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More information on the series, including a complete list of books published, is available at http://justicepowerandpolitics.com/. Race for P R ofit How Banks and t He Real estate In dust Ry unde Rm Ined Blac k Homeowne RsHI p Keeanga- Yamahtta Taylor t\fe unive Rsity of noRt\f caRolina P Ress c\fa Pel \fill This book was published with the assistance of the John Hope Franklin Fund of the University of North Carolina Press. © 2019 Keeanga- Yamaht ta Taylor All rights reserved Designed by April Leidig Set in Garamond by Copperline Book Services Manufactured in the United States of America The University of North Carolina Press has been a member of the Green Press Initiative since 2003.

Cover photo: Child on steps of a North Philadelphia row house, August 1973 (photo by Dick Swanson; courtesy U.S. National Archives, photo no. 412- DA-10 279) Library of Congress Cataloging-in-Publication Data Names: Taylor, Keeanga-Yamahtta, author. Title: Race for profit : how banks and the real estate industry undermined black homeownership / by Keeanga-Yamahtta Taylor. Other titles: Justice, power, and politics.

Description: Chapel Hill : University of North Carolina Press, [2019] | Series: Justice, power, and politics | Includes bibliographical references and index. Identifiers: LCCN 2019014012| ISBN 97814696\f3662 (cloth : alk. paper) | ISBN 97814696\f3679 (ebook) Subjects: LCSH : Discrimination in housing—United States—History—20th century. | Discrimination in mortgage loans—United States—History—20th century. | Urban African Americans—Housing—History—20th century. | African American women—Housing—History—20th century. | Real estate business—United States— History—20th century. | United States—Race relations—Economic aspects. Classification: LCC HD7288.76.U6 T89 2019 | DDC 363 .\f/1— d c 2 3 LC record available at https://lccn.loc.gov/2019014012 For Lauren contents List of Illustrations ix Abbre viations and Acronyms in the Text xi int Roduction Homeowner’s Business 1 1 Unfair Housing 2\f 2 The Business of the Urban Housing Crisis \f\f 3 Forced Integration 93 4 Let the Buyer Beware 133 5 Unsophisticated Buyers 167 6 The Urban Crisis Is Over— Long Live the Urban Crisis! 211 conclusion Predatory Inclusion 2\f3 Ackn owledgments 263 Note s 269 Bibli ography 303 I nd ex 33\f int Roduction Homeowner’s Business On September 18, 1970, Janice J ohnson bought her first home in Philadel - phia with a mortgage guaranteed by the Federal Housing Administration ( \bHA).

In the now voluminous histories documenting the origins, policies, and practices of the \bHA , Janice Johnson stands out as an atypical homebuyer. 1 She was a Black single mother on welfare and living about as far from a “racially homogenous” suburb as one could get. Johnson and her eight- year- old son ma de their home in a working- class B lack neighborhood in Northeast Philadelphia in a decay - ing apartment in a building that had recently been condemned by city officials.

Now facing eviction, Johnson needed to quickly find a new place to live, when her mother told her of an apartment for rent in the same neighborhood. Johnson called the landlord in anticipation, but her hopes were dashed when he told her that she could not rent the apartment because she was a welfare recipient. 2 All was not lost, however; the landlord suggested that instead of renting, Jan - ice Johnson could buy the house at 2043 West Stella Street. Under the terms of a new program created by the Department of Housing and Urban Development ( HUD ), low- income a nd poor people were now able to purchase homes with a small down payment and a low- intere st, government- insured m ortgage backed by the \bHA . Backing from the \bHA removed the risk from banks and other lend - ers who for many decades claimed to avoid lending in areas like Janice Johnson’s neighborhood because of the assumption of financial risk in doing so. Lenders could now dispense money freely, as the \bHA promised that the federal govern - ment would repay all delinquent loans. Janice Johnson met with the landlord- turned - real- estate - agent, a man recalled as “Mr. Zade,” to look at the house, and she liked it. Mr. Zade assured her that 2 i nt Roduction she was getting a “good house” because it had been “approved” by the \bHA . Zade advised Johnson to contact her welfare caseworker because she would need to complete some paperwork to verify her eligibility for the program. Just weeks before Janice Johnson was to move into her new home, however, Zade called to inform her that the floor of the house had collapsed and she would no longer be able to buy it, but he had another house at 2013 West Stella that was “even bet - ter.” Johnson was concerned, but by the end of August she was facing eviction proceedings from her condemned apartment. Johnson, with her young son to care for, was desperate. Within two weeks the transaction was complete. Zade had contacted a mortgage banking company called Security Mortgage Services, and the company approved Johnson for an \bHA- backed loan in the amount of $\f,800. The widespread access to homeownership across the United States in the af - termath of World War II cemented it as a fundamental feature of the cultural conceptions of citizenship and belonging. This was especially true for African Americans. Indeed, the very first civil rights bill to be enacted in 1866 tethered the right to purchase property to freedom and citizenship: “All persons born in the United States without regard to any previous condition of slavery or invol - untary servitude . . . shall have t he same right, in every State and Territory in the United States, to make and enforce contracts, to sue, be parties, and give evi - dence, to inherit, purchase, lease, sell, hold, and convey real and personal prop - erty, as is enjoyed by white citizens.” 3 This American particularity of property rights as an expression of citizenship was reinforced in the 1948 landmark Shelley v. Kraemer decision that affirmed, “Equality in the enjoyment of property rights was regarded . . . as an esse ntial pre- condit ion to the realization of other basic civil rights and liberties.” 4 Despite the insistence on the rights of property ownership as integral to citi - zenship, African Americans faced numerous obstacles in their efforts to secure homeownership. But in the ascendant and optimistic rhetoric of the postwar period, Black citizens expected to finally be able to share in those rights “enjoyed by whites.” Not only were these expectations shaped by the growing prominence of homeownership as symbolic of the good life in the United States, but they were amplified through the exhortations of U.S. presidents, including Harry S. Truman, who declared a “decent home” 5 as the “goal” of federal policy, and Dwight D. Eisenhower, who described “good housing” as a “major objective of national policy” and stated that it was “necessary for good citizenship and good health among our people.” 6 Neither president was referencing homeownership i nt Roduction 3 in particular, but certainly by the 19\f0s, it had become the preferred means of shelter in both public tastes and public policy.

