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

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By the late 1960s and early 1970s, reeling from a wave of urban uprisings, politicians finally worked to end the practice of redlining. Reasoning that the turbulence could be calmed by turning Black city-dwellers into homeowners, they passed the Housing and Urban Development Act of 1968, and set about establishing policies to induce mortgage lenders and the real estate By the late 1960s and early 1970s, reeling from a wave of urban uprisings, politicians finally worked to end the practice of redlining. Reasoning that the turbulence could be calmed by turning Black city-dwellers into homeowners, they passed the Housing and Urban Development Act of 1968, and set about establishing policies to induce mortgage lenders and the real estate industry to treat Black homebuyers equally. The disaster that ensued revealed that racist exclusion had not been eradicated, but rather transmuted into a new phenomenon of predatory inclusion. Race for Profit uncovers how exploitative real estate practices continued well after housing discrimination was banned. The same racist structures and individuals remained intact after redlining's end, and close relationships between regulators and the industry created incentives to ignore improprieties. Meanwhile, new policies meant to encourage low-income homeownership created new methods to exploit Black homeowners. The federal government guaranteed urban mortgages in an attempt to overcome resistance to lending to Black buyers - as if unprofitability, rather than racism, was the cause of housing segregation. Bankers, investors, and real estate agents took advantage of the perverse incentives, targeting the Black women most likely to fail to keep up their home payments and slip into foreclosure, multiplying their profits. As a result, by the end of the 1970s, the nation's first programs to encourage Black homeownership ended with tens of thousands of foreclosures in Black communities across the country. The push to uplift Black homeownership had descended into a goldmine for realtors and mortgage lenders, and a ready-made cudgel for the champions of deregulation to wield against government intervention of any kind. Narrating the story of a sea-change in housing policy and its dire impact on African Americans, Race for Profit reveals how the urban core was transformed into a new frontier of cynical extraction.


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By the late 1960s and early 1970s, reeling from a wave of urban uprisings, politicians finally worked to end the practice of redlining. Reasoning that the turbulence could be calmed by turning Black city-dwellers into homeowners, they passed the Housing and Urban Development Act of 1968, and set about establishing policies to induce mortgage lenders and the real estate By the late 1960s and early 1970s, reeling from a wave of urban uprisings, politicians finally worked to end the practice of redlining. Reasoning that the turbulence could be calmed by turning Black city-dwellers into homeowners, they passed the Housing and Urban Development Act of 1968, and set about establishing policies to induce mortgage lenders and the real estate industry to treat Black homebuyers equally. The disaster that ensued revealed that racist exclusion had not been eradicated, but rather transmuted into a new phenomenon of predatory inclusion. Race for Profit uncovers how exploitative real estate practices continued well after housing discrimination was banned. The same racist structures and individuals remained intact after redlining's end, and close relationships between regulators and the industry created incentives to ignore improprieties. Meanwhile, new policies meant to encourage low-income homeownership created new methods to exploit Black homeowners. The federal government guaranteed urban mortgages in an attempt to overcome resistance to lending to Black buyers - as if unprofitability, rather than racism, was the cause of housing segregation. Bankers, investors, and real estate agents took advantage of the perverse incentives, targeting the Black women most likely to fail to keep up their home payments and slip into foreclosure, multiplying their profits. As a result, by the end of the 1970s, the nation's first programs to encourage Black homeownership ended with tens of thousands of foreclosures in Black communities across the country. The push to uplift Black homeownership had descended into a goldmine for realtors and mortgage lenders, and a ready-made cudgel for the champions of deregulation to wield against government intervention of any kind. Narrating the story of a sea-change in housing policy and its dire impact on African Americans, Race for Profit reveals how the urban core was transformed into a new frontier of cynical extraction.

