Recently, we shared a segment from Last Week Tonight about the perils of PACE Loans. Now, in this piece from John Oliver, we look at one of the most important core values of being a Realtor®, which is Fair Housing. Exploring the history of housing discrimination, the segment shows how it created the current homeownership gap between white and black people.
The Federal Government’s Involvement and “Redlining”
In the early 20th century, as the real estate industry began growing, housing developers used racial covenants to forbid the sale of homes to non-white people. Some of these covenants are still on the books.
In the 1930s, President Roosevelt’s New Deal established the Federal Housing Administration (FHA) and the Home Owners’ Loan Corporation (HOLC). This made it easier to purchase homes during the Great Depression. The government-insured these loans so banks would accept a significantly smaller downpayment with much lower interest rates. Borrowers were given decades to pay the loans off.
Although government-backed loans made the dream of homeownership a reality for millions of people, African Americans were deliberately excluded. HOLC developed the “redlined” map – color-coding areas where African Americans lived, deeming them ineligible for any mortgages. And for new housing developments, the FHA’s Underwriting Manual mandated racial covenants as a prerequisite for receiving mortgage insurance.
The link between the racial makeup of a neighborhood and the value of its homes was so well established by the end of WWII, that some speculators exploited it to buy homes on the cheap. In a practice called “block-busting,” speculators entered white neighborhoods and used deceptive tactics to make it look like black people were moving in. One simple yet effective method was hiring an African American woman to push a stroller down the sidewalk. Panicked by the prospect of sharing their neighborhoods with black people, white homeowners would sell their homes at a loss.
“Steering” and Current Discriminatory Practices
Given all these unjust and deeply bigoted practices, it was not surprising that fair housing became a core issue in the civil rights movement. But even though the landmark Fair Housing Act was signed in 1968, there are still practices in place today that prevent predominately white neighborhoods from integrating. For example, zoning can be used to require minimum lot sizes or ban multifamily homes. Some real estate agents still use racial “steering” to keep ethnic buyers away from certain neighborhoods. A few years ago, Newsday had testers of multiple races pose as home buyers in Long Island, New York. Black testers experienced disparate treatment nearly half of the time.
Even if you own your home, the simple act of an appraisal can still be marred with discrimination. A black Indianapolis homeowner found that her home’s value more than doubled after she concealed her race. The homeowner had two appraisals done, one came in at $125,000, and the second at $110,000. She was present during both appraisals. During a third appraisal, she had one of her white friends pose as her brother. Her home’s value rocketed to $259,000.
You can view the full segment here: https://www.youtube.com/watch?v=_-0J49_9lwc (Warning: Strong Language)
Be sure to join the Deliberately Fair Housing Facebook group: https://www.facebook.com/groups/736266793882116
This is a group of real estate professionals and others that want to listen, learn, and take action!