By Neil Cosgrove

In the winter of 1978, my wife and I sought to buy our first house, and offered to purchase a home in Buffalo’s University District for $25,000. 

The largest commercial bank in the city turned down our application for a $20,000 mortgage, claiming the home’s value was below the agreed-upon purchase price. (Never mind that nine years later we sold the place for more than twice our offered price.) Several people told us at the time that the real reason for the rejection was a “changing” neighborhood. 

“Changing” in this context was a common euphemism indicating a neighborhood had integrated, with African-American families purchasing homes on our block and others nearby. In truth, despite Congress having outlawed the practice during the Johnson administration, “redlining” still happened under another name. 

I vividly recalled this episode while reading Merton awardee Keeanga-Yamahtta Taylor’s recently published book Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership. Dr. Taylor clearly delineates the circular thinking that supported the racism rife within the American housing market—Black people, by their very presence, supposedly lowered property values in a neighborhood even though they found themselves in that neighborhood in the first place because most Black families could only afford housing already low in cost, and unlikely to increase in value any time soon. 

Dr. Taylor’s book carefully explains what happened in a six-year period from enactment of the Housing and Urban Development Act in August, 1968 to the moment in 1974 when the federal government publicly stepped back from implementing a significant portion of that law. Her history directly challenges one part of the mythology about housing markets—that valuations are based on some kind of hard and fast, mathematically and observably sound method for producing such valuations. Instead, the valuations are often emotional in nature, and a significant contributor to the inner life of the white Americans producing those valuations is their racial attitudes. 

Despite the Nixon administration’s retreat from enforcing much of the 1968 HUD Act, that law still strongly influences our current housing market. Not only was “redlining” made illegal, but the law also privatized Fannie Mae and introduced “mortgage-backed securities” as an instrument to ensure a continuous flow of capital into the urban housing market. Readers may recall the out-sized role those securities played in the 2008-09 financial crisis. 

But those provisions weren’t the law’s most politically troublesome elements. The federal government hoped to counter the social unrest roiling American cities during the mid-to-late sixties by expanding home-ownership. Owning one’s own home, the theory went, would give African-Americans a previously denied sense of belonging to American society. 

The law called for the construction of 26 million new housing units in ten years, including six million units subsidized by the federal government. The government never came close to meeting those projections, stymied not just by space limitations in inner-cities but also by the resistance of what Taylor calls “white suburban enclaves” employing means such as zoning ordinances and subdivision regulations to prevent the building of “homes affordable to low-income and working-class Black families.” The federal government had the power to challenge those barriers, but the Nixon administration knew such “forced integration” would create displeasure among much of the coalition that elected it. 

When such lower-cost housing was constructed, it was largely in working-class white suburbs with genuine concerns about the influx of large numbers of children into school districts that had no guarantee of receiving federal dollars to support that expansion. White liberals may excoriate places that now hold many Trump voters, forgetting that looking kindly on diversity comes easier when your own property values, and tax rates, aren’t threatened. 

Stymied in the suburbs, HUD under Secretary George Romney turned to another section of the law, Section 235, thinking that encouraging low-income people to buy inner-city properties would bring the desired results without unduly stepping on any white toes. Low down payments and interest rates, with mortgages guaranteed by the government, would supposedly unleash the dynamics of private markets, without the feds spending large amounts on new public housing. 

Problems quickly arose, however, apart from the inherent racist thinking described above. Unscrupulous real-estate agents, property assessors, and mortgage lenders worked to sell sub-standard housing to people without the resources to renovate and maintain that housing. All that guaranteed federal money was hard to resist, and without risk the alleged virtues of a “free” market were absent. 

The 1968 HUD law’s ambitious agenda failed spectacularly. Even today, Taylor notes, African- Americans do not enjoy, anywhere near the same extent as whites, the economic benefits of the single most valuable asset most American possess: “70 percent of whites own a home, compared with 43 percent of African Americans.” And because of persistent racial attitudes about neighborhood property valuations, the diminished value of Black-owned property aggravates that inequality. 

Many white Americans still blame that inequality on the incompetence of poor people, particularly poor African-Americans. Such blaming diverts attention from their own lack of self-knowledge, and from the often destructive results of “enlightened self-interest.”

Neil Cosgrove is a member of the NewPeople editorial collective and the Merton Center board.