A walk through systemic racism: Blockbusting
No, I’m not talking about the failed video store. Blockbusting, in the real estate industry, is the use of scare tactics to get homeowners to sell at ridiculously low prices in order to then re-sell at an increased price and garner a gross profit. Throughout history, this practice has been used to reinforce racist ideas and manipulate the black community. Blockbusting would not have been possible without the racist practices of the Federal Housing Authority (FHA).
F you, FHA
At the end of World War II, President Franklin D. Roosevelt launched the FHA as part of the national housing act. The FHA was intended to increase American’s ability to purchase a home and boost the economy during the Great Depression. Today, it is applauded for guaranteeing loans and making homeownership accessible — but this is only true for white people.
In 1935, the FHA issued its first Underwriting Manual, an instruction guide for appraisers. Its first issue claimed that “if a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally leads to instability and a reduction in values.” Though later issues were revised to be less blatantly racist, the ideology is maintained. Throughout history, The FHA approved loans only for white people in segregated neighborhoods, making homeownership a whites-only privilege.
These tactics succeeded in segregating America. By 1940, integrated neighborhoods didn’t exist in any major U.S. city. Appraisers were (and still are) trained to segregate housing and undervalue property owned by people of color. These policies are justified by the claim that black neighbors would depress property values for white homeowners. Though this is still accepted as truth for a lot of Americans, the FHA could never prove that such claims were true. Instead, they made them true.
Blockbusting: The racist conspiracy we know to be true
After a 1948 supreme court case outlawed legal enforcement of private covenants (read: neighborhood-wide pacts to segregate), black people were legally able to move into white neighborhoods, though they lacked the financial means to do so. With no way to acquire a mortgage, African Americans depended on white homeowners to rent them boarding. Money hungry and willing to take advantage of black people, white realtors did just that.
Beginning in the 1950s, white real estate agents would buy homes on the border between black and white neighborhoods and rent them at excruciatingly high prices to black families. They then convinced the white people living nearby that their neighborhood was becoming a slum, the property value was decreasing, safety was declining, and they should sell now. This is what we now call blockbusting.
In a 1962 expose published by the Saturday Evening Post, an anonymous blockbuster confessed the tactics used to scare white homeowners. Speculators would pay black women to push babies through the neighbor and black men to drive cars blasting the radio through the streets. They had agents accompanied by black men knocking on doors to ask if the home was for sale. Random phone calls were made asking for stereotypically sounding black names. Advertisements for homes that were often not even available were placed in black newspapers to encourage black men to visit the property. Some agents even went so far as arranging burglaries and home invasions to convince white people that their neighborhood was no longer safe. The FHA created a racist idea about black neighborhoods, then white people made it come true.
With these practices, white homeowners were scared into selling their property at extremely low prices. The FHA then used this as evidence that black neighbors decreased property value. (The punch line: after the homes were purchased at low prices, they were rented to black people at marked-up prices, technically increasing the market value.) It was a self-fulfilling prophecy and we face the effects of it today. The inability to purchase a home has obstructed generations of black families from building wealth. Homeownership is lower for black college graduates than for white high school dropouts. The homeownership gap between blacks and whites is larger today than it was in 1934. And black-owned homes are still underpriced in appraisals
Resources
A Requiem for Blockbusting: Law, Economics, and Race-Based Real Estate Speculation, Fordham Law Review
Blacks in the U.S. face a huge gap in homeownership rates, compared with whites. Here’s Why., The Washington Post
Confession of a Block Buster, Saturday Evening Post
The Color of Law, Richard Rothstein
The racist housing policy that made your neighborhood, The Atlantic
These five facts reveal the current crisis in black homeownership, Urban Institute