For Janice Johnson, though, homeownership was not the fulfillment of the American dream; it was the beginning of an American nightmare. Within days of moving into her new home, the sewer line broke, spewing wastewater all over the basement floor. The electricity for the house was sporadic and haphazard.

There were holes and other irregularities in the foundation of the home. All of the windows in Johnson’s new house were nailed shut and inoperable. The floorboards in her dining room were so rotten that she feared her dining room table would collapse through the floor. The compromised structure of the house was not the worst of it. On Halloween night, Johnson’s son, Edward, woke up to find a rat in his bed. Janice saw rats throughout her house, including in the kitchen and bathroom. Apparently, the holes in the basement harbored nests of rats that regularly entered the house. She called Zade to complain about the condition of her new house. He sent workmen out on a couple of occasions, and they even patched the failing plaster in her dining room; but soon after, the real estate agent reminded her that the problems in her house were now her own.

They were “ homeowner’s business.” Race for Profit: How Bank s and the Real Estate Industry Undermined Black Homeownership examines the critical turn in U.S. housing policy when the \bHA , housed within HUD , ended its long practice of redlining, instead turning to new policies that encouraged low- income A frican Americans to become homeown- ers in the 1970s. After years during which Black citizens’ access to conventional means of financing the purchase of a home had been undermined, the social upheaval and urban rebellions of the 1960s finally forced the federal govern - ment to relent. The low- income h omeownership programs, the first of their kind, utilized federal subsidies, long amortization periods, and mortgage insurance guarantees to entice the participation of the real estate industry while also mak - ing homeownership affordable and accessible to poor and working- class Af rican Americans. These programs generated unprecedented real estate sales in Black urban communities across the country. But the transition from the exclusionary policies of HUD and the \bHA to inclusion into the world of urban real estate sales was fraught with problems. In Race for Profit , I argue that this unprecedented public- privat e partnership in the production of low- income housing tethered HUD and the \bHA to real 4 i nt Roduction estate brokers, mortgage bankers, and homebuilders. These partnerships were troubled from their inception because of the real estate industry’s long history of racial discrimination against and demonization of African Americans as unfit owners and detrimental to property values. Generous government financial out - lays and the near- satura tion of white homeownership helped the real estate in - dustry overcome its reluctance to sell and lend to African Americans it believed presented a risk or threat to accruing value within the real estate market. The transformation in \bHA policy did not immediately change the practices or the beliefs that motivated the practices within the real estate industry—or among agents working within the \bHA . The shift did, however, facilitate the participa - tion of broader networks of real estate operatives and lenders who circulated billions of new dollars throughout the urban housing market. The declensional framing of “inner cities” and “urban crisis” in urban studies of the 1960s and 1970s belies the dynamic and innovative methods of financ - ing generated to develop the urban housing market. The tendency to view the postriot city as trapped in the stasis of blight, flight, and the inevitability of decay over time misses how the late 1960s and the 1970s were defined by chang - ing political, social, and economic dynamics, and how the inner city was at the nexus of these processes. New financial instruments, such as mortgage- backed securities, produced an intense demand for more homeowners and more money for home financing, while lax oversight and regulation incentivized unscrupu - lous and predatory targeting of urban communities. Far from being a static site of dilapidation and ruin, the urban core was becoming an attractive place of unparalleled opportunity, a new frontier of economic investment and extraction for the real estate and banking industries. The race for profit in the 1970s trans - formed decaying urban space into what one U.S. senator described as a “golden g hetto,” 7 where profits for banks and real estate brokers were never ending, while shattered credit and ruined neighborhoods were all that remained for African Americans who lived there. 8 When historians have written about the big economic shifts that took place in the 1970s, they rarely consider these changes in the real estate market and how they disproportionately impacted African Americans. As interest rates rose sharply in the late 1960s and early 1970s, the slowed pace of housing starts in the conventional housing market made sales in the government- subsidiz ed low- income h ousing market more attractive than they had ever been. Even while real estate brokers and mortgage lenders were discriminating against women with middle- class j obs and incomes, poor women on welfare, like Janice Johnson, who i nt Roduction \f were also disproportionately heads of their households, were sought out as par - ticipants in the low- income h omeownership program.9 The inclusion of thousands of poor Black women in these low- income h ome- ownership programs subverted both racial and gender norms. Real estate and mortgage bankers valued these women, though, because of the likelihood they would fail to keep up their home payments and slip into foreclosure. Black women like Janice Johnson were desired customers because they were poor, des- perate, and likely to fall behind on their payments. Unlike the programs of old, the HUD- \bH A gua rantee to pay lenders in full for the mortgage of any home in foreclosure transformed risk from a reason for exclusion into an incentive for inclusion. The struggles of poor Black women provide particular insight into the ways that overlapping patterns of racial and gender discrimination shaped the new inclusive housing market. As historian R honda Williams has noted, “Low- income b lack women[’s] . . . citize nship struggles draw attention to the issues shaping postwar urban residency as well as the character of the liberal state and U.S. democracy.” 10 I describe these and the other new terms on which the real estate industry conducted business within the urban housing market as “predatory inclusion.” Predatory inclusion describes how African American homebuyers were granted access to conventional real estate practices and mortgage financing, but on more expensive and comparatively unequal terms. These terms were justified because of the disproportionate conditions of poverty and dilapidation in a scarred urban geography that had been produced by years of public and private institutional neglect. When redlining ended, these conditions of poverty and distress became excuses for granting entry into the conventional market on different and more expensive terms, in comparison with the terms offered to suburban residents.

