[This is the second of a three part series on gentrification (i.e., the process whereby a once disinvested black or brown neighborhood becomes a predominately white neighborhood that conforms to the tastes of middle or upper class whites). Although the issues surrounding gentrification and economic development are complex and in many respects beyond our purview, we at Community Frontline believe that we must do our best to educate ourselves and others on these important subjects—even when the issues and concepts are difficult to understand.]
Context, Context, Context!
In our last post, we discussed the basics of gentrification: what it is and how it works. In this post, we will explore the relationship between gentrification and race in America.
Before we get started, though, let’s clarify some terminology. When we say “race,” we mean the socially constructed categories of “black,” “white,” “Hispanic,” “Asian,” and so forth, although we understand that there are numerous ethnicities, cultural groups, and nationalities covered by those imprecise designations. By “racism,” we mean the assignment of hierarchical value based on race.
For reasons discussed below, we believe that gentrification is, at least in part, a function of systemic racism (i.e., racism that is carried out through systems and institutions and that does not require the participation of any individuals acting with racial animus). To connect the dots needed to reach this conclusion, we must examine some historical context.
Zoning Laws and Racially Restrictive Covenants
In the early 1900s, local governments enacted city ordinances that prohibited the sale of property to black people and that forbade black people from moving into neighborhoods where the majority of residents were white. During this period, African-Americans living within those jurisdictions generally could not purchase real property in majority-white neighborhoods even if they could afford the property.
The Supreme Court of the United States ruled that these zoning laws were unconstitutional in 1917. To get around this ruling, homeowners began privately implementing racially restrictive covenants (i.e., agreements among members of neighborhoods or homeowners’ associations) that prohibited the sale of homes within neighborhoods to black people and certain other racial groups.
The Supreme Court held that judicial enforcement of these covenants was unconstitutional in 1948. But by then, the practice was so widespread that exclusion of African-Americans and other affected racial groups from the participating neighborhoods was nearly impossible to undo or at least was going to take a long time to ameliorate. Some cities, like Chicago, are recorded as having as many as 80% of their neighborhoods subject to racially restrictive covenants by the 1940s.
What is more, the Federal Housing Administration (more on this agency later) “continued to informally support the use of racially restrictive covenants for years after” they were ruled unconstitutional.
Federal Policies and “Redlining”
In addition to these discriminatory practices of local governments and private individuals regarding the sale of residential property, the federal government implemented racially discriminatory policies regarding mortgage lending in the 1930s.
“In 1931, in the midst of the Great Depression, President Herbert Hoover assembled more than 400 housing experts for the President’s National Conference on Home Building and Home Ownership.” President Hoover and his team were convinced that encouragement of home ownership was the best option for growing the American economy. The experts advised Hoover to create a system that offered mortgages with long payback periods and low down payments, which would help make home ownership a reality for families who previously could not afford to buy a house.
A couple of years later, President Franklin Delano Roosevelt also created the Home Owners’ Loan Corporation (“HOLC”), a federally funded program to refinance the mortgages of families at risk of losing their homes. “[B]etween July 1933 and June 1935, HOLC made more than a million mortgage deals for a total of over $3 billion.”
In 1934, as part of the New Deal, President Roosevelt created the Federal Housing Administration (“FHA”). Unlike the HOLC, the FHA program did not offer mortgages. Rather, it provided a mechanism for insuring bank mortgages.
Because of the risk inherent in the federal government’s getting involved in mortgage refinancing and insuring, “the HOLC included in the FHA Underwriting Handbook ‘residential security maps’ used to help the government decide which neighborhoods would make secure investments and which should be off-limits for issuing mortgages.” For over 200 major American cities, the HOLC created maps with the following color-coding system:
- “Green (‘Best’): Green areas represented in-demand, up-and-coming neighborhoods where ‘professional men’ lived. These neighborhoods were explicitly homogenous, lacking ‘a single foreigner or Negro.’”
- “Blue (‘Still Desirable’): These neighborhoods had ‘reached their peak’ but were thought to be stable due to their low risk of ‘infiltration’ by non-white groups.”
