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Wealth Inequality in America

Housing Segregation in America

How Suburbia Disarmed the Arsenal of Democracy

On July 25, 1951, the wealthiest city per capita in the world, described by the New York Times as Lusty and Young, celebrated its 250th year anniversary. The city known as the Arsenal of Democracy earned the name by producing more tanks over a three-year period than Nazi Germany built during the course of the entire war.

During the celebration, President Truman, speaking to a crowd of about 40,000 people, on a platform located at Cadillac Square, invited America’s “doubters and defeatists” to “come out here and look at these great factories and this industrial power,” and “to hear the answer of a free people to tyranny in any shape or form,” but even more than that, the President implored his detractors to “look beyond the the people who make up this great city.” 

It is easy to understand why there was so much optimism in Detroit on July 25, 1951. 

In 1950, Detroit reached a population of about 1.8 million. That population enjoyed the highest income per capita in the world. Every 24 hours, 31,000 vehicles rolled out of the factories in the Motor City. Of all the automobiles in the world, 56% were built in Detroit. And while black Americans faced enormous barriers, receiving about 46% of what white workers were paid, Detroit nevertheless provided black people with unprecedented job opportunities. By 1950, despite the barriers, one out of every three black families owned their own home. 

All of that happy talk, however, ignores the fact that 27.9 percent of black homes were “dilapidated or deteriorating.” From 1940 to 1950, the number of non-white households living with 2 or more families to a home rose from 274,000 to 339,000. And while the demand for new housing was there, through sub-dividing and overcrowding families, landlords preferred to make vast amounts of money cramming vulnerable families without any options into dilapidated houses.

And while the City of Detroit was becoming more overcrowded, millions of white people, fearing a “negro invasion” (discussed below), moved to the surrounding suburbs in Oakland County. Many businesses would follow them into the suburbs. Despite the fact that many of these suburbs, and those fleeing to them, considered themselves to be “liberal,” very few people spoke out against these trends, although there were a few notable exceptions.

In contrast to the liberal white folks fleeing to Oakland County, regardless of credit score or economic means, from about 1934 to 1970, approximately 1.15% of homes in Metropolitan Detroit were available for black people to purchase.

The fact that black people were essentially trapped in the city during this time-period provides context for that misleading term, “white flight,” which is generally used in a manner that assumes that white people were making rational decisions in a free market.

What is so rarely addressed, however, is the fact that black people did not choose to remain in Detroit, and the decision of white people to leave Detroit, or any other city in America during this time period, was not the result of natural market forces, but rather the intended and predictable result of government intervention.

Now, we have finally reached the critical question: given that many black people were in a financial position to move to the suburbs, including cities such as Royal Oak, Huntington Woods, Birmingham, Warren, and Roseville, and assuming everyone is operating in a “free market,” why were only 1.15% of these homes available for black people to buy? 

From 1930 to 1970, there are three primary reasons that the overwhelming majority of people who moved to the suburbs were white:

(1) The Federal Housing Administration’s Underwriting Manual classified black people and integrated neighborhoods as high-risk;

(2) racial covenants and zoning restrictions prevented black people from purchasing homes;

(3) black families that somehow overcame the first two barriers faced highly organized, sustained and state approved violence.

The Federal Housing Administration Underwriting Manual classified black people and integrated neighborhoods as high-risk

The National Housing Act of 1934 established the Federal Housing Administration (“FHA”). Most significantly, the FHA shifted the risk of loan default from the banks to the government thereby creating a buffer to absorb default risk. With the knowledge that certain loans would be backed by the United States Treasury Department, so long as those loans satisfied the conditions of the FHA underwriting manual, this new marked opened the floodgates for unprecedented private capital to flood mortgage markets creating the most liquid market in the world.

Unsurprisingly, home ownership soared for white people. The reason was not a result of individuals participating in a “free market,” but rather white folks participating in a racially discriminatory market, created by the government. In its underwriting manuals, The FHA explicitly refused to back loans to black people or even other people who lived near black people.

From 1934 to 1968, 98% of FHA loans went to White Americans. Adjusted for inflation, of those who obtained an FHA loan, half of the people earned less than $40,000 per year. 

