Racial Myths, Market Myths, and the Policy Roots of Predatory Lending in 1970s Chicago

Beryl Satter – 

9780674970953In The Color of Money and in the opening post of this Symposium, Mehrsa Baradaran challenges the notion that markets exist outside of political power. What she shows for credit policy, I have shown for housing policy, particularly in my book, Family Properties: How the Struggle over Race and Real Estate Transformed Chicago and Urban America.  Here I’d like to discuss a shocking example of governmental policies shaping “markets,” or, rather, supporting investors to extract wealth from segregated black communities: the Housing and Urban Development (HUD) Act of 1968.

In 1968, after rebellions following Martin Luther King, Jr.’s assassination finally focused Congressional attention, two laws were passed to address the problem of “the ghetto.”  First, the Fair Housing Act prohibited racial discrimination in the advertising, rental or sale of housing.  It included no significant enforcement mechanism.  Its solution to “ghetto” problems was to give those wealthy enough to move out the chance to do so.  “Fair housing does not promise to end the ghetto,” one senator admitted, but simply enables “those who have the resources to escape the… suffocating…inner cities of America.”

In contrast, the HUD Act attempted to address conditions within “suffocating… inner cities.” It created mortgage subsidy programs to help “lower income families in acquiring homeownership.”  It also reversed the workings of an earlier federal program that many felt had created ghettoes in the first place – the Federal Housing Administration (FHA)’s insured mortgage program.  Starting in the mid-1930s, FHA-insured mortgages had been denied to black or racially changing urban neighborhoods, thereby encouraging conventional lenders to similarly “redline,” or refuse to issue mortgages, in such areas.  In a major reversal, HUD specified that FHA-insured mortgage loans would be made in “older, declining urban areas.” Such areas need only be “reasonably viable” to qualify for FHA-insured loans.

The newly redirected FHA-insured mortgages were meant to spur the “resources…of private enterprise” to address the housing needs of “low income families.”  The HUD programs never acknowledged that racial segregation was unjust or even problematic.  Instead, they were built on the assumption that lending to blacks and Latinos was inherently risky. Those who needed protection were lenders, not borrowers.  HUD programs cosseted lenders active in what were euphemistically referred to as “certain neighborhoods”— that is, black, Latino, and racially changing ones — in ways so extreme that they damaged the very communities they were ostensibly created to help.

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The Racial Wealth Gap and the Question of Time Zero

Michelle Wilde Anderson

Each year teaching Property Law, I have taught many of the big cases and topics on race and property law, such as M’Intosh and Dred Scott; segregationist turbulence in rights of reasonable access; public accommodations law; racially restrictive covenants; the Fair Housing Act. I never quite had a cohesive idea about this—they each seemed formative.

Meanwhile, evolving case law and politics have made it clear that we still have a basic disagreement at the heart of American law and politics, and my students carry that question with them into class: On matters of race, did we reset the playing field of property to start a merit system where fair access to markets would govern? Did we create a new Time Zero—for instance, when LBJ signed the Fair Housing Act as a gesture of solace and appeasement seven days after Martin Luther King, Jr.’s assassination?

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Property Law as Poverty Law

Michelle Wilde Anderson –

I recently interviewed a man in a weakened rural town who makes sausages for a local meat packing business on the 3am shift. He told me about a homeless woman who had come to the meat shop one dark morning with blood-soaked hands. Delirious with cold and exhaustion, she had punched in the glass on an abandoned burrito shack to shelter from the cold rain overnight.

For her, housing and land still matter. The forces of weather and gravity mean that 100% of people need shelter, with a patch of dirt for it to stand on. More than ever, it seems that housing and land matter most for understanding poverty and rising inequality. An average of more than 550,000 people were homeless each night in 2017, and 6,300 people are evicted in the US every single day. I live in San Francisco, where just yesterday I passed by 40 or so tent shelters on sidewalks, plus two Lamborghinis worth at least $250,000. I’ll guess that those cars don’t spend their nights outside.

The 1L introductory Property Law course isn’t usually about how law helps protect money and drive poverty, but I think it could be. Teaching it as a class mostly centered on land helps it get there.

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