- “Yellow (‘Definitely Declining’): Most yellow areas bordered black neighborhoods. They were considered risky due to the ‘threat of infiltration of foreign-born, negro, or lower grade populations.’”
- “Red (‘Hazardous’): Red areas were neighborhoods where ‘infiltration’ had already occured. These neighborhoods, almost all of them populated by Black residents, were described by the HOLC as having an ‘undesirable population’ and were ineligible for FHA backing.”
The term “redlining” is derived from this practice. “Almost every majority-black neighborhood in the country was given a D and ‘redlined’ on the federal government’s maps, barred from receiving federal funding for mortgages.” Making matters worse, nearly every major bank adopted the federal government’s system, thereby dooming African-Americans chances of obtaining mortgages in the private sector.
“Within a few years of the HOLC system’s start, it was almost impossible to get a mortgage in much of the United States if you were black.” One legal scholar has put it this way:
[T]he FHA had a major negative impact on central cities and minority communities from its very beginning. Its impact on the former was unintentional. Because the FHA made financing available for so much new housing, white working-class families fled the cities to the newly built suburbs in massive numbers. But the impact on minority households was quite intentional: the FHA reflected the widely-held prejudices and discriminatory practices already endemic in the all-white housing and mortgage lending industries.
As an example of the type of intentional racial discrimination that went into redlining, consider the following excerpts from the HOLC security map’s description of one South Dallas neighborhood located along South Malcom X Boulevard:
1. AREA CHARACTERISTICS:
a. Description of Terrain: Level.
b. Favorable Influences: Schools and stores in area, has all city conveniences.
c. Detrimental Influences: Distance from center of city – type of population, unpaved streets, cheap houses.
. . .
a. Occupation: Negro laborers.
. . .
d. Negro: Yes, 100%.
. . .
5. CLARIFYING REMARKS: This is a typical negro area, on the outskirts of the city. Sale demand is largely for investment and when prices are bargains.
As the plain language of the FHA manual makes clear, the racial makeup of the neighborhood was a basis for the assignment of a “red” or “hazardous” coding.
A decade after the establishment of the FHA, President Roosevelt signed into law the Servicemen’s Readjustment Act of 1944 (more commonly known as “the GI Bill”), which established the Veteran’s Administration (“VA”) and created a mortgage-guarantee program for veterans returning from World War II. Like the FHA program, the VA Program insured bank mortgages and drew upon racial factors as part of its underwriting criteria.
Collectively, the HOLC, the FHA programs, and the VA programs paved the way for the mortgage industry that we know today (i.e., long-term payback periods, low down payments, etc.). As a result of the federal government’s mortgage-guarantee programs, banks started “making riskier bets and making loans in numbers never seen before.” “In 1933, construction began on 93,000 new homes.
By 1937, just three years after the FHA was created, housing starts had risen to 332,000. In 1941, 641,000 homes began construction. After World War II, construction really boomed: the United States added 13 million homes between 1945 and 1954. And VA mortgages accounted for 40 percent of these homes in 1946 and 1947.”
Unfortunately, as described above, African-Americans and certain other racial groups were largely excluded from participation in this new era of mass homebuilding and ownership.
Continued Federal Malfeasance and Inadequate Remedial Measures
These federal policies and their implications continued for decades. “[T]he Truman Administration revised the FHA’s Underwriting in Manual in 1949 to include equal opportunity standards,” but “very little actually changed in practice.”
As one scholar explains, in the 1950s, “[t]he quality of housing for white households improved dramatically in the 1950s. Black households, however, continued to suffer from a variety of discriminatory policies, including redlining by the FHA.” Although the FHA took some meager measures to remedy its past discrimination, the positive impact was marginal, to say the least:
In 1947, following the creation of the Minority Group Housing Program, the agency did increase its acceptance of minority housing projects, insuring 205 new developments for minority occupancy between 1947 and 1954 with an additional 146 small projects in the process of being completed.
Yet in aggregate this amounted to a total of only 29,386 dwelling units, 15 percent of which were open to white occupants as well. To provide some perspective on the proportion of this effort relative to the FRA’s broader operations, by 1953 the FHA had provided $33 billion of insurance on nearly 3,500,000 homes and 650,000 rental and cooperative units, the vast majority of which were new dwellings outside of central cities.
