This article was co-produced and co-published with Nonprofit Quarterly.
In this review of a set of essays by leading housing justice advocates, Josh Silver examines the micro-dynamics of structural racism in housing. To end endemic racism, Silver contends change must occur in realtor regulation, lending underwriting, credit scoring, loan pricing, bank regulation, the housing tax credit system, and special purpose credit programs. Silver also calls for expanding community housing ownership. A restorative approach, Silver insists, must be all-encompassing, addressing private sector practice and public policy in housing and lending markets.
A systemic approach is needed if decades of systemic racism in housing is to be successfully combated, according to the authors of a new compendium of essays published by the Poverty and Race Research Action Council (PRRAC). The publication, Racial Justice in Housing Finance: A Series on New Directions, contains essays by academics, practitioners and advocates about racism in housing and the wide-ranging responses needed to create a more just housing system and economy. The series was edited by Megan Haberle, former Deputy Director of PRRAC, and Sophia House, Deputy Director for Policy, Housing Solutions Lab at the NYU Furman Center.
Understanding the Past Century of Housing Discrimination
The federal government first became a national guarantor of mortgage lending in the 1930s. When it did, federal policy acted to reinforce preexisting structural racism. The National Community Reinvestment Coalition (NCRC) has described how the Home Owners’ Loan Corporation (HOLC), established during the administration of Franklin Delano Roosevelt, drew maps dividing neighborhoods based on the quality of their housing stock and the risk posed to lending institutions.
African American neighborhoods in this schema were designated as “high risk” (typically shaded red on maps, hence the term “redlining”), which resulted in Black families being denied federally subsidized mortgage loans. Leading real estate professionals under the direction of appraiser Frederick Babcook created these maps, which reflected an industry consensus regarding risk and race.
Over the decades, these racist designations became baked into the private and public sectors’ approach to risk. As a result, African Americans were left out of the homeownership market while homeownership became the primary vehicle for wealth building for the White middle-class, starting in the post-World War II years and extending throughout the 1950s and 1960s.
One stark statistic captures this phenomenon: from 1930 through 1960, only 1% of all mortgages in the country were issued to African Americans. If racial and ethnic disparities in homeownership rates caused largely by disparities in access to credit were eliminated, the Black-White wealth gap would shrink by 31%.
Redlining of communities of color exacerbated segregation and made communities of color susceptible to predatory lending since credit needs were not being met by traditional lenders. Even after the passage of the Fair Housing Act and the Community Reinvestment Act (CRA), laws which prohibited discrimination in housing and imposed an affirmative obligation on banks to serve all communities, abusive lenders flooded vulnerable and underserved communities of color with high-cost subprime loans, leading to massive foreclosures and loss of wealth in communities of color.
This prompted Henry Louis Taylor, an urban planning professor at the University at Buffalo, to ask: “How could the Civil Rights Movement leave in its wake a nation where schools are more segregated than ever, where Black workers are stuck in low-income jobs, where racial residential integration is a dream deferred, where most Black children live in poverty, where significant health disparities exist between the races, and where Blacks comprise 32 percent of American prisoners but only 13 percent of the population?”
A considerable part of this can be explained by a segregated housing market that stripped wealth from communities of color, to which can be added unequal funding for public schools, a racially biased criminal justice system, and widespread labor market discrimination.
Since discriminatory practices were established and legitimized by Washington, the onus is on the federal government to make amends. Carolina Reid, an urban planning professor at the University of California, Berkeley, discussed how the CFPB, as a relatively new agency with enforcement powers, must employ the Fair Housing Act and Equal Credit Opportunity Act (ECOA) to ensure that underwriting systems and data do not contribute to racial or ethnic disparities in lending.
Central to these data concerns is the use of credit score data to evaluate a borrower’s ability to repay a loan. Credit score data relies on the borrower’s history of using credit cards and other forms of credit. Since people of color have had to rely to a greater extent on unregulated and abusive lenders that harass and file claims against them frequently, their credit scores are often lower than Whites and results in higher rates of loan denials. Practitioners have proposed new ways of evaluating creditworthiness, including use of cash-flow analysis, and using utility or rental payments.
