Madvillain
Pro
11.3.14
Rebecca Burns is an assistant editor at In These Times and a Chicago-based reporter and housing activist.
Rebecca Burns is an assistant editor at In These Times and a Chicago-based reporter and housing activist.
Eight years after the housing bubble burst, the wreckage of the mortgage crisis continues to pile up, with at least five million homes lost to foreclosure to date. The toll has been greatest among blacks, who were twice as likely as their white counterparts to lose their homes.
Foreclosure-effected displacement among communities of color has been so pronounced that some have argued it’s potentially greater in scope than the postwar Great Migration.
The same actors who bear responsibility for the financial crash have been upbeat about its aftermath: in 2011, analysts at Morgan Stanley blithely proclaimed that the US was in the midst of a transformation from an “ownership society” to a “rentership society,” a prediction that proved prescient, in part thanks to Wall Street’s own efforts.
Over the last two years, investors have purchased more than two hundred thousand homes — most of which were foreclosed — with plans to convert them into rental properties. A new single-family home rental empire, controlled primarily by major investment groups such as the Blackstone Group, is poised to take advantage of growing rental demand in the wake of the foreclosure crisis.
In addition to understandable alarm, Wall Street firms’ new role as landlords has inspired a good deal of nostalgia for the days when the rental market was overseen by supposedly beneficent mom-and-pop outfits. But Wall Street’s new rental empire is less a game-changer than an intensification of longstanding patterns of exploitation in the housing market.
Just as not all communities suffered the same level of devastation as the result of foreclosures, not everyone is equally likely to be swept into this new “rentership society.” Thus far, it appears people of color make up the majority of those at the mercy of the new Wall Street landlords.
A survey by the Right to the City Alliance suggests that in California, those renting from Invitation Homes — a subsidiary of the Blackstone Group, and the largest owner of single-family homes in the US — are overwhelmingly people of color. In Los Angeles, that number is a staggering 96 percent. In addition, my reporting from Chicago indicates that many have already gone through foreclosure, and thus have few alternative housing options.
Consequently, the single-family home rental market is best understood not as a brand new development but as the latest manifestation of a longstanding feature of urban life: a dual housing market that locks people of color out of the most secure means of accessing housing, thereby pushing them into substandard options often offered at a significantly higher cost.
In short, Wall Street has found a way to wring additional profit out of the misery of the housing crash. After foreclosing on millions of homes, investors and the banks that back them have been able to purchase properties at bargain-basement prices, then graciously offer to rent them back (in some cases, literally, to their former owners).
The distinctly racialized aspect of this scheme recalls enduring forms of housing discrimination. Call it redlining, redux.
Housing discrimination occupies an ignominious role in US history: it’s one of the key mechanisms through which wealth has been stolen from blacks and other people of color.
Some officials responsible for regulating the housing market acknowledge that such discrimination still exists, but they typically portray it as the work of a few bad apples. Last month, for example, New York Attorney General Eric Schneiderman announced that his office was filing a lawsuit against the parent companies of Evans Bank for allegedly engaging in redlining, the practice of denying mortgage loans to borrowers in neighborhoods of color.
The suit against Evans Bank charges that it excluded residents of majority-black neighborhoods in East Buffalo, New York from access to mortgage products, regardless of residents’ creditworthiness. Schneiderman has opened a wider investigation into potential redlining by banks operating in New York state, and warned that he might file further lawsuits in order to ensure that all residents have an “equal opportunity to obtain credit,” regardless of their skin color.
But there’s more to the story than a few discriminatory banks.
Prior to 2008, some of the same banks Schneiderman’s office is reportedly investigating flooded now credit-scarce areas with high-interest or subprime loans. During the subprime lending boom, such predatory loans were five times more likely to be made in African-American neighborhoods than in white ones.
This practice, sometimes called “reverse redlining,” was merely the next stage in a cycle of exploitation enabled by a dual housing market. Communities of color, having historically been denied access to credit, were next aggressively targeted for subprime loans. As a result, black communities and other communities of color are also now disproportionately impacted by foreclosures — which, due to persistent segregation, remain concentrated in minority neighborhoods. Among US zip codes where at least 43 percent of homeowners are still underwater, two-thirds of these areas are majority black or Latino.
As a credit crunch took hold and lenders grew less likely to grant new mortgage loans or refinancing to residents of neighborhoods with high foreclosure rates, borrowers from minority neighborhoods were denied at much higher rates. Bank of America, for instance, has reportedly denied loans from neighborhoods of color in Los Angeles at four times the rate that it denies loans from white neighborhoods.
In other words, the re-emergence of redlining in communities of color is as much a predictable outgrowth of a cycle of legal exploitation as it is a matter of illegal discrimination.
The term “redlining” dates back to the 1930s, when the Federal Housing Administration, as part of a massive project to increase homeownership by underwriting private mortgage loans, distributed “residential security maps” to help determine where mortgages could and could not be issued. Neighborhoods considered too “risky” to make loans — those inhabited by black and Latinos, even if small in number — were inked out in red, effectively disqualifying residents from receiving mortgage loans, regardless of their creditworthiness as individuals.
In his exceptional Atlantic essay “The Case for Reparations,” Ta-Nehisi Coates documents how the legacy of redlining has profoundly shaped today’s urban neighborhoods. Describing how the development of the modern suburb proceeded in tandem with urban policies that shored up segregation, Coates relays the story of Daisy and Bill Myers, the first black family to move into the archetypal planned communities of Levittown, Pennsylvania.
The Myers were received with protests and a burning cross; one white neighbor said that Bill Myers was “probably a nice guy, but every time I look at him I see $2,000 drop off the value of my house.”
This concern for falling property values, a near-ubiquitous refrain from those opposing neighborhood integration, was in one sense the euphemism of choice for white homeowners who demurred from more explicit, violent racism. In another, however, it was economic reality — since at least the 1920s, the burgeoning appraisal industry had explicitly opposed integration, going so far as to say that this development would cause “the decline of both the human race and of property values.”
The valuation of property became intertwined, in essence, with the presence or absence of minorities in a given neighborhood. Those who merely rented black tenants homes in white neighborhoods, as Coates recounts, could be charged with “conspiring to lower property values” — surely a uniquely American crime.
