Banks and the Real Estate Business Have Undermined Black Homeowners

JUAN GONZÁLEZ: We turn now to the housing crisis. Recent census data reveals the homeownership rate for African Americans has fallen to its lowest level since before the civil rights movement. In the second quarter of this year, the rate fell to just 40%, the lowest level since 1950.

AMY GOODMAN: A new book by Keeanga-Yamahtta Taylor examines the roots of this crisis. It’s titled Race for Profit: How Banks and the Real Estate Industry Undermined Black Home Ownership. The book has just come out. It’s been longlisted for the 2019 National Book Award. Keeanga-Yamahtta Taylor is an assistant professor at Princeton University. She’s joining us from Philadelphia.

Welcome back to Democracy Now!, Keeanga. When you talk about black homeownership, you can also link this to African-American wealth and the difference between wealth and income. Talk about why you decided to write your book, Race for Profit.

KEEANGA–YAMAHTTA TAYLOR: Well, thanks, Amy and Juan, for having me on.

I wanted to really understand why racism in the housing market continues even after the passage of fair housing. So, a lot of histories recently, and even in the popular media, have focused on the role of the Federal Housing Administration in creating — perpetuating residential segregation and really as offering an explanation for the disproportionate rates of homeownership between African Americans and white Americans. And, you know, it’s been pretty consequential to trying to understand this thing called the racial wealth gap, that most people have concluded is rooted in the disparities between access to homeownership. But I was — you know, and so the history tends to stop around 1968, when the Fair Housing Act was passed. And, you know, one of the questions that I often encounter as someone who teaches about the history of housing discrimination is: What happened after that? And so, you know, I wanted to really look at: Why, even after the federal government stops its practices of redlining, does racism persist?

And one of the things that I try to look at in the book is how the federal government doesn’t really upend the consequences of segregation. It just says, you know, from this point on, segregation is not legal, without actually dealing with the issues that precipitated that moment. And the conditions that are created after decades of disinvestment, neglect, exclusion and isolation really become the basis upon which lenders and the real estate industry, in total, treat black consumers differently. And the result is that for African Americans, even those who are able to access homeownership, that it’s done on different terms, that it’s more expensive, that it is typically confined to a market that is seen to have less value. So, even those black people who are able to purchase a home, it comes to mean something different than it does for their white peers, where the house has become an asset that accrues in value over time. Often for African Americans it becomes a debt burden and not an accruing asset for which — which can be passed on to their children. So, I was interested in looking at why these patterns of inequality continue to exist even when the law is formally changed.

JUAN GONZÁLEZ: Well, in your book, obviously, you go through the — you refer to the earlier periods of the ’30s, ’40s and ’50s, when you really, in essence, had a dual market. You had a private market for homeownership, and then you had the federal government, especially after — as part of the New Deal, building public housing, largely even then segregated — white public housing and black public housing. But then, around the ’70s, you get all the rise of these public-private partnerships. And then you talk about what happens, especially in the ’70s, in cities like Philadelphia, Detroit, St. Louis and others —

KEEANGA–YAMAHTTA TAYLOR: Yeah.

JUAN GONZÁLEZ: — with the failures of the federal government’s attempts to promote homeownership among African Americans. I’m wondering if you could expound on that.

KEEANGA–YAMAHTTA TAYLOR: Sure. I mean, I think that the popularity of public-private partnerships really derived from the Johnson administration. I mean, there’s a whole entire history of the private sector in collaboration with the federal government to, you know, do everything from build railroads to its original homeownership programs in the 1930s. So that aspect isn’t new. But there is a — the newness of the programs that I look at are the ways that these partnerships are used to build and produce low-income housing. But what is different with the Johnson administration is that it’s caught between the bind of Vietnam and the pressures at home, the mass rebellions that happened throughout the 1960s. And to avoid a larger deficit even becoming even larger, Johnson engages in these partnerships with the real estate and banking industries to kind of shift the production of low-income housing, whether it’s homeownership or whether it’s rentals, to the private sector.

And there are all sorts of problems with that. I mean, the main one is that it’s the real estate and banking industries that have been largely responsible for the dearth of good, affordable, safe and sound housing in African-American communities in the first place. And so, what does it mean then for the federal government to partner with these institutions, for which race, racism and racial discrimination, has been so critical to its bottom line in the first place, keeping white neighborhoods exclusively white and keeping black people locked in deteriorating and dilapidated housing? And because of segregation and the enclosure that it ensures means that black people have very few options and, in many ways, are a captured audience. And so, what does it mean for the federal government to then empower, with its resources, mortgage guarantees and subsidies, this particular sector?