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

  1. 4 out of 5

    D. St. Germain

    The private-public partnership has been a model long touted by politicians as a panacea for solving social problems without the bloat of government programs. But in Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, Keeanga-Yamahtta Taylor shows us how this model repeatedly failed black homeowners. She illuminated the low-income housing programs to encourage home ownership that enabled a new class of real estate professionals to profit off substandard The private-public partnership has been a model long touted by politicians as a panacea for solving social problems without the bloat of government programs. But in Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, Keeanga-Yamahtta Taylor shows us how this model repeatedly failed black homeowners. She illuminated the low-income housing programs to encourage home ownership that enabled a new class of real estate professionals to profit off substandard housing, with the full backing of the federal government. When housing policy shifted from building public housing to underwriting public private partnerships, she writes, “the HUD-FHA guarantee to pay lenders in full for the mortgage of any home in foreclosure transformed risk from a reason for exclusion into an incentive for inclusion.” She notes that by 1971, “federal subsidy programs were paying the real estate industry $1.4 billion a year and financing one in four new housing units produced.” In this way the shift in housing policy was a handout to the private sector while failing to regulate the activities of that sector, leading to scores of bad actors and bad outcomes for the people who fell prey to them. Taylor brings us dozens of examples of these bad actors in practice. She writes of one study of Berkeley and Oakland, California, where “dilapidated homes were sold to low-income families for three and four times more than they were worth. The houses were “largely incapable of passing honest FHA inspection and certainly failed to meet minimum FHA standards.” In 1971, after a large outcry against the government’s failure to oversee these loans and guarantees, a study by HUD (overseen at the time by George Romney) found that eighty-eight percent of existing housing guaranteed by FHA and HUD had significant problems, while with 43 percent of new subsidized housing that had been build with federal handouts had serious defects. The private / public model of affordable housing has at its heart a conflict of interest, and this plays out particularly along race and class lines. As the economist Paul Collier has succinctly put it, “people have two motives for buying a house. For most people it is a home; for some it is an asset.” There are fundamental mismatches in motivation between the public interest of providing housing for people and the private interest in maximizing profits from housing. As Taylor notes, the private (real estate) market tends to ignore the public call for safe and affordable housing, as the profit motive considers safe and affordable non-lucrative and thus a non-starter. But the rise of low-interest mortgage loans backed by the Federal Housing Authority (FHA) and Housing and Urban Development (HUD) created opportunities for those real estate speculators to profit from real estate sales that might otherwise be considered risky. The government diffused that risk, thus creating a moral hazard whereby real estate dealers were protected from the consequences of their actions, knowing they could be bailed out by the government. Homeownership matters for so many reasons. It has historically been the primary way wealth is accumulated in America. Exclusionary housing practices in communities of color have ensured that intergenerational wealth created by housing has accrued primarily to white families only. As Taylor shows through careful historical analysis and reams of data that private/public partnerships have only entrenched and intensified the battle for decent housing, while making the most vulnerable evermore vulnerable. This book is a serious work of scholarship showing how the actual results of political ideas are a far cry from the reality they produce.

  2. 4 out of 5

    Matthew Hall

    As much as everybody went nuts for Matthew Desmond's Evicted, and without trying to directly compare the two, this book might perhaps deserve as much or more cultural fanfare as Desmond's book received. Taking as a starting point the vaunted housing initiatives set in place under Johnson's administration, this book details the institutional and administrative failings that beset these programs, as well as the way in which the "public/private partnerships" so touted by The Great Society became As much as everybody went nuts for Matthew Desmond's Evicted, and without trying to directly compare the two, this book might perhaps deserve as much or more cultural fanfare as Desmond's book received. Taking as a starting point the vaunted housing initiatives set in place under Johnson's administration, this book details the institutional and administrative failings that beset these programs, as well as the way in which the "public/private partnerships" so touted by The Great Society became little more than mechanisms for Real Estate and Banking interests to fleece both the federal government (with the tacit approval of HUD and FHA officials) and, more often than not, poor women of color. Taylor does a phenomenal job of not merely mining the tendrils of redlining and the half-baked race "science" that underpinned basic assumptions around real estate values and the rules and regulations that fed directly into discriminatory practices that still exist today (sub-prime mortgages, anybody?) but of tracing the dots between redlining, federal policy and the coded and racialized language that has been used to denote who deserves or does not deserve public money, who uses or abuses public subsidies and public aid. She points her finger squarely at the way poor women of color were (and still are) demonized as "welfare queens," while at the same time 'upstanding men of business' absconded with millions of tax dollars for doing essentially nothing to alleviate segregation (indeed further cementing it) and by conning people who just wanted safe, adequate housing near job opportunities into incurring debt. While Desmond's book discusses the need for more housing assistance, this book makes more substantive case against the racist rot of our mindset towards housing from the outset, and the dire need for substantive changes towards finally achieving safe, affordable and integrated housing across this completely fucked up, racist-ass country.

