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"Race and Real Estate,"

by Beryl Satter July/August 2009 issue of Poverty & Race

My new book, Family Properties: Race, Real Estate, and the Exploitation of Black Urban America, deals with one of the most contentious questions of recent American history— why so many urban neighborhoods changed so rapidly from white to black, and then decayed into slums. Yet the book originated in something very personal—my curiosity about my father, Mark J. Satter.

He was a Jewish Chicago attorney with a largely black, working-class clientele. He was 49 years old when he died from a heart ailment in 1965; I, the youngest of his five children, was 6. As I grew older, I picked up oddly mixed messages about him from my relatives. They told me he had been a well-known crusader for the oppressed. But they also spoke in more whispered tones about properties he had owned in what was now a black ghetto. He’d hoped that they would provide for his family, relatives said. Instead, the properties had become worthless. They were sold shortly after his death. By then they were worth so little that their sale hadn’t even covered that winter’s coal bills—and I understood that somehow, my relatives felt that he was to blame.

There was a mystery here, but it was only a decade ago that I decided to investigate my father’s story. I began by reading my father’s papers, which had been saved by one of my brothers.

I was shocked by the stories they contained.

I learned that my father had represented scores of African Americans who had been unconscionably misled and grossly overcharged by the real estate agents they’d turned to for help in buying homes. A typical example: In 1955, a white real estate agent, Jay Goran, bought a building for $4,300. Soon after, Goran sold it to a black couple, Albert and Sallie Bolton—for $13,900.

Goran never told the Boltons that he was actually the building’s owner. The Boltons signed some complicated documents that said that the building would remain the legal property of its current owner until they paid off the property in full. They made their high monthly payments for a year; they also spent a considerable sum for repairs. Then they missed a payment and were evicted. Goran was now free to resell the property, while keeping all that the Boltons had invested in it.

In part, the Boltons lost their home and their savings because of the policies of the Federal Housing Administration, which redlined—that is, refused to insure mortgages—in neighborhoods that contained even a few black residents. As urban historians have shown, FHA redlining made it impossible for most African Americans to buy homes with a mortgage. Instead, they were forced to deal with speculators, who bought low from whites and sold high to blacks. But these historians missed a critical point: Given that blacks could not get mortgages, how were they able to buy properties at such high prices?

Buying On Contract

The trap that caught my father’s clients provides the answer. Unable to get a mortgage, the Boltons bought their building on contract—that is, on an installment plan. They made a downpayment. They were also responsible for taxes, insurance, maintenance and interest. However, they couldn’t get the title to the building until the purchase price had been entirely paid off. With just one missed payment, the speculator could reclaim the building. If housing prices were inflated, a missed payment and subsequent quick eviction was practically guaranteed. And prices were wildly inflated. White speculators routinely sold properties to African Americans for about double the properties’ value, but sale prices of triple to quadruple the properties’ value were not uncommon. When you consider that approximately 85% of the properties sold to black Chicagoans were sold on contract—and that there were close to a million black people in Chicago by the mid-1960s—you get a sense of the scale of the exploitation.

Some might wonder why black Chicagoans were willing to buy overpriced properties on contract. Didn’t they realize that they were being overcharged? The answer lies in the situation facing black Chicagoans during the post-war years. Between 1940 and 1960, Chicago’s black population almost tripled, from approximately 278,000 to 813,000. But most of this population was squeezed into the old South Side Black Belt—a neighborhood that had been severely overcrowded even before World War II. Essentially, they were trapped. Even though there were vacancies or homes for sale at decent prices in nearby white areas, black people could not get mortgages to purchase property there, no matter what their income level. Landlords in the surrounding white neighborhoods usually refused to rent to them as well. And in the 1940s and 1950s, the few black families who managed to escape the South Side ghetto and move to a less crowded white area were often attacked by their new white neighbors, who would mass in front of their home, breaking windows and shouting death threats.