For example, urban- based re sidents could now use \bHA- backed l oans, but big depository banks continued to refuse to lend to prospective homeowners in the urban market, opting for higher interest- rate ret urns on bigger loans and more expensive housing in white suburbs. This relegated most African Ameri - can urban buyers to the use of unregulated mortgage banks, often subsidiaries of the same depository institutions that refused to lend in Black communities, that were indiscriminate in the dissemination of loans because their profits were based on volume sales. Mortgage bank loans relied on costly origination fees and other costs for the particular services they offered. The differences in physi - cal condition, geography, and location of predominately Black housing became the proxies for race where direct references to race were no longer permissible 6 i nt Roduction because of fair housing legislation. These differences, long existent in the urban market, both legitimized the different treatment of Black homeowners and con - tinued to make them vulnerable to predatory real estate practices. Federal fair housing laws had been passed to uproot discrimination in the housing market and held out promises for the unobstructed participation of African Americans in buying and selling homes. But HUD ’s reluctance to enforce civil rights laws preserved the practice and patterns of segregation that had historically driven up the price of substandard properties in predominately Black enclaves. The failure of HUD to systematically root out the segregative impulses throughout the real estate industry meant that these exploitative practices prevailed even as federal redlining fell out of favor. Historian Nancy Kwak describes how the change in policy from federal redlining to inclusion shifted the priorities of civil rights ad - vocates from “fair access to credit” to “access to fair credit.” 11 The continuation of residential segregation after the fall of federal redlining and the passage of federal fair housing created the conditions for predatory inclusion. Here, I argue that the discriminatory “best practices” of the real estate indus - try made it resistant to change in adhering to new fair housing legislation. The benignly named “public- privat e partnership” obscured the ways that the federal government became complicit with private sector practices that promoted resi - dential segregation and racial discrimination. Selling dilapidated homes to poor women who could not afford the repairs, like Janice Johnson, reinforced the idea of unfit Black owners who posed a threat to the quality of a neighborhood.

When the federal government guaranteed Johnson’s mortgage, it became impli - cated in the shoddy business practices of private sector agents bent on profiting from the desperation of low- income u rban residents. Racially informed real es - tate practices were not the actions of an industry impervious to change and old in its ways; instead, racial discrimination persisted in the new market because it was good business. Tethering federal policy to the practices of the private real estate industry com - plicated the ability of federal agents to regulate the administration of the new homeownership programs. The paucity of oversight in a housing market deeply ingrained with the belief that the Black population needed to be contained or segregated to preserve property values for white homeowners, combined with unprecedented federal dollars and a mandate to produce more units of housing than ever in American history, was a recipe for nefarious business practices. The end of redlining and the introduction of conventional real estate practices into the Black urban market ended one set of predatory practices, like homes for i nt Roduction 7 sale on land installment contracts (LICs), without fully resolving the conditions that gave rise to those practices in the first place. The result was the continua - tion of older predatory practices in combination with the invention of wholly new means of economic exploitation of African Americans in the U.S. housing market. History weighed heavily on the then-contemporary moment. The past could not be so neatly erased from the new world that was created; instead, the past helped to shape how the new policies and practices were implemented. The 1970s witnessed an enormous shift in how the federal government housed its poor and low- income p opulation. As one writer described it, “A new policy paradigm defined by the free market had emerged to replace that of collective public provision of housing.” 12 Moving from public housing to low- income homeownership was not an issue of whether government or the free market was best situated to respond to the ongoing crisis in affordable housing in the coun - try. Instead, housing policy in the 1970s hinged on the collaborative relationship between public and private sectors. I argue that as a result of this relationship, the federal government was impaired in its ability to aggressively regulate an industry that had employed racial discrimination in its determined pursuit of insatiable profit as a business principle. Sociologist Christopher Bonastia, one of the few scholars to investigate the HUD- \bH A hou sing crisis, has rightly drawn attention to the “unwieldly” bureaucratic inefficiencies of HUD along with the conflicting political agendas of those at its helm. 13 But this explanation alone does not account for the powerful influence of the real estate industry in shap - ing the policies and their execution in ways beneficial to the industry and not the public. The continuity of exploitation in the urban real estate market does not suggest that exclusion was preferable. Instead, it compels us to look more closely at the practices of the real estate market and not just inclusion in it. The suggestion that Black equality in the real estate market could be achieved by the formal end to housing discrimination failed to take into account the very ways that racial inequality was structured and embedded within the architecture of the system of buying and selling real estate in the United States. Thus, even when discriminatory policies were formally dismantled, the impulse toward economic exploitation and residential segregation ensued because of the ways that racial discrimination continued to add value to racially exclusive suburbs. The Ameri - can housing market was an expression of the prevailing racial consciousness of the larger society in which it operated. As social scientist Dalton Conley put it, “White housing is worth more, precisely because it is not Black housing.” 14 In general, racial discrimination remained good business for the real estate industry. 8 i nt Roduction The concept of predatory inclusion also captures the failures of racial liberal - ism and its premise that inclusion into American democracy through the vehi - cles of citizenship, law, and free market capitalism could finally produce fairness and equality for its Black citizens. 15 African Americans were afforded formal access to those tools of American democracy, but their function and abilities had been fundamentally distorted by racism. The enduring obstacles faced by African Americans in pursuit of fair housing defy the narrative of the eventual - ity of progress over time in the United States. Racism in real estate has remained resilient and ingrained, demonstrating the limits of inclusion as discrimination, exploitation, and predation continued well after the legal hurdles to fair or open housing had been cleared. The story of the HUD- \bH A hou sing crisis of the 1970s is complex. In order for us to grasp its full impact, there is a set of issues that we must reckon with in the pages that follow. These include the formation of risk, the mechanics of the low- income h omeownership program, the role of suburbs in urban housing policy, and the ways that the crisis that erupted within the federally backed low- income homeownership program shaped political discourse, including notions of “urban crisis” and “underclass,” by the end of the 1970s.

Risky Business After several decades of refusing to guarantee the mortgages of African Ameri - cans, or those who lived in close proximity to them, the \bHA charted a new path.

