The False Hopes of Homeownership

The American Dream of private home ownership has fueled a system that preys on Black people for profit.

Homeownership in America has long been a broken system. A decade ago it tore our economy in two and reminded us just how central a role housing plays in the nation’s racial and social inequality. Today, amid the battles for affordable housing that haunt many major cities, an attentive pedestrian in New York will find graffiti claiming, “THE RICH KILLD NYC,” stenciled onto many a public facade. The writing, quite literally, is on the walls.

Since the last recession, most studies of America’s flawed housing system—from Ta-Nehisi Coates’s “The Case for Reparations” (2014) to Richard Rothstein’s The Color of Law: A Forgotten History of How Our Government Segregated America (2017)—have focused on how the government directly segregated the country for most of the 20th century prior to the 1968 Fair Housing Act. In this narrative, the government created spatialized inequality, using devices such as zoning, redlining, urban renewal, and the disproportionate construction of public housing in Black neighborhoods.

Keeanga-Yamahtta Taylor’s latest book, Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, takes the opposite approach of this critical line. Rather than focusing on government action, Taylor examines the “free market” of real estate that came after 1968, the pivotal year when American housing policies turned to the “liberating” potential of “market forces” to combat systemic housing discrimination.

Taylor’s new and critical addition to the canon of housing-inequality scholarship illuminates how the private real estate industry, even in the era of supposed “Fair Housing,” failed Black people by preying on them for profit. It also reveals how mistaken American ideas about real estate—specifically, the idea of homeownership as a pillar of the American Dream—fueled the system that encouraged the pillaging of Black capital, while ultimately betraying the American public writ large.

Taylor’s focus on predatory market forces, and how they are actually aided by the government, reveals just how precarious the ideal of American homeownership really is. Her critical-race approach to the topic proves especially valuable to this revelation, as it underscores the embedded flaws of that ideal through the lens of the population it has least served and most subjugated since its inception.

From the onset of homeownership as the American Dream, the dream has unquestionably been a raced and classed one.

The American Dream of a home as an individualized investment, whose value derives from some mythic property tied to self-determination, is, at best, an anachronistic belief carried on from the colonial romance of self-sufficient, Jeffersonian agrarianism. At worst, such a belief is a self-righteous deception, promoted by real-estate associations and swallowed whole by early 20th-century suburbanites.

Popularizing and institutionalizing this dream has led to the erratic assumption now omnipresent: that a well-maintained home will endlessly and lucratively accumulate worth of its own accord.1 This assumption masks the cooperative action of the government labor, civic participation, and private funds that originally made (and still makes) the metropolitan spaces where a majority of our country now lives, both urban and suburban, valuable. Many nest eggs could never have been feathered without governmental provisions like highways, or state participation in the coordinated exclusion of certain populations from many suburbs and upper- and middle-class neighborhoods. Certainly, from the onset of homeownership as the American Dream—which began with the government’s backing of cheap and racially exclusive loans for suburban homes in the 1930s—the dream has unquestionably been a raced and classed one.2

Naturally, as Taylor shows, there was a conflict in the government’s attempts after 1968 to extend this dream’s ideological horizons to the communities it was fundamentally designed to exclude. This created contradictory objectives that rendered null many of the government’s post-1968 attempts to correct housing inequalities. Even while using an array of new and rather generous low-income home-buying programs, the government failed to assure fair housing. It also failed to pursue any “overall integrated strategy for urban and metropolitan development” that would reduce spatial differentiation.3 As such, Taylor shows that when the government handed the keys to “forward” progress over to private industry, it fostered “a captive market in which Blacks had to pay exorbitant costs for inferior housing.” Thus, “even when housing options began to expand for African Americans, they were constrained within the segregation paradigm.”4


Who Segregated America?

By Destin Jenkins

Taylor uses the term “predatory inclusion” to describe how Blacks were overcharged for low-quality homes in the “free” market, via the government’s discreet blessing or complete naivete about how “neutral” economic logic does not apply to American housing. After all, there can be no such neutrality within a system that has historically devalued Black life, along with the buildings that house it, and which has placed a premium on racial separation.

