Family Properties: Race, Real Estate, and the Exploitation of Black Urban America Book

"Family Properties" is an absolutely essential book, one that hammers home, over and over again, an all-too-often neglected, yet vitally important, fact about racism: it pays. In the first (and better) half of the book, Satter lays out, by following the career of her father, crusading Chicago lawyer Mark Satter, the way in which the ghettos of Chicago -- and presumably those of other Northern cities -- were created. First comes a dual housing market, in which blacks cannot buy housing in the same ways and in the same places that whites can. This is largely created by a combination of banking racism -- banks, and Savings and Loans institutions in particular, refusing to lend to blacks -- and Federal policy, in this case redlining, the Federal Housing Administration's practice of refusing to guarantee mortgages in neighborhoods containing any black people. This latter has the beneficial side effect of increasing white racism: if the FHA won't guarantee mortgages in your neighborhood any more because a black family moved in down the street, the value of your house, into which you've put much of your savings, has plummeted. Under these circumstances, the riots that greeted attempts by blacks to move into previously all-white neighborhoods in the '50s were inevitable. Combine this dual housing market with an increasing and upwardly mobile black population, and you create a large pool of people who are desperate to buy property and so easily exploited. In the Chicago of the '50s and '60s, the main form the exploitation took was buying "on contract". A contract seller starts by getting a mortgage on a property from one of the S+L's that refuse to sell to black people, often buying the property at a discount from a white owner who is desperate to get out due to a combination of dislike of black neighbors and fear of redlining rendering his house unsalable. Then it's offered for sale to a black family at a markup ranging from 20% to 100% (if the targets start talking about bringing in a lawyer, the seller simply threatens not to sell, knowing that the prospective buyer will usually be so desperate to buy that he'll cave). The down payment is often enough to pay off the seller's down payment, with something left over, but it's the monthly payments that kill: in fact, they're so high so as to be essentially impossible, which is fine for the seller, because the advantage of selling on contract is that the seller retains the title to the property until it's paid off. Once the buyer misses a single payment, they can be, and are, evicted, with the property immediately put up for sale to the next desperate black family. After just a few years, the seller has raked in more money than the property was worth in the first place, paid off his loan from the S+L, and sold the contract to somebody else in Chicago's upper middle class. It helps, of course, to spend no money on repairs or upkeep, which the buyer can't afford either: indeed, the buyer, assuming he or she can keep up his or her payments, is essentially forced to reduce the value of the property by subdividing it (often violating building codes, though in Mayor Daley's Chicago those were essentially just there to help the building inspectors make some money on the side through bribes) and renting pieces to other black families who were equally desperate for a place to live. The result is a neighborhood with too many people crammed into ever-more dilapidated buildings; far more children than the neighborhood schools, underfunded as they are, can possibly take on, leading to children being taught in shifts and the growth of gangs; and a general lack of services. In short, a slum. But an extremely lucrative slum: Mark Satter's estimate was that $1 million dollars (1950's dollars, recall) a day was flowing from the black areas of Chicago to the property speculators they were forced to deal with, a windfall that was distributed throughout Chicago's, and probably the nation's, white elite.

The S+L's stuck with the system too long, though: by the late '60s, they were giving contract sellers mortgages on practically worthless buildings, so run-down that not even the most desperate black family would stick with them for more than a few payments. The sellers didn't care: they simply defaulted and dumped the buildings back on the S+L's. Overcome with bad loans, the S+L's would then be forced to sell the mortgages for a fraction of their value to anyone who would take them, usually the same slumlords. If they couldn't sell fast enough and went out of business under the pressure of these bad loans, the mortgages went to the Federal Savings and Loans Insurance Corporation, which was similarly eager to dump the loans to anyone they could find: again, the buyers were usually the original contract sellers, picking up the buildings -- buildings that were now worthless in large part thanks to their refusal to spend a cent on upkeep -- for a song. These worthless buildings could still generate payments, though: even if nobody would buy, the continued shortage of housing made renting possible. And when all else failed, there was arson: thanks to the Illinois Fair Plan -- which allowed slum buildings to be insured against fire for far more than they were worth, a provision intended to benefit their black residents but one that, like many such provisions, actually benefited only the exploiters -- arson became far more lucrative than renting. To avoid the negative publicity that arose from tenants dying in fires, one need merely refuse to pay for gas to hear the building in the Chicago winter: usually that cleared any remaining tenants out fairly quickly (though not always: Satter cites a 3-week period in the winter of 1969 in which three babies died in unheated apartments). And thanks to corruption in city agencies, there was no need to worry about consequences.