With the passage of the 1968 Housing and Urban Development Act ( HUD Ac t), new provisions were made to encourage low- income home ownersh ip. A fter years of partisan jousting over the creation, placement, and management of public housing programs, President Lyndon Johnson turned to the market to solve the perennial “housing crisis” that had plagued American cities since at least World War II. The private market had largely ignored the regular refrain for more safe, sound, and affordable housing, but the advent of low- intere st mortgage loans with the full backing of the federal government piqued the interest of the real estate industry. For decades, the \bHA maintained that the deteriorating housing stock and “inharmonious” racial groups within American cities made them too risky for the risk- averse r eal estate and banking industries. The new legislation induced private sector involvement by removing said risk. Creating a risk- free env ironment for business, though, presented new risks to potential low- income h omeowners. Advocates proselytized the virtues of i nt Roduction 9 ownership, including the creation of stakeholders within otherwise distressed communities. They suggested that the efficiency and speed with which business could produce housing would finally end the perennial scarcity of good urban housing. Private property, then, not only could solve the housing crisis but was presented more broadly as a palliative to an “urban crisis” that had metastasized into annual riots and rebellions throughout the 1960s. The market was cham - pioned as a neutral space where capital or credit flattened or eradicated differ - ence. The market was the great equalizer. The consumer experiences of African Americans, however, painted a much different picture. From the inception of the housing market in the United States, its viability had been structured around a scaffolding of racial knowledge that presumed insight into the speculative elements of “good housing” and “good neighbor - hoods,” which could then be actualized through ascending property values.

Transmogrifying real estate into homes and then again into financially accru - ing assets depended on the alchemy of race, place, and the perceptions of the buying public—or “property values are where culture meets economics.” 16 As Frederick M. Babcock, considered an originator of the field of real estate ap - praisal, wrote in his seminal The Appraisal of Real Estate , “It is obvious that there is no absolute iron- clad met hod of computing real estate values . . . becaus e val- ues are a social phenomenon dependent upon human behavior.” 17 The intensely subjective process of determining the value of property or a neighborhood—the pseudoscience of real estate appraisal—was inherently informed by the presence or absence of African Americans. 18 The American Institute of Real Estate Ap - praisers ( AIREA) said as much when its professionalization materials maintained that “the clash of nationalities with dissimilar cultures . . . contri bute[s] to the destruction of value. When a new class of people of different race, color, nation - ality and culture moves into a neighborhood . . . old inhab itants think that the neighborhood is losing desirability.” 19 Segregating African Americans into deteriorating urban neighborhoods and then starving those communities of resources and other investments greatly lim - ited their access to better- paying j obs and well- resour ced public schools, while pushing them into substandard housing. 20 Poverty and segregation led to over - crowding in Black housing, thus hastening its deterioration. These conditions were then spun into evidence that African Americans were unfit as potential homeowners and deleterious to property values within the housing market.

These were justifications for confining African Americans to Black- only ne igh- borhoods where they could not “infect” the larger housing market. The scarred 10 i nt Roduction geography of these developing Black neighborhoods was the physical evidence invoked to legitimize keeping African Americans out of predominately white communities. As Babcock wrote, “There is one difference in people, namely, race, which can result in a very rapid decline. Usually such declines can be partially avoided by segregation and this device has always been in common usage in the South where white and negro [sic] populations have been separated.” 21 The racial logic permeating the real estate market was not an invention of the \bHA , even if that agency was a willing recipient of the inheritance. Long before the formation of the \bHA , real estate brokers had already established rules encouraging the physical isolation of African Americans from white neighbor - hoods. By 1924, the National Association of Real Estate Boards ( NAREB) prom- ised punishment and revocation of membership to any broker who disrupted patterns of racial homogeneity on a given block or neighborhood. 22 These ideas and practices were then codified into policies created by the \bHA . Frederick Bab- cock, as one example, developed his theories of property appraisal during his time as a real estate agent in Chicago in the 1920s. Babcock went on to author the \bHA ’s underwriting criteria that determined coverage within the federal mortgage insurance program. So while it is true, as Richard Rothstein has most recently argued, that the federal government played a critical role in expanding the logic and practices of residential segregation with the invention of its housing policies in the 1930s, government agents did not act in a vacuum, nor did they act alone. 23 When antipodal objectives of public interest were melded with private en - terprise in the American housing market, those policies were bent to satisfy the market demands of real estate. The political and financial influence of private sector actors was outsized compared with the influence of individual homeown - ers simply trying to secure their housing by obtaining a mortgage. The interests of real estate inevitably meant that the racial practices at the very heart of real estate and mortgage lending practices were then grafted onto public policy. If the real estate industry required segregation to preserve profitability, then what would prevent housing policy from reflecting that same priority? It was not just the influence of private sector operatives within public agen - cies that shaped U.S. housing policies, but the public and private collaboration produced tension- filled ho using policies strained between meeting a public need while also acting to preserve the economic interests of private enterprise.

The tension was born in the conflict between exchange value and use value, or more intimately, the difference between real estate and a home. 24 If these values i nt Roduction 11 are not irreconcilable, they often operate at odds with each other. These con - tradictory objectives of real estate and home—one a commodity and the other intimating a place of belonging—also reinforced reactionary racial norms and deepened the perception of dual housing markets working at dual purposes.

Midcentury narratives of normative whiteness embodied in conceptions of the suburban- based n uclear family shaped the perceptions of home as an expression of use value within white communities. Conversely, developing narratives con - cerning perceived domestic dysfunction within Black living spaces—whether nonnormative family structures or poverty or dilapidated living structures— cast Black dwellings as incapable of achieving the status of home , thus reducing them to their base exchange value . Where white housing was seen as an asset developed through inclusion and the accruable possibilities of its surrounding property, Black housing was marked by its distress and isolation, where value was extracted, not imbued. These racialized narratives of families, communities, and their built environments reinforced and naturalized the segregative practices among real estate brokers, mortgage bankers, and the white public. 25 Indeed, these perceptions of insurmountable difference steeped in the permanence of blood, race, and culture constituted the underwriting criteria that determined who was to be excluded and who should be included. Racial real estate practices, then, represented the political economy generated out of residential segregation. The real estate industry wielded the magical ability to transform race into profit within the racially bifurcated housing market. The sustenance and spatial integrity of residential segregation, along with its appar - ent imperviousness to civil rights rules and regulations, stemmed from its prof - itability in white as well as African American communities—even as dramati - cally different outcomes were produced. In the strange mathematics of racial real estate, Black people paid more for the inferior condition of their housing. They referred to this costly differential as a “race tax.” Real estate operatives confined each group to its own section of a single housing market to preserve the allure of exclusivity for whites, while satisfying the demand of housing for African Amer - icans. This was evidence not of a dual housing market but of a single American housing market that tied race to risk, linking both to the rise and fall of property values and generating profits that grew into the sinew binding it all together. As Arnold Hirsch wrote, “The rise of ‘second ghettos’ in the postwar era and the suburban boom were . . . organi cally linked.”26 A “white housing market” would have actually been unintelligible without its Black counterpart; both relied on the other to become legible. 12 i nt Roduction \fomeowne Rs\fi P fo R t\fe Poo R By the end o f the 1960s, the National Advisory Commission on Civil Disorders, known as the Kerner Commission, had left no doubt that substandard housing was a recurring factor in the annual bout of riots that roiled American cities.

