Money  /  Explainer

How Real Estate Segregated America

Real-estate interests have long wielded an outsized influence over national housing policy—to the detriment of African Americans.

When the Fair Housing Act was passed in 1968, it confronted a history of exploitation and segregation that had physically degraded the communities that African Americans lived in. Black neighborhoods had suffered decades of disinvestment and institutional neglect, yet realtors continued to charge African Americans inflated prices for inferior or substandard properties, knowing they had nowhere else to go. By the 1970s, the landscape of foreclosed and abandoned properties and burned-out hulls of urban residences served as the visual markers of what was popularly described as an “urban crisis.”

Fifty years after the passage of “fair housing,” racial discrimination remains embedded in the operations of the American housing market. The federal government’s failure to enforce its own laws against racial discrimination is a reflection of its institutional racism but not an explanation. One explanation for the failure of federal housing policies to actually produce “fair” housing is found in the state’s continued reliance on the private sector as the sole provider of housing in the United States. The federal government long ago abdicated the responsibility of directly producing affordable housing, instead outsourcing the task to private developers—while continuing to provide vast amounts of assistance in the form of guarantees, subsidies, and tax relief. As a result, it has absorbed the real-estate and banking industries’ historic embrace of racial discrimination.

Indeed, the real-estate industry grew in tandem with and helped to popularize racist, even eugenic ideas about African Americans, including the notions that Black residents negatively impact property values, are undesirable neighbors, and pose an existential risk to communities and neighborhoods. As early as the 1920s, the National Association of Real Estate Boards had threatened professional discipline against any agent who disrupted segregated neighborhood racial patterns.

As the government got more involved in regulating and subsidizing housing, these ideas translated directly into policy. The notorious redlining maps issued by the federal Home Owners’ Loan Corporation in the 1930s, to take one early example, were based on existing maps used by local banks and brokers. It’s not hard to see why: starting in this period, real-estate executives were recruited to develop government housing policies because of their former roles within the private sector. Over time, the real-estate industry, in turn, would seek out former government employees for their valuable connections to the state. With this “revolving door” in place, public and private networks formed an insular feedback loop mostly concerned with maintaining a brisk housing market. The real-estate industry flexed its enormous influence over national policy again and again over the following decades, including when it vociferously—and successfully—lobbied to hobble public housing in the 1940s and 1950s.