Daniel Immergluck, an urban studies professor at Georgia State University, discussed how the secondary market exacerbated inequalities in access and affordability of loans. Two government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, purchase sizable quantities of private sector loans, enabling banks and mortgage companies to acquire more capital with which to make more loans. These GSEs, however, charge a premium for risk based on credit scores. This leads to higher interest rates for borrowers with low credit scores. As noted above, due to a lack of equitable credit access, these tend to be lower for people of color, leading to hard-to-repay, high-cost loans, which in turn decrease equity accumulation. Immergluck discussed GSE reform including the possibility of a public sector utility to replace Fannie Mae and Freddie Mac, which would decrease if not eliminate risk-based pricing based on credit scores and thus give people of color a better chance to obtain affordable and sustainable loans.
Better monitoring of real estate agents is also essential to root out discrimination. “Despite repeated, significant evidence of discriminatory practices, real estate agents—who participate in nearly 90 percent of residential property transactions in the US— have largely been asked to regulate themselves. Predictably, this has proven inadequate,” said sociology professors Max Besbris, Jacob William Faber and Elizabeth Korver-Glenn. They recommended that a Home Mortgage Disclosure Act (HMDA)-like data requirement be imposed on the real estate industry to improve monitoring. New York is considering their proposal, which would involve real estate agents reporting on the demographics of their customers, the outcomes of their interactions with their customers, and any lenders to which they referred their customers.
Stronger enforcement and reform of fair lending laws must not only police the real estate industry but also involve updates to the Community Reinvestment Act (CRA). Currently, CRA is income-based, measuring the extent to which banks serve low- and moderate-income (LMI) borrowers and communities. My colleague, Gerron Levi, has written an insightful article aimed at influencing federal bank agency CRA regulatory reform’s consideration of people of color and communities of color. Reid echoes Levi’s call for a greater consideration of race on CRA exams. In addition, my own article in the collection urges agencies to further encourage neighborhood integration by providing stronger incentives and improved guidance about financing affordable housing in middle- and upper-income suburban communities as well as gentrifying neighborhoods.
Patrice Alexander Ficklin and Charles L. Nier, III, senior officials at the CFPB, urge greater use of special purpose credit programs (SPCP) as a means of increasing lending to people of color and low-income communities. Nonprofit and for-profit entities can use SPCPs to lend to a group of borrowers or communities that fit the federal definition of “economically disadvantaged,” as long as the data analysis documents that these communities fit that category. Ficklin and Nier suggest that HMDA data analysis can be used to document need. Targeting neighborhoods redlined due to HOLC’s hazardous designation would also be acceptable. CRA reform should encourage SPCP efforts by providing points on exams for the use of SPCP programs.
Although vital, lending market reforms by themselves are insufficient to rectify entrenched segregation by race and class. The physical layout of neighborhoods will have to change significantly to facilitate integration. In addition, the ownership of housing must undergo changes; specifically, social housing that is publicly- or community-owned must be increased substantially. The typical housing owned by corporations and in which profit is maximized is not the best model of achieving affordability or promoting integration.
Integration is a goal because segregation remains an effective tool of structural racism that reinforces continued economic and social disadvantages. Taylor was adamant about integrating suburbs by race and class. He maintained that “government must reaffirm its commitment to integration by constructing low-income housing projects in upscale White suburban communities and withholding federal dollars to municipalities that block such projects.” He also stressed that the racist culture prevalent in too many suburban communities must be changed. It would have been valuable if either his essay or another essay in this volume had elaborated on how to do this.
Part of the effort to integrate neighborhoods involves increasing the amount of social housing. Social housing refers to either housing controlled by the public or nonprofit sectors or various forms of community ownership and control. The idea behind social housing is that traditional profit-oriented housing is not well suited for people with modest incomes. The pressures of profit maximization can lead to destructive behavior including eviction and harassment of lower income tenants. Social housing, in contrast, provides vulnerable populations the ability to remain in their neighborhoods for the long-term, particularly those communities undergoing gentrification and increased home values. It can therefore facilitate integration.
For vulnerable populations with modest incomes, social housing can also be a form of empowerment and wealth building (though often less equity accumulation than traditional homeownership). Law school student Krystle Okafor explained, “Black women were central to the development of modern experiments in common property. With New Communities, Inc., Shirley Sherrod founded one of the nation’s first Community Land Trusts (CLTs) in 1968, when she and her husband Charles Sherrod established a 5,700-acre farm where Black families lived and stewarded the land under long-term ground leases.”