Identifying segregation at the root of raging Black communities, the commis - sion’s findings called for a historic change in American housing policy. In the spring and summer of 1968, after the release of the Kerner Commission’s final report, federal fair housing was passed, and a landmark Supreme Court decision in Jones v. Mayer removed any doubt about the illegality of housing discrimi - nation. Recalling the 1866 Civil Rights Act and the Thirteenth Amendment, the justices held that “when racial discrimination herds men into ghettos and makes their ability to buy property turn on the color of their skin . . . then it . . .

is a reli c of slavery.” 27 The passage of the HUD Act in August 1968 buttressed the antidiscrimination edicts with a mandate to produce 10 million units of new and rehabilitated housing within a decade. Separately these legislations and the judi - cial decision responded to two significant issues that constrained Black housing opportunities: residential segregation and available housing. The HUD Act was intended to produce record amounts of housing where there had been historic shortages since the World War II era, and federal fair housing was to allow for housing choices beyond segregated ghettos. This program, however, was not con - sidered to be typical of the largesse of the Johnson administration. Instead, the HUD Act represented a new direction in housing poor and low- income p eople.

For decades, federal officials relied on public housing to shelter poor and low- income people. But by the end of the 1960s, public housing had become politi - cally untenable, with endless jousts over its maintenance, location, and inhab - itants. The private real estate industry vacillated between charges of socialism and profligacy in its denunciations of public housing. It opposed a government program that it claimed competed with private enterprise in the housing market.

A policy vacuum was created when it came to housing for the poor, which suf - fered from a mixture of government neglect and shrinking tenancy because of the conditions endured by residents and the constant pressure to exclude anyone other than the poorest tenants. The HUD Act changed this by creating the means for poor and low- income p eople to purchase their own homes.

With the turn to private property, federal officials were hoping for a cheaper program with smaller outlays and the social stability that, they proselytized, came with property ownership. As with any partnership, the private sector had i nt Roduction 13 its own expectations, including the infusion of subsidies and federal mortgage guarantees in a moment of incertitude within the housing market. Private sector actors welcomed the pioneering role of HUD and the \bHA in forging a risk- free ve nture in the new urban housing market. There were other expectations as well.Placing homeownership at the heart of the nation’s low- income h ousing poli- cies ceded outsized influence and control to the real estate industry over dwell - ings intended to serve a disproportionate number of African Americans. The implications of this policy shift were that the steep involvement of the real estate industry would make African Americans vulnerable to the practices of an in - dustry whose wealth was largely generated through racial discrimination. The profitability of the real estate industry was contingent on “best practices” that actively encouraged racial segregation, and the public policies that grew from the partnership between property assessors, brokers, bankers, and federal policy - makers reflected the logic of the housing market. Even when the policies were in response to prolonged social protest, as was the case in the 1960s, the outcomes still reflected terms that were favorable to private sector actors. Historically, African Americans had called on the federal government to intervene on their behalf in articulating both rights to and rights from when it came to developing a legal regime in response to unchecked racial discrimination within the private sector. What would it mean for the protection of African Americans from ra - cial discrimination in the private sphere if the state ceded to private entities its responsibility to deliver goods and services, as the homeownership program did? unlock in\b t\fe suBuRB s A key to Bla ck housing inequality had been how residential segregation cir - cumscribed space, inferred inferiority through spatial isolation, and incentiv - ized substandard maintenance and care from property owners, while driving up the costs relative to the better housing options for white residents. Despite the simultaneity of fair housing legislation and favorable court decisions ban - ning racial discrimination, they were not acted upon, as private sector agents continued to insist on isolating fair housing from the housing production man - date. In other words, while the real estate industry celebrated the passage of the HUD Act, it vociferously denounced “fair housing” as “forced integration.” This attitude was certainly not representative of the private sector in its entirety.

Homebuilders and mortgage lenders, looking to benefit financially from the housing mandate, became enthusiastic backers of expanding housing choices 14 i nt Roduction for African Americans into the suburbs while also capitalizing on the expan - sion of the urban housing market. But real estate brokers were the first line of encounter for African Americans who hoped to use the homeownership subsidy.

And it was real estate brokers who were most adamant in their opposition to fair housing. While a source of vigorous scholarship in social sciences concerning what Gregory Squires, Kevin Fox Gotham, and others describe as “privatism” or “the underlying commitment by government to help the private sector grow and prosper,” these conflicts of interest at the heart of this public- privat e partnership deserve more scrutiny in housing historiography in terms of their consequence for African American consumers and our understanding of the stubborn ques - tion of why fair housing has not worked. 28 Improving the housing opportunities for low- income A frican Americans was contingent on transforming the practices of the real estate industry. Given the dueling objectives of different sectors within the real estate industry, federal regulators in HUD , newly empowered in this role by the Fair Housing Act (as the Civil Rights Act of 1968 came to be known), would have to take responsibility for implementing the new legislation in fair and equitable ways. By 1968, though, the federal and local governments had a poor record of enforcing the fair housing laws already on the books. As early as 1960, dozens of fair housing ordinances in cities across the country had already been passed, but none had a perceptible impact on stopping housing discrimination. The 1962 executive order signed by President John F. Kennedy ordered a ban on racial discrimination in any new, federally subsidized hous - ing. The order fulfilled a long- standi ng campaign promise to wipe out housing discrimination with the “stroke of a pen.” Because the order was not retroactive, though, it was limited to a small percentage of the actual housing market. Even within this limited scope, the enforcement mechanisms of the executive order were ineffective, calling only for “public or private hearings for . . . complia nce, conciliation and persuasion to cure violations by any person, firm, state or local a genc y.” 29 The 1964 Civil Rights Act banned discrimination in any federally subsidized housing with an important exception: homes purchased with an \bHA - backed l oan. Omitting the \bHA from the scrutiny of federal racial regula - tors exposed not only the suffocating influence of the real estate industry but also the servile reluctance of government officials to seriously confront racism in the housing market. The 1964 Civil Rights Act also included Title VI, allow - ing federal officials to withdraw federal funds as a form of punishment against i nt Roduction 1\f municipalities or localities engaging in discrimination. It was another tool that inspired the illusion of progress against discrimination without deploying spe - cific enforcement requirements that would encourage action. But perhaps the most egregious example of the self- imposed i mpotence of the federal government regarding discrimination involved not housing but edu - cation. The response to the 19\f4 Brown v. Board of Education Supreme Court decision provided ample evidence of federal reluctance when it came to the state enforcing its own laws against discrimination. For years after the Brown deci- sion, courts and local officials stood idly by while southern officials established all- white “s egregation academies” in a blatant flouting of the Court decision.