“Between 1934 and 1960, just 2% of FHA mortgages were made to African Americans.” Further, although the FHA helped to finance about 1/5 of all newly constructed housing during its first thirty years of operation, “as of 1967, only 3% of all new homes were sold to African Americans.” To use a localized example, “[a]s late as 1966 . . . there had not been one mortgage backed by the FHA issued in the urban centers of Camden or Paterson, New Jersey, yet nearly half of all suburban housing the 1950s and 1960s was backed by the FHA or the VA.”
In 1962, the Kennedy Administration “reversed the FHA’s redlining policy that had been in effect since its inception, and the FHA began to embark on a change of focus to supporting low- and moderate-income homeownership as well as minority homeownership.”
To this end, in the late 1960s, the Johnson Administration appointed what was popularly known as “the Kerner Commission,” which found that “[i]n the 31-year history of subsidized Federal housing, only about 800,000 [low income] units have been constructed” and that “[b]y comparison, over a period only 3 years longer, FHA insurance guarantees have made possible the construction of over 10 million middle and upper income units.”
In response to these historical inequities, Congress enacted a number of initiatives focused on “underserved borrowers,” including the “Section 235” homeownership program. But Section 235 was poorly executed, among other problems, and ended up causing “rapidly increasing foreclosure rates” and “wreak[ing] much havoc in the early 1970s.”
Sadly, “many of the homes sold through the program were sold by predators who covered up structural problems with sheetrock and paint and sold them to unsophisticated low- and moderate-income buyers. Once the structural problems surfaced, many of these households could not afford to repair them, and the homes went into default. Entire blocks in some cities were lined with boarded-up homes that had been financed pursuant to Section 235.”
The Section 235 program was suspended in 1973 “because so many of its mortgages ended up in default and foreclosure,” and the program terminated a few years later.
According to one scholar, “FHA underwriting went from being prejudicially restrictive for households of color in its early years to being irrationally loose in its later years.” Both were devastating to communities of color. The FHA’s underwriting failures “continued to haunt the FHA and the communities it served decades after it rejected its early discriminatory practices,” well into the 1980s and 90s.
Nearly fifty years after the creation of the FHA, a Commission on Housing appointed by President Ronald Reagan, made the following comments about the long-lasting effects of the FHA (albeit with the intention of putting a positive spin on things:
Few pieces of social invention from the 1930s have reverberated so loudly through the corridors of time as the FHA-insured, level-payment, self-amortizing, long-term mortgage. Supplemented by VA mortgage guarantees after the war, this piece of paper and its acceptance—first by homebuyers and banks, later by insurance companies and an organized secondary market—made homeownership possible for tens of millions of Americans who would otherwise have lived out their days in rented quarters.
Of course, we know the vast majority of these “tens of millions of Americans” were white.
Subprime Lending and other Mortgage-Related Discrimination in the 2000s
Heading into the 2000s, barriers to affordable black and brown home ownership continued to manifest themselves. To take an illustrative snap shot, in 2006, the home ownership rates of African-American and Hispanic households (taking into account both federally and privately insured mortgages) was still about twenty percentage points less than the national rate.
Evidence shows that financial institutions have systematically discriminated against people of color applying for mortgages. For example, a series of investigations in 2009 and 2010 by the United States Department of Justice (“DOJ”) caused the DOJ to conclude that, as a result of one particular bank’s policies and practices in the Baltimore and Washington, D.C. metropolitan areas, about 4,000 “qualified African-American and Hispanic wholesale borrowers were placed in subprime loans rather than prime loans even when similarly-qualified non-Hispanic white borrowers were placed in prime loans.”
This process, known as “steering,” substantially harmed those African-American and Hispanic borrowers, because “[s]ubprime loans generally carried higher-cost terms, such as prepayment penalties and adjustable interest rates that started with low initial teaser rates, and then increased significantly after two or three years, often making the payments unaffordable and leaving the borrowers at a much higher risk of default or foreclosure.”
