The Ultimate Frontier: Housing as Structural Racism
Richard Rothstein of the Economic Policy Institute published a piece in the Times on Sunday focused on a Silicon Valley satellite of San Francisco, San Mateo. He surveys the fine initiative of a Hillsdale High School freshman, Sophia Heath, who became inspired by a history course she took to start up a local chapter of “Coalition Z,” a nationwide youth group that “registers voters and presses officials to combat climate change, provide more equitable school funding and enact gun control.”
The group’s first activity after the killing of George Floyd took place on June 3, at which “Signs and chants called for an end to systemic racism, including police militarization and brutality. Protesters also called for reparations to compensate African-Americans for centuries of enslavement and oppression.”
Rothstein, who is the author of a widely-praised and cited book on the long history of housing discrimination in the U.S. (we blogged about it here), suggests that Sophia and her classmates might want to investigate the construction history of San Mateo’s own housing. There are no Black residents in Sophia’s neighborhood; one percent of the students at her high school are Black (housing segregation and school segregation are tightly linked, given that the majority of American K-12 students attend assigned – often, neighborhood – schools).
Sophia says that she would like to live in a more diverse neighborhood – her idea of that would be “affordable housing” there might include awarding of housing vouchers so that (some) Blacks could move into the neighborhood. But Rothstein reminds his readers that, contrary to general belief, most Blacks are not poor. He suggests that instead, activists conduct “deep research into how their communities’ racial boundaries were established.”
We think this is an absolutely terrific idea – in fact, we’ve suggested it ourselves at a blog we follow regularly – so let’s see how it would work in practice:
Many of our parents (if we’re of a certain age; otherwise, think “grandparents”) were able to take advantage of low-interest mortgages (home loans) in the 1940s, 1950s, and 1960s (and earlier, and later, but these are really the key decades for mass-scale suburban developments across the U.S.). In order to “build a development (community, neighborhood),” you need: a developer willing to take on the risk of building a raft of homes on spec, so that means they need a financial institution to back them. In the case of San Mateo’s Hillside neighborhood, which got its start early on (1940s), the developer was David D. Bohannon, who built many of the houses in the San Mateo neighborhood where our young activist Sophia lives. Bohannon’s financial backer was the American Trust Company. American Trust’s loan to Bohannon was guaranteed by the federal government.
You also need a real estate firm to market the new homes – in this case, a firm called Fox & Carskadon handled the actual sales. Here’s how they advertised the Hillsdale neighborhood: “Let us tell you of the protective covenants that guarantee Hillsdale’s enduring character for all time to come.” [Note: “protective covenants” are code for “racial exclusion clauses,” aka “racial covenants.”]
The deed to the home Sophia lives in today states that “No persons other than members of the Caucasian or White race shall be permitted to occupy any portion of said property, other than as domestics in the employ of the occupants of the premises.” In this, Bohannon – who built much of the “whites only” housing in the San Francisco Bay area in the forties and fifties – wasn’t doing anything unusual; in fact, it was general practice to exclude Blacks (and other minorities, for example Jews) from middle-class housing developments during these years.
While racial covenants are no longer legal (they were ruled unconstitutional by the Supreme Court in 1948 as being in violation of the 14th Amendment’s Equal Protection Clause, and were outlawed outright by the Fair Housing Act of 1968), they’ve found a worthy successor in local zoning laws, which in the case of neighborhoods like Hillsdale (and thousands upon thousands of similar neighborhoods across the U.S.), continue to forbid the construction of multiplex residences (townhouses, duplexes, triplexes, apartment buildings) in residential areas zoned solely for “single-family dwellings.”
To return to what Sophia would like to see: more “affordable housing,” which could theoretically mean Section 8 housing vouchers in her neighborhood. But vouchers can’t solve segregation (once by race, now by income) in neighborhoods like Hillsdale – as we noted, most Blacks are in fact not poor enough to qualify for this benefit; there are few (if any) rentals available, and it’s highly unlikely landlords-owners would rent at a rate Section 8 would cover – or even be theoretically willing to rent; they’re not.
Could such neighborhoods benefit from zoning changes? Yes, but many neighborhoods are “full up” – all the houses that could be built, have been built, many decades ago. Until the tear-down process begins, even zoning law changes would only be somewhat effective in the absence of available lots for new development. Here, it’s useful to recall that such changes, should they occur, would benefit all middle class potential buyers – police, firefighters, teachers, nurses, hotel and restaurant workers – those “who serve the neighborhood but cannot afford to live in it.” [Note: this is one of California’s most serious problems right now – the people who work for its major cities can’t afford to live in them, and the problem is most severe in the greater San Francisco area, where Sophia lives.]