At the same time, black Chicagoans in the 1950s were doing well economically. Black incomes rose nationally, but the rise was particularly pronounced in Chicago—the only city where black median income was higher was Detroit. By the 1950s, then, tens of thousands of middle-income black people were living in the grossly overcrowded South Side Black Belt, where they were forced to pay high rents for inadequate spaces. Given this context, when a contract seller offered them housing outside of the ghetto, it made sense for them to grab it. Although the prices the contract sellers charged were high, the monthly payments often weren’t that much higher than the rents black families were already paying. Given the redlining policies of the FHA, buying on contract was one of the only means of escape from the high-rent, overcrowded ghetto.

But that didn’t mean that contract sellers weren’t wreaking havoc, fomenting racial division and exploiting their black customers. Real estate speculators who sold on contract understood that there was a dual housing market in Chicago—an immense demand for housing in the black market, and—in part because some whites were moving to the suburbs—a supply of housing in the white market. That supply was also a result of the contract sellers’ “blockbusting” practices. Contract sellers would go door-to-door in white neighborhoods that were near pre-existing black neighborhoods, telling homeowners that “the blacks are coming.” If a white person’s house was worth, say, $8,000, they’d offer him $7,000—adding that if the homeowner didn’t want to sell immediately, the speculator would be back in a month, but this time would offer $6,500—and if that wasn’t adequate, he’d offer him $6,000 shortly after that. Facing this kind of pressure, the white homeowner would sell to the contract seller at $7,000—and the contract seller would then sell that same property, on contract of course, to a black buyer—often a person of middle-class income —for, say, $15,000.

But even for a middle-income person, being forced to pay double or more than a house was worth hurt. In addition to being grossly overpriced, the properties that contract sellers sold were often riddled with code violations. As a result, black families were often quickly overwhelmed by high repair costs. Some managed to make the payments and the repairs—others did not. And remember, if a contract buyer fell behind on even a single payment, he or she was out—the property reverted to the contract seller, who would then resell it to another victim.

What happened to “racially changing” areas where contract sellers were active? While contract sellers became millionaires, their harsh terms and inflated prices destroyed whole communities. Because black contract buyers knew how easily they could lose their homes, they struggled to make their inflated monthly payments. Husbands and wives both worked double shifts. They neglected basic maintenance. They subdivided their apartments, crammed in extra tenants and, when possible, charged their tenants hefty rents. Indeed, the genius of this system was that it forced black contract buyers be their own exploiters.

Feeding White Racism

The resulting decline of racially changing areas fed white racism. White people observed that their new black neighbors overcrowded and neglected their properties. Overcrowded neighborhoods meant overcrowded schools; in Chicago, officials responded by “double-shifting” the students (half attending in the morning, half in the afternoon). Children were deprived of a full day of schooling and left to fend for themselves in the after-school hours. These conditions helped fuel the rise of gangs, which in turn terrorized shop owners and residents alike.

In the end, whites fled these neighborhoods, not only because of the influx of black families, but also because they were upset about overcrowding, decaying schools and crime. They also understood that the longer they stayed, the less their property would be worth. But black contract buyers did not have the option of leaving a declining neighborhood before their properties were paid for in full—if they did, they would lose everything they’d invested in that property to date. Whites could leave— blacks had to stay.

Unfortunately, much of the popular thinking on why so many aging urban neighborhoods deteriorated once their populations shifted from white to black remains split between conservatives, who blame black people for failing to maintain their own communities, and liberals, who either blame racist whites for fleeing racially mixed neighborhoods, or who argue that black urban neighborhoods declined because of deindustrialization (the flight of industrial jobs overseas).
My father’s papers suggested an entirely different reading. The reason for the decline of many black urban neighborhoods into slums was not the absence of resources, but rather the riches that could be drawn from the seemingly poor vein of decrepit housing and hard-pressed but hard-working and ambitious African Americans. A $1,000 investment by a speculating contract seller could turn into $3,000 in one year; that investment could be multiplied by thousands across the city; and its profits could be shared widely, as the contract paper that enforced draconian monthly payments was sold at a discount to Chicago investors. The problem was not that racially changing neighborhoods were unprofitable. The problem was that the pickings were too easy, and the scale of profits too tempting, for many of the city’s prominent citizens—attorneys, bankers, realtors and politicians alike—to pass up.