The investigation also found that the bank discriminated against approximately 30,000 African-American and Hispanic wholesale borrowers by charging them “higher fees and rates than non-Hispanic white borrowers because of their race or national origin rather than the borrowers’ credit worthiness or other objective criteria related to borrowers risk.” The investigation showed that these “borrowers paid more than non-Hispanic white wholesale borrowers, not based on borrowers risk, but because of their race or national origin.”
In other words, it was on purpose. The New York Times reported in 2008 that some of the bank’s loan officers referred to their black customers as “mud people” and to the subprime loans they pushed on them “ghetto loans.” Keep in mind, this was not 1935. This was roughly during the period between 2004 and 2009! The DOJ end up settling with the bank for more than $175 million.
Connecting the Dots
So what does all of this have to do with gentrification? Well, a lot. As journalist Peter Moskowitz points out in his book How to Kill a City:
The United States’ racist housing legacy may seem only tangentially related to gentrification today, but the two processes are part and parcel of the same historical trajectory. If black Americans had been able to achieve the same kind of success through housing that whites had, gentrification would not be such a race-based phenomenon. Instead, the intentional destruction of black urban life has become the canvas on which gentrifiers now paint.
In other words, you cannot divorce the economic factors at work in the gentrification process from the impact of past and present racism in homeownership, mortgage lending, property conveyance, insurance, and the numerous other areas where it has persisted. Here are some reasons why we believe gentrification is a form of systemic racial injustice, as opposed to merely a matter of economics.
1. Correlations Between Once-Redlined and Now-Gentrified Neighborhoods
The low property values and related economic conditions that make certain predominately black and brown neighborhoods susceptible to gentrification are inevitably related to the FHA’s past redlining of those neighborhoods and the resulting disinvestment in the neighborhoods. There are notable correlations between neighborhoods that were redlined in the 1930s and neighborhoods that have experienced recent shifts to high-end commercial redevelopment and influxes of affluent white residents.
Using Dallas as an example, the FHA redlined a neighborhood located in part of what is now known as “Uptown,” covering streets like North Pearl Street, Maple Avenue, and Cedar Springs Road. Today, that area contains a relatively new Ritz-Carlton Hotel, Truluck’s restaurant, and Whole Foods grocery store, among many other affluent features.
By way of another example, the FHA redlined a portion of West Oak Cliff in Dallas running along Sylvan, West Commerce, and Fort Worth Avenue. That area now contains newly built high-end apartments, townhomes, and retail, along with a boutique hotel and upscale restaurants reflective of white tastes.
Undoubtedly, a number of economic, social, governmental, and other factors combined to make these developments happen. But we have to note the correlation between the redlining of those neighborhoods in the mid-to-late 1930s and the recent developments in those neighborhoods today.
The converse is also true. Residential neighborhoods that received a “Green” (Best) rating from the FHA have long been economically stable areas predominately inhabited by affluent whites. For example, the Highland Park and University Park neighborhoods were “green-lined” in the 1930s, as were Walnut Hills and the “M” Streets areas. If you’re familiar with Dallas, you know that these areas are economically prosperous and inhabited primarily by affluent whites.
2. White Flight and Disinvestment of Inner-City Neighborhoods
Also relevant to the redlining conversation is the phenomenon of “white flight.” Redlining and the HOLC, FHA, and VA programs discussed above incentivized homebuilders to invest in the suburbs and facilitated home ownership by white families in those suburban areas. This, in turn, spearheaded a powerful white-flight movement in which white families left the inner cities for the blues skies of the suburbs.
Those programs helped numerous white families (who had previously been renters or homeowners facing foreclosure) gain their footing after the Great Depression, advance economically, and become homeowners in healthy neighborhoods.
This white-flight movement, in tandem with the reverberations of racially restrictive covenants and zoning laws, helped solidify much of the racial segregation we see today. More to the point, it set the stage for eventual gentrification by contributing to the disinvestment of inner city black and brown neighborhoods, on the one hand, and the investment in white homeownership and wealth creation and accumulation, on the other.