And I think that there’s a more fundamental problem that I definitely locate in my research, which is that these are — there are two really opposing set of objectives here, where you have private real estate corporations and banks that are primarily interested in making money. Why is there no real affordable housing in the United States? Why is this a perennial problem that has never been solved? Because there’s no money in creating affordable housing for poor and working-class people. There’s no money to be made. So that when that is left to the private sector to fulfill, you know, it always comes up short, because there’s no money to be made in housing those kinds of people. So you have the profit motive from the private sector, but then, you know, what is the public policy for? It’s to promote public welfare. And so, these are two opposing goals: profiteering and public welfare. And to put them together erupts into, you know, a million different kinds of contradictions that play themselves out in these programs.

And one of the biggest problems that emerge is then the inability of the federal government to actually enforce its own civil rights laws, to aggressively regulate its programs, because, you know, if you’re in partnership with these entities and the federal government itself has divested from creating housing, from producing housing, managing it on its own on a nonprofit basis, then — and has become completely reliant on the private sector to produce this housing, then it makes it difficult to police and punish its private partners when they begin to engage in fraudulent and corrupt practices. And so, all down the line, I found conflicts of interest and contradictions that could not be overcome in these policies. And the result, you know, are a series of not just failed programs, but a host of tens of thousands of foreclosures that are centered in African-American working-class communities, that then work to devalue the surrounding properties, and that a generation later become the basis upon which these communities and the people who live in them are declared to be subprime.

AMY GOODMAN: We’re talking to Princeton professor Keeanga-Yamahtta Taylor, whose book is just out. It’s called Race for Profit. You quote President Nixon, who famously said, “If they own their own homes, they won’t burn the cities down.” So, you talk about the shift away from excluding black Americans from homeownership in the ’60s and early ’70s, and you say that “Racist exclusion gave way to predatory inclusion.” Explain what you mean.

KEEANGA–YAMAHTTA TAYLOR: Sure. I think that a basic tenet of liberalism in the period after the Second World War, really through the 1960s into the early 1970s, is that America is basically a good society. The problems that African Americans are facing is one that comes from exclusion, that, essentially, if black people are included into the same institutions that have produced this enormous white middle class after the Second World War, then those institutions can play the same role in black communities. So, the problem is exclusion, and all we need is inclusion. And the problem for that outlook is that it doesn’t actually allow us to understand the institutions that we are suggesting black people be integrated into. And so, from the purview of housing, the problems with this idea of just shifting from exclusion to inclusion become very clear.

And so, I describe the inclusion of African Americans into conventional real estate practices and mortgage banking as predatory. And it’s really a way to understand how the previous period impacts the contemporary moment, meaning that the decades of disinvestment, of racist exclusion of African Americans from the conventional real estate market, you know, create a tremendous amount of distress in black communities. It is at the root of substandard housing in black communities. And those become the basis upon which even when African Americans are included, for them to be treated differently, for them to be seen as more risky. And the whole notion of risk gives the banks and real estate industry an excuse to charge African Americans more, to subject them to less secure banking methods, all of which end up putting African Americans in — making them vulnerable to new predatory practices that aren’t exactly like the previous examples, like, you know, the use of contracts in lieu of conventional mortgages. And Chicago is one example. So they’re not quite that way, but it means that, you know, African Americans have to rely on unregulated mortgage banks as opposed to commercial banks with better interest rates and a better situation overall.

So, it’s really trying to look critically at the institutions and practices themselves, and not just whether or not African Americans are present and able to actively participate. We need to look at the institutions themselves and the practices themselves to determine whether or not this is the best way to increase social mobility for black people.

JUAN GONZÁLEZ: I wanted to ask you — you begin your book with one home buyer, Janice Johnson, in 1970, trying to get a mortgage, an FHA mortgage. You live in Philadelphia. And Philadelphia was really, actually, the epicenter of the FHA crisis —

KEEANGA–YAMAHTTA TAYLOR: Yeah.

JUAN GONZÁLEZ: — of the 1970s. I remember I lived there in the 1970s, and there were about 35,000 abandoned homes, federally owned abandoned homes, and a huge squatters’ movement developed, led by Milton Street and John Street, Henry De Bernardo, the Puerto Rican Alliance and others, to reclaim those homes. How did that happen? How did so many homes, federally insured by the government, all end up really paving the way for gentrification? Because once all those people were expelled from the inner cities, that’s when the massive gentrification movements began in many of those cities.

KEEANGA–YAMAHTTA TAYLOR: Well, the way that the programs that I look at look worked — so, they’re created by the 1968 Housing and Urban Development Act. And the most well known — there are two programs that are probably the — were the most prolifically used in a city like Philadelphia: Section 235 of the ’68 act and Section 221(d)(2) of the ’68 Act. Section 235 was a program that allowed people to pay $200 as a down payment. The mortgage was 20% of their income, so not the value of the house. And interest rates were capped at 1%. And the issue that made this all operational was that the federal government for the first time stepped in and said, “We will ensure the mortgages of all of these homes that are purchased under the terms of these programs in the inner city for the first time.” And so, what mortgage insurance meant, the FHA wasn’t lending money, but it told the banks that if someone defaults or goes into foreclosure, “We will pay the loan off.” And it essentially removed all the risk from the banking industry. And this really helped to crack wide open the urban housing market in completely unprecedented ways. And so, now you have speculators who were coming in, who were buying up properties, many of which had already been condemned or they were in very poor condition. They do a cheap rehab, which often just involved a quick coat of paint, and they would flip them to poor and working-class families that were desperate for housing.