Phillip Tegeler, Executive Director of PRRAC, made an excellent point that Department of Housing and Urban Development (HUD) subsidies including Section 8 vouchers and allocations to jurisdictions under the HOME Investment Partnerships program should be targeted to a much greater extent to social housing. HUD should also start collecting data on the form of housing receiving HUD subsidies. Data on the location of the housing receiving subsidies can also determine whether it is fostering integration.
The final series of essays by experts at PRRAC focused on Low Income Housing Tax Credits (LIHTC), which has been responsible for most of the new production of lower-income, affordable housing in the last few decades, namely 3.2 million units from 1987 through 2018. State Housing Finance Agencies allocate the tax credits and develop Qualified Action Plans (QAPs) that serve as a guide for distributing the tax credits to investors of affordable housing. The Internal Revenue Service (IRS) reviews the QAPs, but since the IRS is not geared to promoting social or policy objectives, it is no surprise that the agency does not assess whether the QAPs promote integration. In fact, cost pressures of development lead LIHTC projects to be sited in poorer neighborhoods where land and other development costs are cheaper. The essays explored changes in law, regulation, and subsidies that would promote integration in the LIHTC housing program.
Lending and housing systems, practices, and policies cannot proceed as usual if we are to realize racial justice and increased opportunities for wealth building, integration, or revitalizing communities of color. To undo past damage, a restorative approach must be all-encompassing, addressing all aspects of private sector practice and public policy in housing and lending markets.
Reforms in lending underwriting, diminishing the reliance on credit scoring, changes in GSE loan pricing, CRA regulatory reform, promotion of special purpose credit programs, more data on real estate practices, promotion of social housing and changes in the LIHTC program to foster integration are some of the essential building blocks for a more racially just future. Promotion of integration and empowerment of people of color to live where they want in secure and affordable housing must be guiding and core principles as we rebuild from the pandemic. Finally, social movements must keep the nation’s eyes and hearts on these goals as an essay by Tara Raghuveer of People’s Action made clear. If we fail in this endeavor, our nation will become materially and spiritually poorer.
Josh Silver is a senior advisor at the National Community Reinvestment Coalition (NCRC) and has more than 25 years of experience working regarding the Community Reinvestment Act, fair lending laws and data, affordable housing, and community development.
 Megan Haberle, former Deputy Director, PRRAC and Sophia House, Deputy Director for Policy, Housing Solutions Lab, NYU Furman Center, editors, Racial Justice in Housing Finance: A Series on New Directions, May 2021, https://prrac.org/pdf/racial-justice-in-housing-finance-series-2021.pdf.
 Bruce Mitchell PhD., Senior Research Analyst and Juan Franco, Senior GIS Specialist, HOLC “Redlining” Maps: The Persistent Structure of Segregation and Economic Inequality, March 2018, https://ncrc.org/holc/.
 Daniel Kirp, et al., Our Town: Race, Housing and the Soul of Suburbia 7 (1995), cited by Patrice Alexander Ficklin and Charles L. Nier, III in Racial Justice in Housing Finance, p. 55.
 Daniel Immergluck in Racial Justice in Housing Finance, p. 44, cites this statistic from Sullivan, L., Meschede, T., Dietrich, L., Shapiro, T., Traub, A., Ruetchlin, C., & Draut, T. (2016, June 21). The racial wealth gap: Policy matters. Demos. https://www.demos.org/sites/default/files/publications/RacialWealthGap_2.pdf
 NCRC, Foreclosure In The Nation’s Capital: How Unfair And Reckless Lending Undermines Homeownership, April 2010, https://ncrc.org/foreclosure-in-the-nations-capital-how-unfair-and-reckless-lending-undermines-homeownership/
 Henry Louis Taylor, “Land Values and the Enduring Significance of Racial Residential Segregation,” in Racial Justice in Housing Finance, p. 19.