3. Exclusion of Black and Brown People from Homeownership and Corresponding Wealth Creation and Their Subsequent Vulnerability to Displacement
On the flip side, redlining and the other related federal policies prevented African-Americans and certain other racial groups from participating in the country’s homeownership boom. Black people and various immigrant groups were mostly ineligible for the low-rate, long-term mortgages that their white counterparts enjoyed. This widespread discriminatory lending, moreover, came on the heels of exclusionary zoning laws and overlapped with the racially restrictive covenants that succeeded the zoning laws.
Collectively, if not individually, these practices kept African Americans locked out of higher valued neighborhoods for decades. They also placed African-Americans and certain other racial groups “way behind the starting line,” so to speak, when it came to building up their own neighborhoods to preempt and withstand economic forces like gentrification and to avoid displacement.
It is important to note here, that the history of discrimination in housing and lending that we discussed above are only the tips of the iceberg when it comes to understanding the economic, social, and other setbacks experienced by African-Americans. The unjust housing and lending practices worked in combination with various other forms of systemic racial injustice at work during the same periods (e.g., discrimination in hiring, unfair voting laws and practices, white-supremacist terrorism, denial of admission to certain institutions of higher learning).
Virtually all of these forms of injustice contribute in some way to the dynamics at work in gentrification.
Although a detailed discussion of those other forms of injustice and their disparate impact is outside the scope of this blog, we briefly note some observations made by New York University sociology professor Patrick Sharkey, in his book Stuck in Place. Professor Sharkey “found that over the last half century there has been virtually no improvement in the income of African Americans.
While white children today who come from middle class families can expect to earn . . . $20,0000 more than their parents, black children can expect to earn . . . not only [about $29,000] less than white kids, but $9,000 less than the average earned by black people in the middle class a generation ago. Half of middle-income black kids fall down the economic ladder compared with the previous generation, while only 14 percent of white kids do.”
According to Sharkey, “there’s only one possible reason: ‘When white families advance in economic status, they are able to translate this economic advantage into spatial advantage by buying into communities that provide quality schools and healthy environments for children.’ This simply is not possible for most black families.” When a neighborhood gentrifies, it is in no small part due to factors such as these.
4. Destruction of Successful Black Neighborhoods
Even where communities have color have overcome racial barriers and developed thriving neighborhoods, history tells us that those successes have been intentionally dismantled.
For example, in the early 1900s during the Jim Crow era, the Greenwood community in Tulsa, Oklahoma became so notoriously successful that it was referred to as “Black Wall Street.” It had a population of more than 100,000 black people. “It was home to luxury shops, 21 restaurants, 30 grocery stores, a hospital, a savings and loan, a post office, three hotels, jewelry and clothing stores, two movie theaters, a library, pool halls, a bus and cab service, a nationally recognized school system, six private airplanes and two black newspapers.”
In 1921, the neighborhood was massacred:
The massacre began on May 31, 1921, when white mobs descended on Greenwood, burning houses and shooting black people. Some people were burned alive, and 40 square blocks of business and residential property—valued then at more than $1 million—were destroyed. The rampage, which lasted 48 hours, left more than 10,000 black residents of Greenwood homeless and as many as 300 black people dead.
Witnesses to the massacre recalled seeing white mobs looting homes of black people, pulling out finely carved furniture, pianos, mink and leopard coats, before setting the houses on fire. There were reports that hundreds of bodies were thrown into the Arkansas River or buried in mass graves.
Tulsa was not an isolated incident. “Cities across the country experienced similar events: Atlanta race riots of 1906, Chicago race riots of 1919, the Rosewood massacre of 1923, Washington, D.C. riots of 1919, Knoxville, Tennessee, race riots of 1919, and the East Saint Louis race riots of 1917.” As Dr. Eric Mason has recognized, “these efforts were moved to . . . systemically destroy the opportunity for blacks to build wealth.”