My Father’s Crusade

My father’s immersion in the heartbreaking details of his clients’ lives led him to embark on an impassioned public crusade against Chicago’s real estate speculators—and against the white professionals, mortgage bankers and politicians who enabled those speculators to thrive. He gave speeches attacking exploitative contract sales, demanding, first, that the FHA insure mortgages for blacks on the same basis as they insured mortgages for whites, and second, that banks establish a fund of “at least 50 million dollars for the sole purpose of lending money” to black Chicagoans who were now forced to deal with contract sellers. He also attacked liberals who tended to psychologize the problem as simply one of white working-class racism, entirely ignoring the FHA and the actions of racist mortgage lenders. He was particularly enraged by liberals’ favorite solutions to the problem of slums and segregation – namely, urban renewal and open occupancy. As he pointed out, this agenda was dictated by savings and loan executives who “participate loudly and publicly on all forums of community improvement” while their “financial practices drive minority peoples into the hands of the speculator.”

My father’s crusade was unsuccessful. He lost many of the suits that his black clients brought against real estate speculators; the judges ruled that a contract is a contract, and if the buyer signed it, he or she was obligated to meet its terms, no matter how harsh. My father’s speeches and articles made him famous in Chicago, but they didn’t change any laws, nor did they stop the speculators from continuing to prey on black Chicagoans desperate for decent housing.

His crusade also took a personal toll. And this brings me back to the buildings—that is, to my own family’s properties. At the same time as my father was waging his crusade against speculators and contract sellers, he was also managing his own properties, four West Side apartment buildings he had purchased in the 1940s and 1950s.

The neighborhood where his properties were located contained perhaps the highest concentration of over-priced contract sales in the city. As my father urged others to protect their investments, his own deteriorated. He understood that once a community reached a certain level of decay, there was little an individual could do to save his property. He understood, but he was powerless to stop it. He poured his money into maintaining his buildings, but eventually it became nearly impossible to find either honest building managers or responsible tenants. His building managers stole from him. Some of the tenants they let in refused to pay rent; some severely vandalized the property. The repair bills grew higher until they wiped him out financially.

As the bills and the pressures mounted, the end result, as my brother David later told me, was that my father was “caught in his own trap.” All of his buildings were in Lawndale, an area which had been heavily Jewish (my father was born and raised there), but which was rapidly becoming black. When he rented to black tenants, he was called a “blockbuster.” If he were to refuse to rent to them, he would be a racist. Given his public posture, my father could not sell his buildings as blacks were beginning to move in; that would make him a hypocrite. If he sold after the neighborhood had become all- black, he’d find no buyers except the speculators he was denouncing. Of course he would not participate in the plunder engaged in by these men and women. He decided to hold on and try his hardest to maintain his properties while the surrounding area crumbled. But if his efforts to maintain them failed, then he was a slumlord. If tenants damaged the buildings, he would be called a slumlord as well.

Unacceptable Choices

What all this shows is that just as black people who wanted to leave the Black Belt had few choices, so did those white people who wanted to stay in nearby urban neighborhoods— neighborhoods to which many felt a profound personal attachment. In this sense, although the ironies were greater, my father’s situation was no different from that of any other white resident or landlord in a “changing” urban neighborhood. Their choices were: 1) to become contract sellers themselves, enriching themselves and destroying their former communities; 2) to sell their property to a real estate speculator (once even a few black people moved to the neighborhood, no one else was buying aside from speculators); or 3) to try to “do the right thing”—that is, do what the liberals were preaching and stay in the neighborhood. But more often than not that meant to watch as one’s neighborhood became overcrowded, neglected and crime-ridden, and to watch in horror as one’s property declined dramatically in value—until, defeated at last, the remaining whites exercised the one option that many of their black neighbors did not have—the option to leave.

My father died before he had to face this final indignity of selling his properties for nothing, but in the final months of his life, he suffered because of his powerlessness. There are lines from Herman Melville’s novel Pierre that perfectly express the tragedy of my father’s final year. Melville wrote that “in tremendous extremities human souls are like drowning men; well enough they know they are in peril; well enough they know the causes of that peril; —nevertheless, the sea is the sea, and these drowning men do drown.”

