In a year of many anniversaries, two in particular stand out with respect to the housing crisis facing the United States today. The first is the passage of Title VIII of the 1968 Civil Rights Act, more commonly known as the Fair Housing Act. In some ways, the legislation bitterly acknowledged the role of housing discrimination in keeping African Americans in a subordinate social position. Excluding Black people from white neighborhoods, while simultaneously disinvesting in Black communities, has kept them out of the best-funded schools and highest-paying jobs. Housing discrimination was a linchpin of Black inequality in American society, and the Fair Housing Act held out the promise of undoing it by banning racial discrimination in the renting, financing, and selling of housing.
The second anniversary is that of the 2008 financial crisis—perhaps the starkest sign of the palpable failure of the Fair Housing Act to fulfill its mandate. Not only did the crisis wipe out decades’ worth of hard-won financial gains for African Americans, but it stole their homes as well. In 2010 almost half a million African Americans were at risk of foreclosure, and by 2014 more than 240,000 had lost their homes. This historic collapse in Black homeownership is an important part of why the wealth gap between Black and white Americans is larger today than it has been in decades. In 2007, right before the crash, the median white family had eight times the wealth of the median Black family. By 2013, that figure had risen to eleven times, and it has tapered off only slightly since.
The subprime mortgage crisis, and the wider housing and economic crisis it produced, was the culmination of a long period of predatory inclusion of African Americans in the housing market, which can be traced back to the era of housing and credit reform in the late 1960s and 1970s. After decades of exclusion, African Americans were finally promised access to the robust housing market that had fueled the ascension of the white middle class in the second half of the twentieth century. Instead, they were subjected to rapacious lending and real-estate practices that extended familiar patterns of discrimination. As the early-2000s housing bubble was peaking, African Americans were 50 percent more likely than their white peers to receive a subprime loan. Those loans, it is widely understood today, were more expensive and carried higher interest rates. The terms of these loans increased the probability of their failure, and their concentration in Black neighborhoods promised not just to ruin an individual’s credit but to undermine the stability of entire communities. The real-estate industry created the idea that Black homeowners posed a risk to the housing market and then profited from financial tools promoted as mitigating that risk.
In the aftermath of the predictable failure of those loans, banks and other mortgage lenders today are using this failure as an excuse to revert back to the exclusionary practices that gave rise to exploitative lending in the first place. This has included the resumption of the use of land-installment contracts, requiring “owners” to pay property taxes, make substantial repairs, and pay usurious interest rates while having no equity in the property. There has also been the revival of rent-to-own schemes that lure poor and working-class people into making expensive payments for substandard properties when they no longer qualify for mortgage loans of any type.
How could “fair housing” fail so spectacularly, forty years after it was signed into law?
Recent scholarship, including lawyer and social scientist Richard Rothstein’s much-heralded book The Color of Law: A Forgotten History of How Our Government Segregated America, has helped to shine a light on the nefarious role played by the government in locking African Americans into substandard housing and under-resourced public services from the early twentieth century on. Rothstein and others, however, fail to answer the question of why this discrimination persists long after the federal government formally renounced its own policies promoting segregation. A common explanation points to the continued resistance of white residents, renters, and owners to the presence of Black people in their communities. White violence and resistance is certainly part of the explanation, but lacks the institutional underpinnings that were so critical to understanding the role of the state in the formative years of residential segregation.
For a fuller picture, we need to look to the one factor that has remained a constant even as administrations, policies, and public attitudes have changed. We need to look at the public-private partnerships that have sutured the federal government to the real-estate industry.
When the Fair Housing Act was passed in 1968, it confronted a history of exploitation and segregation that had physically degraded the communities that African Americans lived in. Black neighborhoods had suffered decades of disinvestment and institutional neglect, yet realtors continued to charge African Americans inflated prices for inferior or substandard properties, knowing they had nowhere else to go. By the 1970s, the landscape of foreclosed and abandoned properties and burned-out hulls of urban residences served as the visual markers of what was popularly described as an “urban crisis.”
Fifty years after the passage of “fair housing,” racial discrimination remains embedded in the operations of the American housing market. The federal government’s failure to enforce its own laws against racial discrimination is a reflection of its institutional racism but not an explanation. One explanation for the failure of federal housing policies to actually produce “fair” housing is found in the state’s continued reliance on the private sector as the sole provider of housing in the United States. The federal government long ago abdicated the responsibility of directly producing affordable housing, instead outsourcing the task to private developers—while continuing to provide vast amounts of assistance in the form of guarantees, subsidies, and tax relief. As a result, it has absorbed the real-estate and banking industries’ historic embrace of racial discrimination.
Indeed, the real-estate industry grew in tandem with and helped to popularize racist, even eugenic ideas about African Americans, including the notions that Black residents negatively impact property values, are undesirable neighbors, and pose an existential risk to communities and neighborhoods. As early as the 1920s, the National Association of Real Estate Boards had threatened professional discipline against any agent who disrupted segregated neighborhood racial patterns.
As the government got more involved in regulating and subsidizing housing, these ideas translated directly into policy. The notorious redlining maps issued by the federal Home Owners’ Loan Corporation in the 1930s, to take one early example, were based on existing maps used by local banks and brokers. It’s not hard to see why: starting in this period, real-estate executives were recruited to develop government housing policies because of their former roles within the private sector. Over time, the real-estate industry, in turn, would seek out former government employees for their valuable connections to the state. With this “revolving door” in place, public and private networks formed an insular feedback loop mostly concerned with maintaining a brisk housing market. The real-estate industry flexed its enormous influence over national policy again and again over the following decades, including when it vociferously—and successfully—lobbied to hobble public housing in the 1940s and 1950s.
But the modern iteration of this destructive public-private apparatus was born with the Housing and Urban Development (HUD) Act of 1968. While the Fair Housing Act is widely recognized as a landmark in U.S. policy, the accompanying HUD Act is virtually unknown today despite its equally seismic shift in American housing policy.
The HUD Act was passed in August 1968, four months after Johnson signed the Fair Housing Act into law. It was a historic piece of legislation that decisively shifted the responsibility to provide housing for poor and working-class people from the federal government to the private sector.
In the years of urban uprisings that roiled the mid-1960s, poor and substandard housing was repeatedly listed as a catalyst of Black rage. For example, a report on the causes of the Black rebellion in Philadelphia in 1964 found that 100 percent of rat bites reported in the city (and the resulting deaths) happened in segregated Black neighborhoods. From lead poisoning to a lack of indoor plumbing to general dilapidation, urban housing occupied by African Americans was overwhelmingly in substandard condition.
The poor quality of Black housing was driven by three factors. It was typically older and used, having filtered down to African Americans who were the newest arrivals in Northern cities. Its already distressed condition was then exacerbated by residential segregation that led to overcrowding, as Black residents were hemmed into a few clustered neighborhoods. Finally, the lack of housing choices available to African Americans removed the pressure from landlords to improve the quality of housing. African Am