5. Unfair Lending Practices and Other Current Forms of Discrimination
Racism’s impact on gentrification is not just a function of past discrimination. The role of race in gentrification is on display when considering present-day realities, such as the ability of young whites to get prime mortgages and move into houses affordable to them in gentrifying neighborhoods—while their similarly situated black and brown counterparts are charged subprime mortgages and higher fees, making it more difficult to purchase houses in those neighborhoods or to thereafter avoid foreclosure on such houses. The DOJ investigation discussed above is just one example.
5. Cultural Displacement
The connection between race and gentrification is also on display when developers, local governments, and outside investors enter a neighborhood and (directly or indirectly) market their products, services, and policies to affluent whites living outside of the neighborhood.
When high-end wine bars, boutique hotels, and stores window-dressed with pictures of skinny white models start popping up in lower-income black neighborhoods, it is difficult to overlook the racial dynamics in play. This is particularly so when these developments coincide with the involuntary exit of long-time business that have offered services and products to long-time residents (e.g., an ethnic black beauty supply store or a Mexican grocery store).
Similarly, when a city offers tax abatements to new businesses who rehab store fronts, but makes those abatements unavailable to long-time businesses who rehab store fronts, the city is signaling who it does—and does not—want in the jurisdiction. Consider, too, the situation where a black man who has lived in the neighborhood for years is confronted by the police after his new-to-the-block neighbors call 911 because he has been sitting in his car “too long” for their sensitives.
These sorts of happenings can make long-time residents feel like strangers in their own neighborhoods. Cultural displacement can inflict racial discrimination on people of color who manage to avoid literal displacement from the neighborhood.
6. Racial Insensitivity in Characterizing Neighborhood Changes
Another way that gentrification can cause pain and reflect the dehumanization of black and brown communities is in how white people and the media characterize the neighborhood changes that occur as part of gentrification.
As we discussed in our first blog post, when a neighborhood gentrifies, white people and the media use phrases like “no one used to go over there” and “now people are starting to move there,” which imply that the people who had been living in those neighborhoods all those years were “no one.” To use a Fort Worth example, in a recent newspaper review of a restaurant that opened in the eastside neighborhood of Polytechnic Heights, the author or editor wrote that the new restaurant was “worth the trip to Rosedale Street,” as if there had previously been no reason to go over there.
Oftentimes, the narrative assigned to a gentrified neighborhood is that the neighborhood was “revitalized” or “saved,” usually by benevolent outside heroes. This type of oversimplified narrative can minimize the contributions and successes of long-time community members, leaders, and business owners. Making this observation in the context of recent economic development activity in Detroit, one journalist writes:
The people who are benefiting from all these subsidies—the gentrifiers of the 7.2 [a nickname for downtown Detroit]—do not seem to realize the work that has gone into bringing and keeping them there. They consider themselves cunning pioneers who’ve figured out how to make the economics of a rough city work, ignoring the fact that hundreds of millions of dollars that could be used to keep people like Cheryl West (a longtime resident) in their homes are propping up their lifestyles of conspicuous consumption.
And they don’t seem to realize that they are benefiting directly from the past oppression of those whom they hope to lift with their rising tide. Detroit was made cheap and therefore attractive to gentrify because, beginning in the 1930s, its black residents were systematically denied jobs in the booming auto industry and, later, mortgages in the suburbs as the housing industry took off. Detroit’s black residents were hired last and fire first when the auto industry collapsed; they were foreclosed upon and denied basic city services.
Similarly, writes the journalist, “New Orleans, despite the tens of thousands still missing from it, is ‘back.’”
There is much we did not address in this post. We did not examine, for example, the role that the construction of highways played in breaking up black and brown neighborhoods, including in Fort Worth. We also did not evaluate how two-and-a-half centuries of race-based chattel slavery contributed to modern-day phenomena like gentrification. Similarly, we did not analyze the way in which lands were colonized away from Native Americans and how gentrification may not, in fact, be a modern-day phenomenon after all. Time and space (and in some cases, available data) did not permit.
But the goal of the post is simply to demonstrate that gentrification is a function of systemic racial injustice. If we fail to see it as such, we will surely fail to properly address it.
As we admitted in our first bog post in this series, gentrification is complex. Many communities that gentrify are, in fact, in need of investment and development. In the next post, we will focus on finding solutions.