I thought that my father’s untimely death was also the tragic end of the story of exploitative contract selling in Chicago; he died—his properties were sold to the speculators he’d devoted his career to fighting—and we, his family, were left with nothing.

Contract Buyers League

Luckily, my belief that my father’s death was the end of the story was wrong. And here’s how I found that out. In the course of researching my father’s story, I was told that if I was wanted to know anything about race and housing in Chicago, the person to contact was Monsignor John J. Egan. When I finally reached Egan, he told me that he’d known my father, and that after my father’s death, he and Jesuit seminarian Jack Macnamara had picked up the struggle against contract sales. Next I called Macnamara. He told me that late in 1967, he had helped launch a group called the Contract Buyers League. He said that the group, which was based in my father’s former neighborhood of Lawndale, grew to encompass 3,000 African-American families that had purchased homes on contract.

Led by Clyde Ross, Charlie Baker, Ruth Wells and Henrietta Banks—all West Side, African-American contract buyers—the Contract Buyers League used tried-and-true community organizing to mobilize Lawndale. First they went door-to-door to inform and unite the community. Next they picketed contract sellers to demand a renegotiation of their exploitative contracts. When that didn’t work, they went on a payment strike. The payment strike led to mass eviction orders, sometimes encompassing the residents of entire blocks. They fought the evictions in court, eventually winning changes to Illinois’ eviction statute, which had been heavily weighted in the landlords’ favor.

The Contract Buyers League also initiated two massive federal lawsuits against the contract sellers and the savings and loans that had funded them. The League’s attorneys drew upon the Supreme Court’s 1968 ruling Jones v. Mayer, which stated that racial discrimination that “herds men into ghettos and makes their ability to buy property turn on the color of their skin” was a “relic of slavery” that had been outlawed by the Thirteenth Amendment. Indeed, the Court wrote, that amendment would be “ ‘a mere paper guarantee’ if Congress were powerless to assure that a dollar in the hands of a Negro will purchase the same thing as a dollar in the hands of a white man.” The ruling could be applied to the actions of the contract sellers, who, the League argued, had exploited residential segregation and the resulting black housing shortage for their own financial gain. By entrapping black buyers in contracts that gave them no equity in their grossly overpriced properties until the entire price had been paid, they had extracted a “race tax” from the contract buyers, essentially devaluing their purchasing power—a direct contravention of Jones v. Mayer.

The courtroom battle against the contract sellers took twelve years to conclude. It played out against a backdrop of community and political battles that ultimately shaped its outcome. In the interests of suspense, I will leave the suits’ final conclusion to those who read my book. I will say that the ultimate result of the League’s battles was the passage of two hugely important pieces of federal legislation, the Home Mortgage Disclosure Act (1975) and the Community Reinvestment Act (1977). Many hail the importance of these acts, but my book is the first to uncover the decades of struggle that culminated in their passage.

* * * * *

My book challenges basic assumptions about race and inequality. The rapid decline of changing neighborhoods was not the result of a black “culture of poverty”; nor could it be laid to racist whites who fled their neighborhoods at the first sight of a black face. African Americans who migrated from the South after World War II were not “poor people”; they were people who were made poor in the North by white professionals who used their expertise to fleece them. The American dream of a family property was not fair and open to all—it was a rigged system that lifted many whites while impoverishing many blacks. Yet as today’s headlines show, the scams that typified contract selling—extremely high-cost loans with hidden fees that practically ensured eventual foreclosure—have now ensnared millions of Americans of all races and backgrounds. When I started this book, I thought it would be one that Americans should read to understand our country’s bitter recent history. Now it is also a book they must read to understand its present crisis.

Beryl Satter is Associate Professor of History at Rutgers-Newark. She prepared this précis from her book cited in the opening sentence, with permission from Metropolitan Books, an imprint of Henry Holt & Co., LLC. All rights reserved. Copyrights © Beryl Satter.

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