It was not until 1968 that the Supreme Court ruled in Green v. County School Board of New Kent County that states must dismantle segregation “root and branch.” If the federal government lacked the will to confront and undo racism within the domain of the public sector, where its authority was overwhelming, what were the chances that it would aggressively confront racist practices in the private sphere of the politically influential and financially connected world of real estate and mortgage lending? The federal government was not suffering from letharg y or even malicious intent, but its delayed response reflected political con - siderations and deference to market sensibilities that disavowed government in - tervention in business matters. Even as federal actors moved at a glacial pace in enforcing their own rules banning discrimination, the formal changes in legislation also indicated the ac - ceptance of the right of African Americans to participate in the conventional housing market. The policy demands against racial discrimination, at least for - mally, broadened the scope of those who could now expect to participate in the evolving housing market. This opening was created through a combination of upward and downward pressures. From above, federal legislation, judicial deci - sions, and direct intervention from the executive branch formally excised the language of racial exclusion from the policies of the federal government. Within business, agents of private enterprise who also explored the possibilities of a new market while seeking to minimize their exposure to risk shared this perspec - tive of reform. From below, Black protests targeted the different sectors of the real estate industry to pressure them into allowing Black participation. Activism and other forms of civic pressure from organized African Americans and oth - ers demanded inclusion in the “affluent society.” The persistence of second- class c itizenship evidenced by trenchant housing discrimination, among other badges 16 i nt Roduction and indices of inferiority, provoked protests, demonstrations, and eventually urban uprisings. As a result of migration by African Americans from rural areas into American cities, incomes rose and homeownership became a tangible pos - sibility for an unprecedented number of Blacks. Prompted by protests led largely by African Americans, successive political actions produced greater numbers of legal protections against housing discrimination. The urban turn in homeownership policies reflected the conflicting agendas of government officials and private actors in the housing market. New public policies encouraged homeownership, but there was lax enforcement for the frac - tious demand of fair housing. Indeed, NAREB denounced the Fair Housing Act, but the organization strongly backed the passage of the HUD Act, which came four months after Fair Housing. Real estate agents welcomed the economic op - portunities presented by the far- reachi ng legislation, while still demanding that segregation be preserved as a prerogative of white homeowners. Even as fair hous - ing and the production mandate were passed within months of each other, the legislations operated within different spheres. The reluctance to leverage the new fair housing legislation against the excite - ment of the housing production mandate represented shifting political priorities.

Even though both of these legislations were created in the twilight of the John - son administration, they were policies that would ultimately be implemented and administered by the administration of President Richard M. Nixon. Nixon appointed former Michigan governor and noted racial liberal George Romney to be secretary of HUD . But Nixon had run on a campaign that stoked the racial resentments of his white suburban constituency that he cohered into a white “si - lent majority” on the promise of preserving the racial exclusivity of white subur - ban communities. The Nixon administration contorted the legislative demands for “fair housing” into charges of “forced integration,” while deflecting criticism of the president’s position by describing his actions as respecting the choices of whites and African Americans in selecting their neighborhoods and communi - ties. Nixon appealed to some African Americans by championing Black capital - ism and pledging to finance Black business ventures, which amounted to prom - ises to “gild the ghetto” and not just confine African Americans to it. Nixon had a weak standing in African American communities, but as desegregation seemed less attainable or even desirable among African Americans, his prom - ises amounted to financial incentives aimed at relegitimizing a murky politics of “separate but equal.” 30 i nt Roduction 17 PRedato Ry inclusion S ince the exclusionary practices of the \bHA had been such a focal point in ex- plaining the distressed condition of Black communities, the logical solution, then, was inclusion. The logic flowed from the ways that the market had created middle- class st atus for white homeowners. Given the tumult at the center of urban life through the 1960s, the hope was that property ownership could tame the Black rebellion coursing through cities across the country. It was also hoped that opening homeownership possibilities for African Americans in cities would curtail their demands for entry into white suburban communities. In a classic formulation of postwar racial liberalism, exclusion from the normalizing institu - tions that governed life for white America was situated as the central problem for African Americans. Racial liberalism posited inclusion as the antidote to the crises created by exclusion. 31 The “American dilemma” was how to make the American dream accessible to African Americans as a step toward finally fulfill - ing the promise of the American creed or American exceptionalism. American exceptionalism was conflated with the free market, and access to both was pro - moted as the solution to the problems faced by African Americans. The inclusion of African Americans could unlock the market’s true potential in creating social stability and middle- class st atus and facilitating the accumulation of personal wealth. It was what Janice Johnson was banking on when she decided to buy a home when renting was no longer an option. Inclusion, however, would be conditional, contingent, and tiered. Racism and the economic exploitation of African Americans was the glue that held the American housing market together and would necessarily need to be overcome to fully include Black buyers in the real estate market. But inclusion did not bring an end to predacious practices; it intensified them. Take the end of federal redlining as an example. The \bHA stopped its redlining practices even before the passage of the Fair Housing Act, meaning that their cessation was not necessarily linked to the federal government’s prohibition on racial discrimination in the housing market. Indeed, \bHA redlining was simply dismissed as a problem of location and not of race. The \bHA claimed it decided to exclude urban areas from its insurance because of the age and condition of the structures in those areas.