Taylor tracks the effects of predatory inclusion through two specific programs from the Department of Housing and Urban Development, both utilized extensively during the period from the 1968 Fair Housing Act to the 1973 moratorium on federally subsidized housing. These programs, Sections 235 and 221(d)(2), aided those affected by urban renewal and who lived in deteriorating neighborhoods (a population disproportionately urban and Black) in making housing purchases, using federally backed and discounted mortgages that sometimes came without down payments as a fulcrum.

Despite good intentions, Section 235 and Section 221(d)(2) fell short. Lack of homebuyer support or checks against private-industry abuse gave speculators carte blanche to raid public coffers.5 Investors bought up bad urban properties, overappraised them, and sold them to Black homebuyers unable to find decent conventional home loans outside the government-backed ones specific to urban properties. After the sale, investors then waited to make a killing off the defrauded homebuyer or federal insurance.6

Black families, especially Black single mothers unable to find homes available for purchase elsewhere, paid well over market value for properties “riddled with code violations, ranging from a leaking roof to a flooded basement.” These structures were frequently so rat-infested that in 1960s Chicago, as Taylor so cuttingly notes, more than 60 percent of Black children misidentified rats as teddy bears on vocabulary tests.

We may never know the complete damages wrought by the private pillaging of these government programs, given their long-lasting and poorly accounted-for local impacts. Still, Taylor sketches a rough and jarring outline of the crookery. The book shows, for example, how a single agency in New York, Dun & Bradstreet, bilked the government of $200 million “in an expansive plot” to offload 2,500 crumbling homes onto Puerto Rican and Black families at high risk of mortgage default. This case, as Taylor reminds us, was one of many. The government opened a total of four thousand such cases of system abuse in a single year (1971–72), and the prime of these programs spanned five of them.

The government has actively participated in creating and insuring virtually all differentiated real estate values.

In compiling various private housing exploitations committed in the name of the public “good” through Sections 235 and 221(d)(2), Taylor issues a direct ideological challenge to governments, especially municipal governments, that have increasingly turned over public provisions to private initiative.

This critique, as is increasingly common, grounds itself in a general naysaying against neoliberalism. Yet Taylor’s critique ultimately runs up against the limitations of this poorly defined concept. Neoliberalism, in the abstract, didn’t create the housing crisis—though it did capitalize upon it after the fact. And despite the emphasis Taylor places on private interests, government actions still form the backbone of every chapter of Race for Profit.

The segregation and racial tiering of US housing that the private industry exploited make up what Taylor calls “discriminatory differentials.” These “differentials” were not just “embedded in the US housing market based on a combination of historical and continuing practices within the real estate, housing, and banking industries,” and they did not endure merely because the federal government failed “to enact rigorous regulatory compliance with civil rights laws,” as Taylor argues. No, those “differentials” reflect how the government has actively participated in creating and insuring virtually all differentiated real estate values, including many of the discrepancies in urban and economic development that mark Black spaces from White.


Cities Run by Real Estate

By Gordon Douglas

Failing to recognize the fundamental inseparability of public and private action, especially when it comes to real estate, can obscure a major, though understated, implication of Taylor’s work. Knowing that Section 221(d)(2) and Section 235 encouraged financially unstable families to venture into the private market, then funded the general malfeasance of the private real estate market with little penalty or benefit to the public, Race for Profit calls us to question what the very idea of a “private” real estate market constitutes in the first place.

To state the point clearly: no transaction involving real estate involves a free or distinctly private market, just as it does not involve free or distinctly private actors. Even the earliest writings on capitalist political economy, like those of Adam Smith, acknowledge that land value is inevitably bound up in “the good government of the sovereign,” and deserves to be substantially taxed to compensate state labor.7

To combat housing discrimination, and to fundamentally reimagine and redress the unequal American housing system, we have to “build a theory of the State’s role in shaping and creating markets,” as economist Mariana Mazzucato recommends.8 We must account fully for how the state’s provision of infrastructure, rights of tenure, and investments into risky areas typically avoided by private investors undergird a significant proportion of differentiated property values. A penthouse in New York, for example, recently sold for a record price of $238 million, or just over $9,900 per square foot. Luxury apartments at near $10,000 per square foot do not pop up in transit-less districts with no endearing public spaces, garbage collection, or clean air and water regulations.