 Economically marginalized communities of color merit the most aid to rectify systemic discrimination. The essays in Racial Justice in Housing Finance did not address differences within communities of color regarding the extent of discrimination. Some work by NCRC and the Consumer Finance Protection Bureau (CFPB) did show these differences in the lending context within the Latinx and Asian community. More work is needed in this area. See Seema Agnani and Jason Richardson, Mortgage Lending In The Asian American And Pacific Islander Community, August 2020, NCRC, https://ncrc.org/mortgage-lending-in-the-asian-american-and-pacific-islander-community; Agatha So and Jason Richardson, Hispanic Mortgage Lending: 2019 HMDA Analysis, https://ncrc.org/hispanic-mortgage-lending-2019-analysis; and Consumer Financial Protection Bureau, Asian American and Pacific Islanders in the Mortgage Market, July 2021, https://www.consumerfinance.gov/data-research/research-reports/asian-american-and-pacific-islanders-in-the-mortgage-market.
 Carolina Reid, Moving Towards a Reparations Agenda in Housing: The Federal Government and the Black/White Homeownership Gap, in Racial Justice in Housing Finance, p. 10.
 Daniel Immergluck in Racial Justice in Housing Finance, p. 46, cites McCargo, A., & Choi, J. (2020). Closing the gaps: Building Black wealth through homeownership. Urban Institute. https://www.urban.org/sites/default/files/publication/103267/closing-the-gaps-building-black-wealth-through-homeownership_1.pdf
 Daniel Immergluck, Racial Justice and the Mortgage Market: Recommendations to the Biden Administration Regarding the Future of the GSEs, in Racial Justice in Housing Finance, pp. 45-49.
 Max Besbris, Jacob William Faber, Elizabeth Korver-Glenn, Shifting the Burden of Proof to the Discriminators: A Proposal for Real Estate Industry Data Collection in Racial Justice in Housing Finance, p. 37.
 Ibid, p. 38.
 Gerron S. Levi, CRA & Race: The Federal Reserve’s Proposal On The Community Reinvestment Act (CRA), December 2020, NCRC, https://www.ncrc.org/the-federal-reserves-proposal-on-the-community-reinvestment-act-cra/
 Carolina Reid, op. cit., p. 10.
 Josh Silver, Senior Advisor, NCRC, CRA Could Do a Better Job Promoting Integration in Racial Justice in Housing Finance, pp. 60-70.
 Patrice Alexander Ficklin and Charles L. Nier, III, The Use of Special Purpose Credit Programs to Promote Racial and Economic Equity, in Racial Justice in Housing Finance, pp. 52-59.
 Bruce Mitchell PhD., Senior Research Analyst and Juan Franco, Senior GIS Specialist, HOLC Redlining Maps: The Persistent Structure Of Segregation And Economic Inequality, NCRC, March 2018, https://ncrc.org/holc/, and Redlining and Neighborhood Health, https://ncrc.org/holc-health/.
 The forces of Not in My Backyard (NIMBY) are fierce and mighty; I have encountered this in my “progressive” suburb in Bethesda, Maryland, when planners suggested that increased density and multifamily housing should be added when mixed use (commercial and residential) areas are redeveloped. The familiar cries of congestion, overcrowding in the schools, and impact on property values are raised again and again. I wish I had a magic bullet here, but one suggestion is that people can only get used to integration and diversity if they experience it at their workplace, places of worship or entertainment (sports or cultural events). Increasing diversity in multiple avenues of life would perhaps demonstrate that diversity is enjoyable and interesting as opposed to the staid boredom of relatively homogeneous neighborhoods. Educational institutions at all levels must increase their multi-cultural offerings.
 Krystle Okafor, J.D. Candidate, Root-Tilden-Kern Scholar, and Moelis Urban Law and Public Affairs Fellow, NYU School of Law, Towards the Black Commons: Meeting the Moment with Community Land Trusts in Racial Justice in Housing Finance, p. 83.
 Philip Tegeler, What Can HUD do to Support Community Ownership and Control of Rental Housing? In Racial Justice in Housing Finance, pp. 74-79.
 Peter Kye, How the Federal Government Can Promote Fair Housing in the LIHTC Program in Racial Justice in Housing Finance, pp. 105-113.
 Tara Raghuveer, The Campaign for a National Homes Guarantee in Racial Justice in Housing Finance, pp. 98-103.