  3. 5 out of 5

    Katie/Doing Dewey

    Summary: This was a fascinating, infuriating, and important read, but it could also be dry and repetitive at times. I'm so glad I got around to doing an end of month round-up and realized I'd not yet reviewed this book, because I'm excited to tell you about it. Like many of the National Book Award nominees, this book deals with a heavier topic. It covers the many ways that government housing subsidies in the 1960s and 1970s disadvantaged black families. Several major problems with the program Summary: This was a fascinating, infuriating, and important read, but it could also be dry and repetitive at times. I'm so glad I got around to doing an end of month round-up and realized I'd not yet reviewed this book, because I'm excited to tell you about it. Like many of the National Book Award nominees, this book deals with a heavier topic. It covers the many ways that government housing subsidies in the 1960s and 1970s disadvantaged black families. Several major problems with the program allowed race-dependent outcomes. In particular, it seems that none of the administrations that ran the program were willing to enforce civil rights law or provide adequate oversight of housing quality. This allowed the real estate industry to continue racist practices while receiving government funding. Add to this some perverse incentives that meant banks could make more money on mortgages if tenants were evicted and you have a recipe for disaster. As you might expect, this book covers history everyone should be aware of, but it will make you incredibly angry. I'd already read about some of the racist real estate practices described in this book, but their relationship to government programs were new and horrifying to me. I learned a lot from reading this. It was clearly well-researched and gave a thorough history of these government programs. Like many NBA nominees, it made me want to read many of it sources. If I'm honest though, I could have done with a less thorough history! The broad outlines of the government programs were almost as interesting as they were appalling. The personal stories that were included were also engaging and brought home the devastating human cost of these programs. The details of who was running the programs and the political context weren't as interesting or important to me. Nevertheless, I really would recommend this to pretty much anyone in the US as an important part of the history of our country. I'd just replace it with something even more accessible if that was an option!This review was originally posted on Doing Dewey

  4. 5 out of 5

    BMR, LCSW

    There is so much more to the history of Blacks and homeownership in the US than redlining and restrictive covenants. As with most policies in the US, centuries of exclusion are very difficult to recover from for the most marginalized and minoritized populations. Mitt's dad George Romney plays a very large role in the book, during his time as the head man at HUD. Recommended for history geeks, policy wonks, and housing scholars. Natives of Baltimore, Detroit, St. Louis, and Chicago will probably There is so much more to the history of Blacks and homeownership in the US than redlining and restrictive covenants. As with most policies in the US, centuries of exclusion are very difficult to recover from for the most marginalized and minoritized populations. Mitt's dad George Romney plays a very large role in the book, during his time as the head man at HUD. Recommended for history geeks, policy wonks, and housing scholars. Natives of Baltimore, Detroit, St. Louis, and Chicago will probably recognize a lot of the tales and references.