As with this New York apartment, the state plays an active role in the land values parlayed by private markets. By recognizing that the state makes spatial inequality in the same way that it makes real estate, we can then recognize that it ought to redistribute some of the values it has generated. Make no mistake, we should be angry about the state’s role in “discriminatory differentials” capitalized upon by private industry. But we should also see the potential to reframe the values of those differentials as unpaid wages due back to the state—call these reparations, if you will.

That these differentials still exist today is unquestionable. Homes in majority-Black neighborhoods are valued at half the price of comparable homes in majority-White neighborhoods, even when neighborhood and housing conditions are held the same. This fact has helped build and maintain the current White-Black wealth gap of 13:1.

Whether under capitalism, socialism, or neoliberalism, a bill remains to be paid. No one can argue, by any ideology, against the need to correct such an unbalanced account.

Photograph by author

Even if we reframe ideas of government compensation and involvement in terms of real estate, there still remains the question of how the government can address the joint issues of segregation and inequality that it has helped create and maintain. As Race for Profit shows, and as other scholars have argued, the solution will involve more than just promoting homeownership. Indeed, many financially unstable families, especially those who are steered to purchase homes in devalued neighborhoods, are often harmed more than helped by homeownership. In such cases, homeownership may just create the same rinse-and-repeat cycle of inequality captured in Taylor’s book.

Though the federal government has mostly dropped the ball when it comes to housing inequality, local governmental and community-based innovations in cooperative housing and other alternative forms of tenure offer starting places to look for future solutions. During the low times of the 1970s and 1980s, for instance, New York City foreshortened the penalty period of state assumption of property to one year, and seized tax-delinquent and neglected housing units before turning many of them over to residents and community organizations. Across the city, but especially in Harlem, local officials and community groups helped to organize cooperatives and community development corporations. These moves helped communities curb total abandonment and established some level of local control over dramatic changes like “gentrification” (though the term lacks specificity9) visible today.10

The distributed risk of shared ownership within limited-equity cooperative housing, as well as community land trusts and other alternative tenure forms, seem among the most promising ways to generally reconfigure programs for homeownership. (In a cooperative, for instance, you own shares in a building or group of buildings rather than a single housing unit. Further, you are involved in shared decisions and roles involving maintenance and sales usually structured to avoid speculative fluxes in prices.) These housing “third ways,” as they might be called in neoliberal discourse, may better reckon with how ownership actually works while still retaining community sovereignty. They also seem to avoid the dramatic booms and busts that characterize conventional homeownership.11

Whites, in the end, do not always “win out” when betting on American Dreamstyle housing either. The premiums they pay for homes in White neighborhoods comparable to homes in Black neighborhoods are the stuff from which speculative bubbles are built. From experience, we know that no gentle fallout follows when those bubbles built on exclusion pop.12

Race for Profit calls on us to reconsider, then, not only how real estate creates racial and economic inequalities but also how the much-shilled American Dream of homeownership is part of a system that will be, and has been, stealing value from us all. It is not a system to throw cash at. It is not a system that will be fixed by market forces or traditional, limitative-not-innovative government. It is a system that needs to be reckoned with in order to be reimagined; a system built on a dream of stuttering falsehoods that scholars like Taylor continue to question and unravel.