However, some black families were able to purchase homes without a mortgage, or somehow through incredible determination be qualified for a mortgage. For this group, the next barrier would stand in their way. 

Racial covenants & Zoning restrictions designed to prevent black people from purchasing homes

In the 1940es, 80% of properties outside the city of Detroit were subjected to racial covenants, specifically preventing black people from purchasing homes in suburbs. In Michigan, suburbs such as Huntington Woods, Oak Park, and Royal Oak were at the forefront in designing racially exclusionary covenants, which are found in most homes in this area. 

To understand how a “racial covenant” would work in the early 1940es, it’s pretty simple. A black family overcomes nearly impossible barriers to move into a suburb with mostly white folks, the white people file a lawsuit at the local court seeking to evict the black family, based on the claim that the racial covenant was violated, namely the property was sold to a black person, and the courts throughout the country, although there were some exceptions, would generally uphold the covenant, and order the black family to be evicted. This was valid law until 1948 when the Supreme Court struck down racial covenants. At this time, the suburbs shifted to zoning restrictions to achieve the same purpose: prevent black people from purchasing homes in the suburbs.

In the event that a black family was able to somehow overcome the barrier set-up by racial covenants and zoning restrictions, upon moving into their new home, they would be met with threats and state-supported violence.

Black families experienced threats and violence with state support in the form of non-intervention

From around 1920 to 1970, if a black family moved into a community with white home owners, the family was not provided with the traditional welcoming ceremony, to say the least. For those black families who somehow overcame the barriers already addressed, which were significant, upon actually moving into the neighborhood, black families would be immediately subjected to highly organized, state-supported violence. 

To understand the nature of this threat, along with the manner in which law enforcement would cooperate, the 1925 case of Dr. Ossian Sweet is particularly instructive. Perhaps it is unsurprising that the Ku Klux Klan boasted over 20,000 members in Detroit at this time. 

However, equally instructive is  the case of Giuseppe Stanzione, occurring on September 2, 1963 in Dearborn, Michigan.  Things were different now, however. In the 1925 case, the white mob attacked the black family because of the color of their skin. In 1963, according to the prominent neighborhood associations of the day, these white mobs were not attacking black families, but rather defending the value of the community’s property in a heroic effort to maintain the peace. This was quite the rhetorical shift and highly significant to the more modern discourse on race.

Just as in the 1925 case, police were called, this time 20 times, but according to Mr. Stanzione, “all the police did was cruise around the block, never interfering,” while “the mob threw bottles and rocks at my window and yelled insults at me.”  After the incident, Dearborn’s mayor, Orville Hubbard, sensing an opportunity to promote Dearborn, declared to reporters “Dearborn is one of the safest and cleanest places in the world to live.” 

In between these two incidents of racial violence against black people, in the 1950es alone, there were over 200 recorded acts of violence against black homeowners by white neighbors. In many cases, after being victimized by violent white mobs, law enforcement would charge black families with inciting a riot. In effect, the idea was that the black family started a riot against themselves by moving into a white neighborhood.

Many of these attacks were organized by so called “property protective” associations, such as Chicago’s Kenwood and Hyde Park Property Owners Association. These associations made it clear what their intentions were in the Property Owner’s Journal: the goal was to prevent “the negro invasion.” Chicago was hardly alone. The Baltimore Evening Sun, The Cincinnati Enquirer,  the Fort Worth Star-Telegram, the Tampa Tribune, and the Daily News in New York, regularly tormented its white suburban readers with threats of the “negro invasion.” Many white people at the time clearly perceived violent attacks on black families and their property as a legitimate way to protest “the negro invasion.” Pretty appalling to say the least.  

All of this is to say, that when it comes to segregation, inequality, and race, government policy, specifically the FHA’s underwriting manual which was essentially the basis for whether most applicants qualified for a mortgage to purchase a home, played an integral role. Because of the role played by the government in setting up such an unequal, distorted market, it would appear entirely reasonable for the government to take on an affirmative obligation to end segregation. Although this is what the Fair Housing Act of 1968 was intended to do, despite very modest increases, segregated housing and wealth inequality remains one of the defining aspects of modern society.

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