a home, with no accumulated equity. In the Atlantic last year, Ta-Nehisi Coates described how this system worked in Chicago.
So let’s see Coates’s description:
In 1961, [Clyde] Ross and his wife bought a house in North Lawndale, a bustling community on Chicago’s West Side. North Lawndale had long been a predominantly Jewish neighborhood, but a handful of middle-class African Americans had lived there starting in the ’40s. The community was anchored by the sprawling Sears, Roebuck headquarters. North Lawndale’s Jewish People’s Institute actively encouraged blacks to move into the neighborhood, seeking to make it a “pilot community for interracial living.” In the battle for integration then being fought around the country, North Lawndale seemed to offer promising terrain. But out in the tall grass, highwaymen, nefarious as any Clarksdale kleptocrat, were lying in wait.
They were the people who sold houses on installment plans.
Three months after Clyde Ross moved into his house, the boiler blew out. This would normally be a homeowner’s responsibility, but in fact, Ross was not really a homeowner. His payments were made to the seller, not the bank. And Ross had not signed a normal mortgage. He’d bought “on contract”: a predatory agreement that combined all the responsibilities of homeownership with all the disadvantages of renting—while offering the benefits of neither. Ross had bought his house for $27,500. The seller, not the previous homeowner but a new kind of middleman, had bought it for only $12,000 six months before selling it to Ross. In a contract sale, the seller kept the deed until the contract was paid in full—and, unlike with a normal mortgage, Ross would acquire no equity in the meantime. If he missed a single payment, he would immediately forfeit his $1,000 down payment, all his monthly payments, and the property itself.
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.”
Ross had tried to get a legitimate mortgage in another neighborhood, but was told by a loan officer that there was no financing available. The truth was that there was no financing for people like Clyde Ross. From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market through means both legal and extralegal. Chicago whites employed every measure, from “restrictive covenants” to bombings, to keep their neighborhoods segregated.
Their efforts were buttressed by the federal government. In 1934, Congress created the Federal Housing Administration. The FHA insured private mortgages, causing a drop in interest rates and a decline in the size of the down payment required to buy a house. But an insured mortgage was not a possibility for Clyde Ross. The FHA had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, 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.
And that poison is still all over the system today. It’s not “de facto” at all; it’s not a matter of individual free choices; it’s the outcome of a deliberate organized system.
“A government offering such bounty to builders and lenders could have required compliance with a nondiscrimination policy,” Charles Abrams, the urban-studies expert who helped create the New York City Housing Authority, wrote in 1955. “Instead, the FHA adopted a racial policy that could well have been culled from the Nuremberg laws.”