And one of the things that I look at in the book is the way that black mothers, black women who were living in public housing, who were welfare recipients, were particularly targeted by the real estate partners in this program, on the hope that they would go into default and that they would foreclose, because the banks were making their money not just because the loans were insured, but they made their money for every loan that they secured and on the closing costs of selling the house in the first place. And so, the more foreclosures, the more that they could take the same house that was in poor condition, and sell it and repeat this process over and over again. And so, many of these families, when they’d move into these homes, within a matter of weeks and months, realizing that they were in such deep disrepair, and themselves being on extremely fixed incomes, would just walk away.

And so, the HUD programs were not the basis for all of the abandonment in cities during this time. There are a lot of different factors, that include the outmigration of whites, that include the beginnings of the movement of some African Americans to the suburban periphery. So there are many different pressures that are existing within the housing market in neighborhoods at this time. But the role of HUD can’t be underestimated, because one of the issues that arises is that as these properties, some of — many of which the value has been inflated because HUD has hired part-time real estate agents as appraisers, who — it’s a low-wage job. They are susceptible to bribes. Real estate agents bribe them to inflate the value of the homes. And so, when these houses go back to HUD, they can’t be resold, because they’ve been overvalued. And so, that is why HUD’s housing reserves become so large. And so what they do is they start selling — having open auctions for these houses, selling them for anywhere between a dollar and $100, which then invites speculators to come back in to buy the houses and to begin the process all over again. So, even if HUD wasn’t responsible for all of the abandonment issues that are happening in the cities at this time, these actions certainly weren’t helpful.

JUAN GONZÁLEZ: And I’m wondering also — there are some housing advocates, especially in the African-American and Latino community, who have claimed for years that there was a political purpose, as well as a racial bias, in federal housing policy. They point to the 1974, I think, Community Development Act that specifically set out a goal of spatial deconcentration of the inner city, to —

KEEANGA–YAMAHTTA TAYLOR: Yes.

JUAN GONZÁLEZ: — in essence, because, as you pointed out, the government was so worried about riots and unrest in the inner city, that there was a political project to remove African Americans and Latinos from the inner city, in essence, to defuse the danger to urban America.

KEEANGA–YAMAHTTA TAYLOR: Well, there certainly was a debate about it. I don’t think that there was a consensus position. Even you look in the — within the Nixon administration, Daniel Patrick Moynihan, the mysterious liberal who ends up coming up with all of these conservative positions and then is an adviser to Richard Nixon, definitely favored a political project of deconcentration, meaning pushing African Americans into the suburbs at a moment when black people are concentrated in cities, which for the first time becomes the basis of political power. And this coincides with what we see as the emergence of the black political class and black elected officials, new mayors, African Americans being voted to Congress. The Congressional Black Caucus forms informally in 1969 and formally a 1971. So, this is all happening at this time. But for someone like Nixon, there’s a problem, which is that, you know, he has spent the first term of his administration carefully curating the coalition of disaffected, angry white suburban homeowners. And part of the appeal that he makes to them is that “I will keep your neighborhoods and communities white.”

And so, there is a big debate about where — because one of the things that the HUD Act does is that it mandates Congress to produce 26 million units of new and used housing, rehabilitated housing, within a 10-year period. And so, one of the debates that emerge is: Well, where will this housing go? It’s very expensive to build in cities because of insurance costs, because of land costs. And so, this means that, you know, to keep this housing cheap and where there’s plenty of space, it should be built in suburbs. White people in the suburbs don’t want affordable housing, low-income housing in their communities, because they know that that will bring African Americans into those neighborhoods.

Within black politics, there’s a debate among those who see the potential for the development of black politics and black elected officials based on the concentration of black people in cities, but black people in search of housing know that as a captured market within the city, that it limits their housing choices. It places downward pressure on the conditions of the housing and upward pressure on the price of housing when they are confined to one aspect of the market. So, many African-American working-class and poor African Americans want housing wherever they can secure it. So, all of that is to say that this is a highly contested issue, where African Americans should live, both from white conservatives and white political operatives, but also within the black community itself.

AMY GOODMAN: We’re going to break and then come back to this discussion. I want to ask you about Bernie Sanders’ wealth tax and also this fifth anniversary of the growth of the Black Lives Matter movement. Keeanga-Yamahtta Taylor is a professor at Princeton University. Her new book is just out. It’s called Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership. This is Democracy Now! Back with her in a minute.