The FHA adopted a racial policy that could well have been culled from the Nuremberg laws

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.”

Very profitable.

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.”

Contemplate that.


  1. says

    There’s also the issue of the US’s system of funding schools: the local tax base. Children of the poor go to underfunded schools and have few opportunities and a second rate education, while children of the wealthy and homeowners go to good schools and then college. A vicious circle doesn’t even begin to describe that system.

    I worked for two years in the “rent to own” business, the only work I could get at the time. It was predicated on the same system: overcharge those least able to afford it for crappy products and leave them with no equity in the things they were “buying” if they missed any payments. (It was the single worst job I ever had. I once worked at a gas station for a few months but never as dirty as I did in the “rent to own” scam.) But those were only commercial products costing a few hundred dollars at a time. The ripoff of make believe home ownership is a thousand times worse, damaging multiple generations.

    If they so much believe in “doing what’s right”, where are all the lawyers? This reeks of a class action lawsuit against banks and governments for reparations.

  2. says

    Absolutely – but the terribleness of the school funding system is founded on the de jure segregation which is accompanied by underfunding of public facilities and delapidation of private housing thanks to the contract system and redlining – it all goes around in a horrible circle. Like, in Seattle – there are whole huge swathes of the city that don’t have any fucking sidewalks.

  3. rjw1 says

    It’s not surprising that the US has an unusually high degree of social inequality by OECD standards.

    “There’s also the issue of the US’s system of funding schools: the local tax base.”

    Are local (council?) taxes the only means of funding for primary and secondary schools? What about state government funding?

  4. says

    It’s not surprising that the US has an unusually high degree of social inequality by OECD standards.

    Exactly. I was thinking that while reading both Rothstein and Coates. It’s not surprising that the US lags so far behind all the humane developed countries on so many criteria – infant mortality, maternal mortality, equality, access to education, etc etc etc.

    It’s such a stinking mess.

  5. rjw1 says

    @4 Ophelia,

    In Australia, after WW2 the public housing schemes were administered by state governments, no rentier middlemen and no privatisation, rents were not excessive and tenants had the option to buy. Although the houses were basic, even by 50s and 60s standards, low income people escaped from the poverty cycle–they eventually owned a house!

    I’m not feeling smug, the toxic American privatisation mania has infiltrated the governing conservative party here and social democratic institutions are under attack, particularly the health and welfare systems.

  6. says

    rjw1 (#3) –

    Are local (council?) taxes the only means of funding for primary and secondary schools? What about state government funding?

    US schools are funded mostly by local property tax revenues. People who live in poor areas have a low tax base and schools receive less money than in wealthier areas. (I’m not an American so I only know what I’ve read, but I haven’t been corrected by people more knowledgeable than I am.)

    Differences in School Funding

    Funding in the United States

    Public school funding in the United States comes from federal, state, and local sources, but because nearly half of those funds come from local property taxes, the system generates large funding differences between wealthy and impoverished communities. Such differences exist among states, among school districts within each state, and even among schools within specific districts.

    In 1998, for example, the state with the highest average level of public school funding (adjusted for differences in cost of living) was New Jersey, with an annual funding rate of $8,801 per student, whereas the state with the lowest average level was Utah, with a yearly rate of $3,804 per student (see fig. 1). This means that the typical student attending a public school in New Jersey was provided more than twice the fiscal resources allocated to his or her counterpart in Utah.

    In Canada, by comparison, schools are funded provincially and federally and generally get the same number of dollars per student regardless of school districts or the wealth of the neighborhood. That means larger schools and school districts get more total money and get more bang for their buck when buying supplies. But even the smallest rural schools can still and do provide a quality education.

    It is reported that 51% of Canadian adults have at least a bachelor’s degree, the highest in the world, without the US’s crippling student loan debt. With all its resources and wealth, how can the US fail to accomplish the same thing? Only by intent, it seems.

  7. says

    Yes, that’s true.

    There are moves to reform this system…and it occurs to me I should know more about them. I did follow the discussion once upon a time but not lately. I think some courts have ruled that some school districts – or states or counties – have to distribute funding differently.

  8. rjw1 says

    @6 leftOver1under,

    Thanks for the info.
    Canada seems to have a maintained its social democratic traditions, despite the neoliberal disease that’s infecting most anglophone countries.

    “With all its resources and wealth, how can the US fail to accomplish the same thing? Only by intent, it seems.”

    Yes, that’s an excellent question. Regardless of the platitudes about ‘price signals’ and ‘more efficient private enterprise’, I’m not convinced that neoliberals actually care about outcomes. Small government and low taxes are really ends in themselves, the fact that the US is an outlier compared with other OECD countries is simply irrelevant.

Leave a Reply

Your email address will not be published. Required fields are marked *