Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership

Abstract

Race for Profit is a landmark study of how structural racism transforms and reproduces disadvantages. Keeanga-Yamahtta Taylor tells a convincing story of race and capitalism in late twentieth-century urban American housing markets in transition. The book develops the theme of “predatory inclusion” of African-descended Americans in home ownership sponsored by the Federal Housing Administration (FHA) and financed by private lenders after the urban riots of the mid-1960s (p. 5, passim). One was Wilhelmina Gause of Philadelphia. A twenty-seven-year-old Black mother of three, she could not afford a house, yet a real estate agent said there were none for rent in the neighborhood. She saved the $500 down payment, signed the mortgage, and moved in to discover that a broken pipe leaked sewage into her basement, a wall leaked rain into her house, and a backyard drain was stopped up, flooding the yard. And Gause now owned the property. Her family's experience typifies the transition from redlining to predatory inclusion. Taylor wonders, “How could a house that appeared to be falling apart also be appraised by the FHA as having any value and then approved for a mortgage subsidy?” (p. 142).Race for Profit intervenes in a historiography of race, capitalism, and urban housing that includes Mehrsa Baradaran, The Color of Money: Black Banks and the Racial Wealth Gap (2017), Richard Rothstein, The Color of Law: A Forgotten History of How Our Government Segregated America (2017), Thomas Sugrue, The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit (1996), and Rhonda Y. Williams, The Politics of Public Housing: Black Women's Struggles against Urban Inequality (2004), among many others. Before civil rights legislation including the Housing and Urban Development Act of 1968, legal discrimination excluded Black borrowers from loans, segregating urban spaces and trapping low-income homeowners, particularly Black and Latino residents, in enclaves of impoverished schools and services.Instead of exclusion, the HUD Act subsidized lenders, which encouraged them to lend to those who were traditionally excluded, particularly Black women who were heads of households. But in the shift from legal discrimination to predatory inclusion, brokers and lenders worked to sell substandard and unsafe housing to homebuyers who found themselves saddled with debt in a home they owned but could not safely live in. Black borrowers set up to fail lost their property at a moment in the 1960s and 1970s when urban areas became targets of renewal projects and other investment.Race for Profit explores how the change from exclusion to homeownership occurred. Taylor's narrative seamlessly weaves stories like that of the Gause family with Black women's organizing, policy-making, and an eagle-eyed view of the financial and regulatory landscape of the post-1968 housing market in urban cores. “The end of FHA redlining and the introduction of home finance into American cities created a new market for urban housing almost out of thin air,” Taylor argues, and yet like so many aspects of American capitalism, African Americans paid more for less and were blamed for systemic failures (p. 140).And the predation was the point, at least so far as the real estate industry was concerned. The system of federal subsidies benefited real estate brokers and lenders rather than homeowners, and policy makers tended to blame buyers rather than an interlocking system of predatory lending and deceptive real estate practices. The African American McCrudden family of Philadelphia bought their house soon after the HUD Act subsidized the $9,000 purchase. After they moved in, they realized it had major defects, including holes in the floors, which the broker who sold them the property said would be fixed but were not. In 1972 Carmel McCrudden testified that she was “tired of living in a half-built, torn apart house,” which was now her problem as the buyer (p. 205). Such deceptive practices sapped the incomes and time of predominantly Black borrowers while enriching brokers and lenders. Yes, the McCruddens were homeowners, but their living standards were not necessarily better than public housing. And now they had a mortgage and owned a property that could not easily be sold or rented out. In response, Carmel McCrudden helped organize the Concerned City-Wide Homeowners, a grassroots organization that brought the predatory practices to light and demanded policy responses, and failing that, launched class-action lawsuits.Race for Profit defies an optimistic narrative of civil rights and economics. Markets are not self-correcting and incorporate the values and assumptions of those who govern them. Taylor warns against market-based solutions to systemic racism since the real estate and lending industries that thrived on racist practices before 1968 adjusted to thrive on racist practices after 1968.