This description of how black Chicago neighborhoods were destroyed for fun and profit is infuriating enough, but worse was to come when the federal government took a hand. After years of steadfastly discriminating against black people, the FHA, as of 1968 no longer an independent agency and finally forced to at least pretend to care about the interests of black people, enacted the 223(e) program, which was designed to insure mortgages in "low-income urban areas", i.e. black neighborhoods. The results were, amazingly, just as bad as, if not worse than, contract selling. Widespread corruption -- FHA officials were bribed en masse -- allowed speculators to acquire decaying inner-city buildings (presumably decaying thanks to having spent years at the mercy of contract sellers) and get them appraised at multiples of their actual value. Then they need only find a sucker to buy the building with an FHA-insured mortgage at its inflated value. Of course, thanks to the dual housing market there was large pool of such people available, the working-class blacks and Hispanics who this reform was theoretically supposed to benefit. Speculators got them to sign on the dotted line for massively overpriced buildings by claiming that they had passed FHA inspection and offering a low down payment, which was sometimes even loaned to the purchasers. The sellers were utterly uninterested in whether or not the buyer could pay, routinely falsifying incomes and assets on mortgage forms. Since the mortgages were fully insured by the federal government, there was no risk to the seller, and nobody really cared about ability to pay, as the mortgage companies' profits came from the (extremely high) service fees they charged anyway. And if the borrower defaulted, there was even more money to be made: in fact, the sooner the default, the more money, as the FHA would repay the entire remaining value of the loan plus seven percent interest and service fees right away. In other words, selling to buyers who could not repay was the way to make money: it was quite fortunate for the lenders, then, that thanks to the massively inflated values of the homes they sold and their high fees, paying off the loans was practically impossible for almost all low-income buyers, especially as many of the buildings, despite having supposedly passed an FHA appraisal, were in quite poor shape. In other words, it was contract selling all over again, only on a massive scale, with some of the country's largest mortgage lenders involved. The results were devastating: the foreclosure rate on 223(e) loans was seven times that of conventional loans, leaving block after block of abandoned buildings in the inner city, the kind of urban decay problems which were often subsequently blamed on, e.g., the riots of the late '60s, but were actually due to the fact that it had become more lucrative for banks and mortgage companies to force people out of their homes then keep them there. Of course, the Department of Housing and Urban Development, which was responsible for paying out billions (in pre-inflation, early-'70s dollars) to the mortgage companies and financial institutions engaging in this kind of outright fraud, did nothing, given the power that said companies had over the department.

If all of this sounds rather familiar to a reader who's been following the news since roughly 2008, it should. The subprime mortgage crisis reproduced many of the same elements, in particular selling to people who the seller knew couldn't possibly afford the property they were buying -- selling aided by fraud, including deliberate falsification by the seller of the buyer's income and assets and misrepresentation of just what it was the buyer was agreeing to -- and a corrupt government ensuring that the sellers were paid in full nonetheless. If there were additional levels of sophistication added -- there were no direct bribes, and the government payouts were not the explicit goal but rather a necessary backstop for an otherwise untenable strategy -- the underlying element, of exploiting a population rendered vulnerable by racism with the federal government's help, was the same (recall that Wells Fargo, for instance, deliberately steered black families that could have afforded a prime mortgage into its subprime offerings, which were more lucrative for Wells Fargo precisely because the buyers were less likely to be able to repay their loans.). In fact, this is the most infuriating element of the book: just how little has changed.

Not that efforts weren't made: Satter documents the failures of both Alinsky and the IAF and King and the SCLC in organizing black Chicago, as well as the success of the more home-grown Contract Buyers League. But while the struggle of the CBL and the Catholic social justice advocates that worked with it is often inspiring, its victories were, in the end, fairly minimal. Individual members of the CBL mostly benefited as contract sellers, embarrassed by publicity, negotiated down their balances, but their crusade for justice ended up wilting in the courtroom, undone by unfriendly judges and a jury foreman who wanted to overturn the mess made by Brown vs. Board of Education. The only substantial victories Satter can point to are the passages of the Community Reinvestment Act and the Home Mortgage Disclosure Act, which are extremely weak tea indeed: the former was unable to prevent the likes of Angelo Mozilo (of Countrywide) from devastating black and Hispanic communities just as badly as contract sellers ever did, and all the latter can do is make it easier to tally up the damage. If Satter makes clear (albeit sometimes inadvertently) the bankruptcy of legislative solutions, the way government programs nominally intended to use the market to benefit poor black people all too often end up simply funneling cash to rich white ones, and the futility of relying on the Democratic establishment (even in the liberal era of the '60s and early '70s), she also demonstrates the great difficulty of organizing even the blatantly oppressed -- the IAF and the SCLC are, after all, two of the great organizing success stories of the 20th century -- and the many obstacles that stand in the way of turning even widespread collective action such as a payment strike into a tangible victory. The book makes it clear that radical solutions are necessary, but by the end of the book they seem farther away than ever. Rather than a story of victory, "Family Properties" is one of a struggle that, despite the Herculean efforts of black Chicago residents and various idealistic outsiders, still has a long way to go.