  5. 4 out of 5

    Eli

    Race for Profit is a deeply researched, impeccably argued study of the conception, implementation, and consequences of HUD-FHA's low income housing programs in the late 60s and early 70s. Previously, redlining by the government and the financial sector meant that Black people and Black neighborhoods were--legally--perceived as risky investments due to race. Thus Blacks were overwhelmingly excluded from the rising postwar prosperity enjoyed by whites, who were extended generous FHA loans to buy Race for Profit is a deeply researched, impeccably argued study of the conception, implementation, and consequences of HUD-FHA's low income housing programs in the late 60s and early 70s. Previously, redlining by the government and the financial sector meant that Black people and Black neighborhoods were--legally--perceived as risky investments due to race. Thus Blacks were overwhelmingly excluded from the rising postwar prosperity enjoyed by whites, who were extended generous FHA loans to buy houses in the suburbs whose value was precisely tied to their location in racially homogenous white neighborhoods. Federal redlining officially ended in 1968, but racialized residential segregation and wealth disparity did not. That year, in response to residential segregation and housing shortages, Lyndon Johnson signed the Fair Housing and HUD (Housing and Urban Development) Acts into law, which centralized federal housing policy under one department, prohibited explicit racial discrimination in the housing industry, and created a public-private partnership between the government and mortgage banks to incentivize investment and encourage homeownership in black communities. Crucially, the central mechanism created to achieve these goals was heavy government subsidy of private mortgage loans: if a bank offered a standard loan at 8% interest and $1,000 down payment, HUD would pay the lender 7% of the interest and $750 of the down payment, greatly easing the borrower’s financial burden. In addition, the entire loan was guaranteed by HUD, meaning the mortgage banker got paid the full amount of the loan, even if the borrower defaulted. Because it was conceived as a public-private partnership (for reasons that have to do in large part with the ballooning costs of the Vietnam War) HUD’s low-income housing program absorbed the deeply ingrained racial prejudice of the housing industry, a prejudice so integral that it structured the entire housing market, and touched every element of the home-buying process, from mortgage underwriting criteria, to appraisal, to zoning, and more. By completely removing the risk associated with lending to Blacks without remedying the racism of the housing industry, the new program created a perverse incentive for banks to generate as many new loans as possible without ensuring--and often willfully overlooking--their viability (an incentive that was supercharged by the introduction of a new financial instrument called a “mortgage-backed security,” hmmmm). In fact, under this regime, mortgage banks were especially incentivized to loan to buyers who they knew could not afford the terms of the loan, because when the house went into foreclosure, they could buy it again at a low price and start the process anew, getting paid in full by HUD no matter what. These incentives, in combination with disastrously inadequate oversight, meant that poor Blacks in urban neighborhoods with old housing stock were sold homes they couldn’t afford, at inflated prices set by corrupt appraisers, and given no material support should they almost inevitably fall behind on mortgage payments and maintenance costs, leading in most cases to quick eviction from homes they were promised were the ticket to the American Dream. Though the exclusionary race discrimination policy of redlining had ended, HUD’s federal mortgage insurance scheme created a new regime of wealth extraction in Black neighborhoods through a pernicious “predatory inclusion.” Though Taylor makes clear that it was the combination of racism and profit-seeking in the housing industry that caused HUD-FHA’s low-income mortgage insurance scheme to fail, she also documents the program’s mismanagement under Richard Nixon and his HUD secretary George Romney. Nixon sought to cut back the burgeoning administrative state created to oversee LBJ’s Great Society initiatives. This desire dovetailed with his “southern strategy” of dogwhistle racism to consolidate his white suburban political base. With these goals in mind, Nixon took two measures that effectively doomed HUD’s fair housing initiatives to failure. First, he announced that the federal government would not take punitive measures against white suburban neighborhoods that resisted the construction of low-income housing, even though withholding federal money is the central enforcement mechanism of 20th century American civil rights law. Then, Nixon handed down severe budget cuts to HUD, crippling its ability to properly administer such a large, regulation-intensive program. These two actions greatly exacerbated the existing structural problems involved with the mortgage insurance scheme, nigh-guaranteeing the failures described above. Nixon then blamed this failure on the Black homeowners themselves, taking it as evidence of a deficit of character among Black citizens rather than the result of the racism, profit-seeking, and mismanagement of government and private industry. The HUD act’s low-income housing scheme fell as part of the wider turn to neoliberalism, which Taylor helpfully reminds us was as much a white backlash against the civil rights provisions of the 1960s as it was a corporate backlash to the stagflation and unemployment crises of the 70s. But its failures were not inevitable. Taylor’s analysis suggests that the program would have been more viable if it did not rely on incentivizing private investment, and if the government took civil rights enforcement seriously (If these seem like unlikely counterfactuals, it’s because American capitalism is deeply racist). But because it was a public-private partnership under the aegis of a large federal agency, and because the government did not take civil rights enforcement seriously, Nixon could paint the mortgage insurance plan as a wasteful government handout to undeserving racial minorities, and then use this as evidence that the welfare state needed to be dramatically curtailed, rather than reinforced. These days, we face a cascading series of crises--climate change, extreme wealth inequality, health care, drug-resistant microbes, and more--that call for massive public investment. Taylor’s book should remind us that there are better and worse ways to structure this investment. First, do not structure the investment around the profit-seeking behavior of private actors. Instead, use social welfare as the basis of taxpayer-funded government investment. Second, do not apportion this investment according to racial or other prejudice. Instead, make sure the programs are well-funded and use existing civil rights law to rigorously safeguard against uneven apportionment. It’s no coincidence that these steps cut directly against the principles of neoliberal governance. They are essential qualities for any program that aims to tackle one of the slow-rolling catastrophes listed above. --- I keep trying to add some personal reflections on reading the book at the end of this review, but I find that nothing I write adds anything substantial to my attempt at a description of Taylor’s argument. It’s an argument so powerful, and so well-supported by original research, that all I can say is that if you are interested in mid-century American politics, structural racism, political economy, housing, or (broadly speaking) justice, you are obligated to find a copy of this book and read it as carefully as possible. The style may be a bit academic (it is adapted from a dissertation), but this is in service of precision, not obfuscation.