When Hillsdale was originally built, houses like Sophia’s cost around $5,500 (early forties), which is equivalent to about $100,000 today. But due to overheated demand in the greater Silicon Valley region, such houses sell today for around $1.5 million. [Note: here’s one for sale at the moment – $1,495,000 for a 1,110-ft. 2-bedroom, 1 bath in Hillsdale itself – however, get this: its assessed value is $102,000, right on the mark Rothstein suggested. That means that anybody lucky enough to qualify for a mortgage – est. $5,000 per month, i.e. $60,000 a year – pays property taxes for a house assessed at less than 1/10 of its market value. This is a neat demonstration of how generational wealth has been created for about a century in the U.S.]
Rothstein’s argument: shouldn’t banks like Wells Fargo (which absorbed the original funder, American Trust Co., in 1960) [Note: Fox & Carskadon, the original brokers, were acquired by Caldwell Banker in 1995] make mortgages available to those who can afford one on a $100,000 home? The chances of this happening are, of course, slim to nil – but that’s what it’s going to take to integrate housing in America, Rothstein believes. It’s a practical form – a tangible, significant, wealth-building, integrating, and lasting form – of reparations.
We’ve recently devoted a couple of blog posts (here and here) to an article by Linda Lutton of WBEZ Chicago published in early June on the practices of the major home and small business lenders in Chicago (one of which, predictably, is Wells Fargo). All of the lenders were shown to have had atrociously bad track records of lending to buyers in Black-majority neighborhoods of Chicago – one lender, in fact (Chase), lent only 1.9% of total funds made available between 2012 and 2018 in Black-majority neighborhoods; in fact, Chase lent more to a single white neighborhood (Lincoln Park) than to all Black-majority neighborhoods combined.
A young Chicago activist named Ja’Mal Green, who understood the implications of Lutton’s investigative report, began protesting at Chase bank branches throughout the greater city in July; since then, he’s been “permanently banned” from all Chase properties. This doesn’t mean Green is giving up, but it does signify that he’ll need to employ new approaches and acquire plenty of allies in his campaign to get Chase to do the right thing – big lenders like to do the safe (i.e., most profitable) thing for their bottom line today, not what would benefit their bottom line 20 or 30 years down the road.
Here’s an excerpt from the unsigned letter Chase sent Green when they banned him: “Over the last month, we have held a number of constructive calls and meetings with you to discuss our shared commitments to Chicago’s South and West sides. We will continue to work with community leaders on ways to address longstanding racial disparities in these neighborhoods”… Well, we listened to one of those calls – which Green obligingly broadcast live to his FB audience of around 81,000 – and it wasn’t the least constructive for Chicago’s Black West and South Siders. It was full of woke language, sure, but as far as that $1 billion in investment Green says Chase owes the city’s most heavily-divested neighborhoods, no dice. As our readers know, we consider words relatively cheap. It is deeds that speak out in our view, and on these, mum’s the word.
What would it mean for Chase to up the percentage of its home and small business lending to majority-Black neighborhoods to say, 20% (i.e. ten times what it lent between 2012-2018, or about $1 billion, as Green is demanding)? Well, it would mean a significant – not massive, but important – infusion of funds into the West and South Sides of the city – did you know that the biggest infusion of money into neighborhoods is achieved through home loans? And it would enable the growth of existing businesses and founding of brand-new small business ventures in these neighborhoods. This would, in turn, raise their property tax base, meaning more money for public goods – parks and playgrounds, community centers, schools. It’s the kind of virtuous cycle that has enabled Hillside High School to receive 8 out of 10 from the “Great Schools” ranking service, which is used by real estate companies to boost housing prices across the country. [Note: that Great Schools ranking service is often code for “no poor people or minorities in this home’s catchment area.”]
Rothstein’s idea of “deep research” into one’s own local community’s housing – how neighborhoods got started, funded, sold off, and what their original deeds look like – could ideally be paired with parallel investigations into the historical lending practices of active local lending agents – today of course most cities have branches of the Big Banks (Chase, Wells Fargo, Citi, Bank of America plus the “mortgage originators” like Quicken), but fifty or sixty years ago, there were smaller local banks active in the home mortgage market.
The hypothesis here is that lenders’ (and by extension, real estate brokers’) practices would be discovered to mirror the racial topography of neighborhoods, communities, towns and cities today.
But this has to be proven, over and over again, for countless cities and towns across the country.
Only then can a well-grounded movement achieve what has to happen for structural racism to begin to recede: fully-integrated, mixed-income housing from sea to shining sea.