Due to a storied history of exclusionary policy and blatant racism upheld by legislation, the real estate lending industry has successfully excluded black people from owning homes.
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Although the market is supposedly rising, the African American community is being excluded from much of this apparent uptick. In fact, when it comes to the housing market — the real estate lending industry — African Americans haven’t seen such low homeownership rates since housing discrimination was supported by the law in the 1960s.

Not only have black homeowners not recovered since the Great Recession of 2008, but they also often fall victim to predatory loan practices that pay off only for the brokers or the lenders, while leaving the borrowing party financially devastated.

A history of housing discrimination

Lisa White, a housing expert, and contributor to the book “The Fight for Fair Housing: Causes, Consequences and Future Implications of the 1968 Federal Fair Housing Act,”  has noted that certain federal programs that are ostensibly envisioned to bolster homeownership, are “largely and sometimes exclusively beneficial to whites.” She adds, as an addendum, that the laws actually might actively prevent — or even make impossible — the purchasing of homes for African American individuals or families.

Let’s go back a ways

The setup, and some might say, the carefully laid trap for the African American communities, at least when it comes to housing, can be traced all the way back to slavery in the United States. At that time, black people, due to their enslavement and thus immobility, were, of course, not permitted to take advantage of The Homestead Act. The Homestead Act was federally funded and designed to get people to move out West. The government pursued this aim by ceding tens of millions of acres of land to those willing to relocate to the West, an opportunity that slaves could not take advantage of.

During the time of Reconstruction, land grants were momentarily more easily attained by black individuals. Unfortunately, as Reconstruction collapsed, so did the ease of eligibility. Then came Jim Crow laws, which further shackled black aspiring homeowners. What’s more, there was legislative support — blatantly racist — in many Southern constitutions.

The Great Depression

During the Great Depression of the 1930s, programs for rescuing foreclosed homes were carried out in an extremely racist fashion. Then came The Homeowners Loan Corporation, which aimed to refinance mortgages, but set a highly discriminatory pattern when it drew lines around black communities — they called it “redlining” — and advised that areas within these red lines were not smart investments for the federal government to make. The Federal Housing Administration in 1934 began to insure only federally backed mortgage insurances, but the feds had nixed any backing on redlined areas, and the areas still show the impact today of such ostracization.

The Fair Housing Act of 1968

In the Fair Housing Act of 1968, an attempt was made to outlaw housing discrimination. However, it was little more than a paper-pushing action and nothing was truly enforced. Though if it had been, perhaps something could have changed. How things stood in reality, however, was that real estate discrimination continued to be pervasive. A 2017 study by the Federal Reserve Bank of Chicago found “evidence of a long-running decline in homeownership, house values, and credit scores.” This major dearth of homeownership is still conspicuously present in the areas that were “redlined.”

These predatory loans

Even when African Americans had equity in their homes, they still did had a very hard time of receiving reasonably priced loans. Instead, what they got were vicious and unabashedly racist thieves who, via predatory loans with unfathomably high-interest rates, stole their money (essentially) and left them high and dry. And that is where these impoverished individuals and families remained (financially speaking), right up until the Great Recession of 2008.

Analysis by the Urban Institute shows that between 2001 and 2016, this pattern of predatory lending, which targeted most incisively the African American community, caused the African American homeownership percentage to decline 5 whole percentage points compared to white ownership’s 1 percent decline. Additionally, further analysis showed that out of 100 cities nationwide, none had made any progress in closing the homeownership gap between whites and African Americans. Of course, those who have fallen victim to the predatory loans that have ravaged their finances have now been shut out of the credit market too.

Contract-for-deed lending and takeaway

In the wake of the recession these past 10 years, certain African American communities have witnessed the re-emergence of a particularly pernicious form of lending known as contract-for-deed lending. With contract-for-deed lending, a buyer will agree (usually out of having few alternatives) to pour money into an often dilapidated house while making egregiously high-interest payments. The deal is that he will one day own the house. But the buyer can be evicted if they miss just one, single payment. And so the deal is precarious, to say the least, on the buyer’s end.

Takeaway

In the absence of any federal leadership or intervention into this matter — or perhaps more accurately, any beneficial intervention (as the federal government may be de-regulating the real estate industry further, and dropping more protections) — it will most reasonably fall to the mayors and governors to do their part in stymying attempts to discriminate against African Americans. It likely will fall to those local leaders to transform the real estate industry into an entity that values justice and equality over racism and a dollar sign.

 

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Posted 08.07.2018 - 09:00 am EDT