  6. 4 out of 5

    Never Without a Book

    Keeanga-Yamahtta Taylor novel Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, is another example of how hard it is to be Black. The stunts the government has pulled in the housing industry….ugh! I don’t even know where to begin here. Throughout this book Yamahtta Taylor highlights on the low-income housing programs (HUD) that encouraged “Black homeownership” but, ultimately was a set up from the start. The purpose of the Federal Housing Administration is Keeanga-Yamahtta Taylor novel Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, is another example of how hard it is to be Black. The stunts the government has pulled in the housing industry….ugh! I don’t even know where to begin here. Throughout this book Yamahtta Taylor highlights on the low-income housing programs (HUD) that encouraged “Black homeownership” but, ultimately was a set up from the start. The purpose of the Federal Housing Administration is to back mortgages arranged through a government funded program that would pay off loans if buyers defaulted on their payment. With this program, Black renters from poor areas had an opportunity to become homeowners. Yes! Great news, right?! Wrong! Crumbling structures, rat infested homes, all these conditions opened the doors for homeownership fraud. At the end of the day real estate brokers and mortgage bankers valued black owners because, they were poor, desperate and would likely fall behind on their payments. And you know what that means, banks would profit from being repaid for inflated mortgages, and profit again when the foreclosed property was resold to another poor family that qualified for a government-guaranteed mortgage. cha-ching! Yamahtta Taylor did some extensive research and her findings are shocking. This book is dense, but soooo informative. This is a must-read. Many thanks to University of North Carolina Press for gifting me this copy.

  7. 4 out of 5

    Mary Gearing

    4.5 stars - it took me a little while to get into the book but it picked up after the first chapter. Taylor is very thorough and persuasive in laying out her argument of "predatory inclusion" - the end of redlining certainly didn't mean the end of discrimination. It was hard to read these horror stories of people conned into buying houses in terrible condition and to learn how these public-private partnerships benefited banks/investors instead of home buyers. The end of the book is a gut punch - 4.5 stars - it took me a little while to get into the book but it picked up after the first chapter. Taylor is very thorough and persuasive in laying out her argument of "predatory inclusion" - the end of redlining certainly didn't mean the end of discrimination. It was hard to read these horror stories of people conned into buying houses in terrible condition and to learn how these public-private partnerships benefited banks/investors instead of home buyers. The end of the book is a gut punch - Taylor ties the pivot away from equal housing and other Great Society programs to the general breakdown of the social contract. Really illuminating - I would recommend to anyone interested in policy and social justice.

  8. 4 out of 5

    Mills College Library

    363.51 T2437 2019

  9. 5 out of 5

    Doris Raines

    REALLY WHAT COLOR OF ONE SKIN ———HAS TO DO WITH A BLACK FEMALE PAYING RENT I RATE THIS BOOK 0–F FOR FAILURE MONEY IS STILL GREEN. REALLY WHAT A CUPID BOOK. REALLY WHAT COLOR OF ONE SKIN ———HAS TO DO WITH A BLACK FEMALE PAYING RENT I RATE THIS BOOK 0–F FOR FAILURE MONEY IS STILL GREEN. REALLY WHAT A CUPID BOOK.👎

  10. 5 out of 5

    Becky

    I appreciated the book's narrow focus on (roughly) the mid 1960s to the mid 1970s. A strong dismantling of the idea that inclusion is equivalent to equity.

  11. 4 out of 5

    Douglas Campbell

  12. 5 out of 5

    Gianna Mosser

  13. 4 out of 5

    Briayna Cuffie

  14. 5 out of 5

    Stephanie

  15. 4 out of 5

    Tom

  16. 4 out of 5

    SaraBroad

  17. 5 out of 5

    Jared Berg

  18. 4 out of 5

    Katie

  19. 4 out of 5

    Salonee Bhaman

  20. 4 out of 5

    Kate

  21. 4 out of 5

    Sarah B

  22. 5 out of 5

    Alyssa

  23. 4 out of 5

    Eric Bottorff

  24. 4 out of 5

    Christien

  25. 5 out of 5

    Kate Nielsen

  26. 4 out of 5

    Jomaira Salas

  27. 5 out of 5

    c del

  28. 4 out of 5

    Gregory

  29. 4 out of 5

    Sandi Worthen

  30. 4 out of 5

    Scoutaccount

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