This article was commissioned by Max Holleranicon

  1. Economist Robert Shiller calls this phenomenon “irrational exuberance,” which describes the idea that one’s home value (and, in another case, stock values) will forever climb dramatically upward, regardless of more measurable factors like inflation, location, and changing costs associated with construction or maintenance. Robert Shiller, Irrational Exuberance (Princeton University Press, 2015).
  2. For anyone willing to debate this assertion, consider the selling points still used in suburbs, slogans like “good schools” and “quiet streets,” which usually really mean “little or diminishing Black presence.” (In some urban neighborhoods currently reinventing themselves for back-to-the-city enthusiasts, I’d argue a similar phenomenon occurs via the terms “hidden gem” and “up-and-coming.”) Most suburbs through the 1960s were filled with newly constructed homes backed by White-exclusive FHA mortgages, many built by developers who openly acknowledged their plans for racially homogenous landscapes. The failure to enforce any anti-discrimination measures prior to the Fair Housing Act ensured that, in such places, fights against school integration proved as de rigueur as strategizing over how to evade tax bills for the metropolitan centers that still fueled their economies. For a specific example of this phenomenon as it occurred in the City of Baltimore and Baltimore County, see Mark Levine, “Downtown Redevelopment as an Urban Growth Strategy: A Critical Appraisal of the Baltimore Renaissance,” Journal of Urban Affairs, vol. 9, no. 2 (1987); Joseph L. Arnold, “Suburban Growth and Municipal Annexation in Baltimore, 1745–1918,” Maryland Historical Magazine, vol. 73, no. 2 (1978); and Antero Pietila, Not in My Neighborhood: How Bigotry Shaped a Great American City (Ivan R. Dee, 2010).
  3. Lata Chatterjee, David Harvey, and Lawrence Klugman, FHA Policies and the Baltimore City Housing Market, prepared for the Department of Housing and Urban Development by the National League of Cities (1976), p. xvii.
  4. Taylor’s segregation paradigm can be explained as follows: “From the 1930s until the late 1960s, US housing policies were caught between innovation and regressive racial attitudes that produced a multitiered approach to public policy: homeownership and development for white residents, public housing or extractive and predatory tenancy for African Americans in the wake of urban renewal practices.”
  5. For Section 235 and 221(d)(2), “prospective homeowners never met or even came into contact with a government employee or staff person; their first contact for the program was either a real estate agent or mortgage banker.”
  6. In Detroit alone, the government shelled out $200–450 million in FHA insurance payouts for overinflated mortgages of properties, many of them in dire need of maintenance.
  7. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; Modern Library, 1994), p. 909. See also Henry George, Progress and Poverty (1879). George was an avowed capitalist who didn’t believe in an income tax, though he did believe in taxing the living daylights out of land value.
  8. Mariana Mazzucato, The Entrepreneurial State (Anthem, 2013), p. 8.
  9. Many discussions of gentrification drop the ball of nuance, and occasionally accuracy. For clarification on the topic, see Lance Freeman, There Goes the ’Hood: Views of Gentrification from the Ground Up (Temple University Press, 2006); Jackelyn Hwang and Robert Sampson, “Divergent Pathways of Gentrification: Racial Inequality and the Social Order of Renewal in Chicago Neighborhoods,” American Sociological Review, vol. 79, no. 4 (2014); D. W. Gibson, The Edge Becomes the Center: An Oral History of Gentrification in the Twenty-First Century (Overlook, 2015); Kelefa Sanneh, “Is Gentrification Really a Problem?” New Yorker, July 4, 2016; Quentin Brummet and David Reed, “The Effects of Gentrification on the Well-Being and Opportunity of the Original Resident Adults and Children,” Working Paper 19-30 for the Research Department of the Federal Reserve Bank of Philadelphia.
  10. See Brian Goldstein, The Roots of Urban Renaissance: Gentrification and the Struggle over Harlem (Harvard University Press, 2017).
  11. On the benefits and setups of alternative tenure forms, see James DeFilippis, Unmaking Goliath: Community Control in the Age of Global Capital (Routledge, 2004).
  12. Taylor herself brings this up in a section on “forced” integration: “There was no universal white suburban experience. In the early 1970s, white working-class suburbs continued to develop because of flight from the cities. Many of these people had been ‘block-busted’ out of their homes, which certainly stoked the animus of racial resentment. A corollary to this was a distrustful but well-justified conviction that the federal government’s policies would devalue white working-class communities further by encouraging low-income housing while offering no additional financial support and by excluding rich suburbs as sites of low-income housing. … A house was the most important asset in the lives of ordinary Americans; this fact explains, in part, the extreme reactions of most white homeowners in opposition to low-income housing, especially in white working-class suburbs. It also explains the anxious efforts of African Americans to access this social benefit.”
Featured image: Row houses, Baltimore, Maryland (2008). Photograph by Carol M. Highsmith / Library of Congress