\bHA officials, of course, failed to take into account their own references to race as part of the underwriting criteria used to determine eligibility for mortgage insurance. It was not the case that African Americans and other unworthy racial 18 i nt Roduction and ethnic groups were in the wrong place at the wrong time, but the condi - tions of distress and dilapidation within those communities were attributed to the race and ethnicity of the people who lived there. In the earliest days of the \bHA , theories of eugenics and racial inferiority informed its policymaking with regard to Black people. African Americans were regarded as a pestilence or as a contagion that necessitated containment or quarantine for fear of its ability to destroy value surrounding it. Coming to terms with the racism embedded in past federal practices was not about redress, restitution, or repair; instead, it was necessary to contextualize the conditions found in African American communities. Identifying racially inscribed policies, such as redlining, from an earlier era was also critical to im - plementing new policies that aspired to open up and improve Black housing opportunities. Instead, by ignoring race, new practices that were intended to facilitate inclusion reinforced existing patterns of inequality and discrimina - tion. For example, poor housing and neighborhood conditions caused by earlier \bHA policies became the basis on which new lenders, in the new era of \bHA colorblindness and an end to redlining, could still continue to treat potential Black homeowners differently. African American neighborhoods were given the racially neutral descriptor “subprime.” This distinction allowed for certain kinds of lenders while justifying the continued inactivity of other lenders. Though race was apparently no longer a factor, its cumulative effect had already marked Black neighborhoods in such ways that still made them distinguishable and vulnerable to new forms of financial manipulation. Inclusion was possible, but on predatory and exploitative terms. New \bHA backing created a market dominated by mortgage bankers. Mort - gage banks were not like ordinary depository banks; instead, they were unregu - lated institutions that relied on originating and maintenance fees and volume sales to make their profit. Mortgage bankers had no stake or interest in the areas in which they were lending; they just wanted to rack up sales. The \bHA ’s g u a r a n- teed mortgage, the subsidized interest rates, and the captured segregated housing market incentivized market actors to speculate that the poverty and desperation of Black urban residents, especially Black women, would drive them toward the low- income h omeownership market. In an earlier era, risk had been the pre - text for excluding potential Black homeowners; by the late 1960s, risk had made Black buyers attractive. In fact, the riskier the buyer, the better. Janice Johnson was desired as a homeowner because of the likelihood of her failing to keep up with her mortgage payments. With the new \bHA - insured h ome mortgages in i nt Roduction 19 Black neighborhoods, mortgage banks and other lenders were able to parlay fore - closures into profits as the homes went back onto the market and the process was repeated over and over again. The Federal National Mortgage Association, known as Fannie Mae ( \bNMA), which was made a private organization as part of the HUD Act, sweetened the deal even more by promising to purchase all \bHA loans at face value. The loans that were purchased by \bNMA were then packaged and sold to long- term inv es- tors, and that money was made available to lenders to continue to ply this devel - oping housing market. There was also the added benefit that poor homeowners such as Johnson could revive “zombie properties,” or those dwellings that were economically unviable, into profitable ventures. Johnson’s new home should have been condemned; instead, her desperation for housing in combination with her mortgage brought the house back to life. A web of actors benefited from this act of resuscitation. With this series of transactions, including the person from whom Janice Johnson purchased her house, the mortgage lender that extended her a loan, and the service people she called to fix the never- ending def ects in her home, the more Johnson poured her meager monies into her dilapidated home, the more other people benefited from her investment. Abandoned real estate, cheap mortgage money, drive- by appra isals, quick home sales, defaults, fast foreclosures, and the race for profit all greased the wheels of predatory inclu - sion. Inclusion on predacious terms was not only about banking and real estate, but it raised deeper questions about the progress and triumphalism that pervade the discourses of racial liberalism and uplift so central to the U.S. narrative of progressive change over time. uRB an cR ises The f ederal government’s subsidization of homeownership among African American urban residents had a decidedly different outcome compared with the homeownership programs that had been promoted a generation earlier. Instead of creating a bedrock of middle- class pr osperity, as the homeowning boom of the 19\f0s had done for ordinary white people, the urban homeownership programs of the 1960s and 1970s reinforced the optics of urban crisis while simultaneously appearing to confirm the role of African Americans in perpetuating it. The ra - cial liberalism that had animated much of the Johnsonian welfare state, with its insistence on opportunity and inclusion in American prosperity, eventually gave way to the colorblind universalism that became the calling card of the Nixon 20 i nt Roduction administration. The conservative- inspir ed discourse of colorblindness and its erasure of “race talk” did not actually eliminate the invocation of race to make meaning of the shifting social, economic, and political context of the 1970s; it just changed how race was invoked. 32 “Urban crisis,” as a description of infrastructural and complex policy prob - lems in the built environment in the early 1960s, was absorbed into a pattern of coded speech used to describe those who lived in distressed urban communi - ties. 33 Coded speech was, of course, invoked to communicate ideas that could no longer be spoken of freely on their own terms. The new uses of “urban crisis” were a means of articulating the perception of crisis in American cities without using race as its catalyst. Ending race talk was important because the “rights revolution” of the 1960s introduced new rules and regulatory bodies that were statutorily empowered to address explicit acts of discrimination. These new legal tools helped to spur the spate of antidiscrimination litigation throughout the 1970s. Ordinary citizens made sense of the new rights through multiple law - suits. By shedding reference to race, public and private institutions could shield themselves from the threat of lawsuit. Removing references to race also assisted in tempering the response of civil rights organizations that had become more attuned to the power of litigation than the coercive power of street protests.

