Discriminatory Real estate practices in private industry

• Realtor practices of denying people of color the opportunity to view and purchase properties in neighborhoods inhabited by whites.  “Racial steering” is a term used to describe the real estate practice of limiting the properties that clients are shown based on the racial demographics of the area.  Whitepeople  are steered to areas where the neighborhoods are white, people of color are steered to neighborhoods where neighborhoods are racially diverse.  It’s important to note that racial steering is not due to preferences of clients.
• In the first half of the 20th Century realty codes of ethics required that realtors sell properties in white areas to whites only.  For example, the 1924 National Association of Real Estates Board Code of Ethics included a provision regarding race (Article 34):   “A Realtor should never be instrumental in introducing into a neighborhood a character of property or occupancy, members of any race or nationality, or any individuals whose presence will clearly be detrimental to property values in that neighborhood.”  In short, a realtor could lose their realty license for “unethical behavior” by selling a person of color a home in a white neighborhood.  The racist presumption here was that the presence of families of color would reduce the property value in the area.
• Racial covenants: provisions of the deeds to property that the home could not be sold to a person of color.

The Federal Housing Administration (FHA) and racial discrimination in governmental policy

The Federal Government set up a housing program during the Great Depression.  The idea was to stimulate the economy  by providing low cost housing and mortgage loans that average Americans could afford, thereby encouraging the development of housing construction and overall economic growth.  Prior to this time,  half of the cost of the home would need to be paid upfront when buying a house.  Owning a home was out of reach for many Americans.  The new terms that the FHA set up in terms of financing homes were that people would only have to pay 20% of the cost of the home upfront, and the rest could be financed over 20 years at relatively low interest rates.  This made buying a home affordable to many Americans.  The Federal Housing Administration (FHA) still exists.  Early on, FHA constructed or funded building racially segregated housing. Housing sometimes included racial covenants attached to the deed of the property stating that when a property was sold, it would not be sold to a person of color.

The FHA also backed loans to private banks if the loans were what the FHA determined were good financial risks.   The Home Owners Loan Corporation set up in 1933 by President Franklin D. Roosevelt,  included race in its assessment of whether a property was a good financial risk.  If racial minorities were a part of the geography, the FHA deemed the property a bad risk.  They literally mapped out cities (including Portland) and marked as red those areas that were bad risks.  I’ve attached the Interactive mapping link from 1938 below, called Mapping Inequality.  Please open it and look at different descriptions of parts of Portland.  These maps were used for FHA loans as well as by other mortgage lenders in assessing property investments.

Mapping Inequality   Click on the red areas of the map and read the criteria that determined why it was a deemed “hazardous” and thus a bad financial risk.  What do you notice about race? The practice of redlining literally meant that mortgage loans were denied to communities of color.  Since most Americans hold the bulk of their wealth in the value of their homes, housing policy created racial wealth gap.  Specifically, white families who were able to purchase homes in white neighborhoods found that their homes appreciated in value over time.  In contrast, communities of color were often denied the opportunity to gain wealth in home ownership.  They were more likely to be renters, and were also more likely to encounter predatory loans.

While legitimate loans were often denied to racial minorities, predatory lenders provided substandard loans to people of color.  These are called sub-prime loans.  Because the terms of these loans were often misleading and involved inflated housing prices and hidden costs, these types of loans were more likely to end up in foreclosure. In the Albina area, Dominion was such a lender. It’s leaders were sentenced to federal prison for their illegal and unethical lending practices.   If you’re interested in this history, click on the following link about real estate practices in Northeast Portland.  The Oregonian Series is called “Blueprint for a Slum.” I’ve linked to the piece on Dominion.  Once you’re in the article, you can click on any of the other links to the right of the article for other parts of the series.  African Americans and Latinos were also much more likely to receive subprime loans in the era leading up to the housing crisis of 2008.  So, the wealth gap has increased since the PBS documentary, The House you Live In, was made. I’ve linked an article in Forbes magazine that provides more recent statistics and background links to the wealth gap.  The article is entitled, The Racial Wealth Gap.

Many of the forms of housing discrimination described thus far became illegal in 1968 with the passage of the Fair Housing Act.  Even though it was no longer legal to explicitly discriminate racially, there were still ways that racial discrimination continued.  For example, banks might refuse to offer mortgage loans in neighborhoods with low property values which were disproportionately in communities of color as a result of previous lending policies.

The 1960s began an era of urban renewal. Urban renewal projects were designed to make cities more livable and connect the growing suburbs to the cities. Urban renewal projects tended to be built over areas of town that were once racially segregated and populated by African Americans.  For example, in Portland, Memorial Coliseum, I-5 and then Emmanuel Hospital were built over the African American community.  Most people who lost their homes to urban renewal projects did not receive alternative housing.  The decimation of many communities of color through urban renewal projects led to a further deterioration in the economic well-being of the neighborhood.  As property values decline, more middle class leave, businesses leave, jobs leave, crime grows, property values decline, property taxes decline, schools have fewer resources, crime grows, businesses leave, more middle class leave.  Decades of disinvestment in communities of color led to declining property values.

By  the 1990s, a new era of governmental investment in areas that had become low-income communities of color began.  the City developed a plan to revitalize the area.  Non-profit orgs and private investors were encouraged to buy.  This created a surge in property values.  Mostly middle class whites benefited because they qualified for loans.  As the property values increased, the community members who rented property were now no longer able to afford to stay in the neighborhood.  This is why gentrification is also known as displacement.  Low income racial minorities are forced to move (in Portland, primarily to outer Southeast) and Gresham.

Redlining Map

• Go to Mapping Inequality Website: https://dsl.richmond.edu/panorama/redlining/#loc=5/39.1/-94.58
• Explore the map by Clicking red areas, green areas and see why they are characterized as a good or bad investment.
• What did you notice about the way that race was tied to the color codes on the map?

How does redlining relate to your census tract?  Is your census tract in an area that was redlined?  Is it an area that was considered a good investment?  What are the implications of its rating for the value of homes over time?

Could racial covenants have existed in your census tract?  What would the consequences of racial covenants have been for the racial demographics of your census tract?