Indeed, the persistence of racial inequality well into the 1970s dampened the expectation that continued mobilizations and protests were effective means to combat discrimination, compared with lawsuits and deeper involvement in elec - toral politics. In a similar vein, as the Nixon administration looked for opportu - nities to fund segregated urban development, naked appeals to racism threatened to put pressure on Black operatives either to reject the overtures of the Repub - lican administration or to publicly back activist responses to public displays of racism. Perhaps of most consequence was how the rhetoric of colorblindness confirmed the critiques of racial liberalism. Colorblind universalism fulfilled the dream of racial liberals in their insistence that removal of racial language was evidence of inclusion. Racial liberals relied on the trace of representation or the physical presence of those who had been previously excluded as proof of change. 34 Thus, it was radicals who coined the phrase “institutional racism” to critique the inadequacy of representation and presence as clear measures of racial equality or racial repair. 35 The new world of the 1970s was complicated by African Americans armed with new rights and raised expectations, the emergence of electoral conservatism, i nt Roduction 21 and the unanticipated and sudden collapse of the postwar economic engine. This contentious environment evidenced by clashing political agendas created even more ideological pressure to explain a rapidly changing economic world. The Republican Party at the helm of the country was bent on undoing the archi - tecture of social welfare that had significantly altered the public expectations of government. It did this in multiple ways, including directing an aggrieved white public to focus their apprehensions about the changing world on the dis - proportionate number of African Americans who were recipients of federal aid.

Republicans were also adept at recasting the insufficiencies, gaps, oversights, and other problems in public programs as the problem of government intervention.

This was particularly effective as public cynicism about the role and function of government began to increase with the escalation of the Vietnam War and other evidence of government manipulation and malfeasance. These relatively new dynamics overlapped with much older, persisting discus- sions about deserving and undeserving poor people and who, if anyone, was en - titled to social welfare. 36 The HUD- \bH A low- income homeownership crisis began to unfold in this charged atmosphere. The HUD crisis was wielded to confirm two truths. The first truth was that only the market, as opposed to government, could handle the gargantuan problems rooted in American cities. The Johnson welfare state was declared a failure because, despite the “War on Poverty,” pov - erty still existed. From complaints of red tape, never- ending de lays, and numer- ous other inefficiencies was spun a tale that government was the problem. This critique of the state was then mapped onto an evolving, racially motivated cyni - cism that denounced urban problems as worsening and potentially altogether intractable. This fatalist discourse of state abnegation was not prompted by the HUD- \bHA cris is, but the devolution of the programs aided the narrative. While HUD’s homeownership problems were concentrated in a relatively small number of cit - ies, media coverage of the crisis transformed it into a national story of conse - quence. In an age of investigative journalism, HUD and the \bHA provided ample opportunity to uncover local stories of fraud, graft, and corruption. The HUD- \bHA crisi s was front- page new s in publications across the country by the early 1970s, and in 197\f the Chicago Tribune won a heralded Pulitzer Prize for its cov - erage. In the examination of these programs, the role of private enterprise and the potential mismatch of attaching market principles to the crucial effort to provide housing for low- income a nd poor African Americans were sidelined for the more 22 i nt Roduction sensational focus on the program participants and their fitness as homeowners.

While race was almost never mentioned, profiles of poor Black women, many of whom were welfare recipients, were highlighted in media coverage.

Political operatives within the Nixon administration seized upon these stories as proof that government was, indeed, the problem. This was explained in the midst of a deepening crisis in American cities. Rising crime rates, an emergent drug crisis, and growing poverty were heralded as proof that Johnson’s Great Society had failed, creating an opening for championing market solutions to urban problems. The arguments against perceived social welfare benefits flow - ing to supposedly undeserving African Americans were not confined to HUD ’s problems but were part of a generalized attack on the fragile American welfare state. In the realm of housing, this attack culminated in the Nixon adminis- tration declaring a moratorium on all subsidized housing in 1973. HUD- \bH A’s ho meownership crisis provided a powerful visual component to unending urban crisis as emptied homes, crumbling properties, and abandoned buildings, tens of thousands of which now belonged to HUD , pockmarked Black urban neighbor- hoods across the country. In turn, the neglect of cities in the United States added further legitimacy to the stereotype that poor and working- class B lack people posed a threat to the property values of white property owners. There was no need to state what seemed so obvious as urban crisis faded into an urban malaise—a prelude to the drug wars of the 1980s. A popular refrain from conservatives in the 1970s and certainly by the 1980s was that antipoverty programs and social welfare created the crisis in the first place. The HUD and \bHA homeownership programs were not exactly welfare, even though thousands of people who used the programs were on public assistance. The critiques of government malfeasance were certainly warranted, but the primary role of the private sector in the HUD- \bH A pro grams has been lost to history. Meanwhile, the promotion of public- privat e partnerships and, indeed, the regular exhortations on the primacy of the private sector to perform all tasks and provide all services are assumed. In the face of this, the role of poor Black women, many of whom were welfare recipients, in exposing this particular mani - festation of fraud and corruption in the low- income h omeownership programs deserves to be known and understood. 37 These women braved the indignity of having their personal lives and abilities to maintain a household scrutinized in public hearings, by elected officials, and by other agents of the state, as well as in media outlets that insisted on identifying them as “unsophisticated buyers.” i nt Roduction 23 Their willingness to utilize the services of Legal Aid and to endure the stress and uncertainty that surely accompanied the risk of class- action l awsuits uncovers yet another tool that poor and working- class wo men wielded in their fight for their rights in the 1970s. It would be incorrect to label these struggles as “hid - den.” More than that, they have been marginalized and forgotten. In some ways, they have been forgotten because of a larger narrative of failure in resolving this country’s persisting legacy of housing discrimination. The decades- long sear ch for safe, sound, and affordable housing has been impervious to the country’s triumphalism concerning the inevitability of “progress.” But over the course of the 1970s, dozens of Black women who were the named plaintiffs in civil lawsuits against HUD, the \bHA, and other related agencies represented tens of thousands more women like themselves in asserting their right to a decent home. The par - ticular role of banks and the real estate industry in undermining Black home - ownership, which reinforced the racist idea that African Americans lower prop - erty values, cannot be understood as clearly without these women. The cheating of Black communities and homeowners continues to skew economic outcomes and shape racist housing policies. These women fought back, and by exposing what happened to them in interviews with journalists, and through lawsuits, their story can now be told.