Place, Exclusion and Mortgage Markets

Manuel B. Aalbers

• Publisher: Wiley-Blackwell
• Year: 2011
• Print ISBN: 9781405196581, 9781405196574
• eBook ISBN: 9781444342291
• Edition: 1
• Topic: Social Sciences
• Subtopic: Urban Sociology
• Index: Social Sciences

Utilizing research from the U.S., Italy, and the Netherlands, Place, Exclusion and Mortgage Markets presents an in depth examination of the practice of redlining and the broader implications of contemporary urban exclusion processes.

• Covers exclusion in mortgage markets in three different countries - the U.S., Italy, and the Netherlands
• Presents an interdisciplinary perspective to the practice of redlining
• Connects the literature on social exclusion and financial exclusion

Part I

The Exclusion, Urban, and Market Lenses

1

Social and Financial Exclusion

Since redlining usually hits non-whites, it is almost exclusively conceptualized as related to race. That, however, does not mean that redlining equals racial discrimination: redlining is, by definition, a geographical notion. The debate in the United States, however, has shifted from redlining to applicant-level discrimination, fueled in part by new detailed data collected by the federal government since the 1980s. Consequently, the geographical dimension in research has diminished and in the last two decades evidence has been found for racial discrimination, but hardly so for redlining. Indeed, the anti-redlining legislation – including the disclosure of mortgage data – formed a strong incentive against redlining practices (see Chapter 4).

The origin of the concept is to be found in Boston where, in the 1930s, city maps were discovered on which was indicated in red that certain neighborhoods were excluded from residential mortgages. Redlining, by its nature, hits all residents from an area, no matter what their color is. People are not only excluded on the basis of class and race, but also on the basis of place (Kasinitz 2000). Redlining is a form of place-based financial exclusion, and financial exclusion is a form of social exclusion. Although a conceptualization of redlining as a form of exclusion may seem plausible or even logical, empirical research has usually not conceptualized redlining as a form of exclusion, viewing it instead as a form of racial discrimination or as a form of rational action. Using an alternative approach I will locate the concept of redlining in the literatures on social exclusion and financial exclusion. Indeed, literatures plural because social and financial exclusion have almost exclusively been discussed as two separate entities. Most of the social exclusion literature pays no, or at best scant, attention to issues of financial exclusion. At the same time, the literature of financial exclusion includes many hints at social exclusion, at deprivation and at poverty, but in most cases with only a passing glance.

My aim in this chapter is to highlight the linkages between the two literatures and to refer to financial exclusion as a form of social exclusion, framing redlining as one particular form of financial exclusion, and therefore also of social exclusion. Since redlining hits not only the poor or the non-whites in a certain neighborhood, but also the non-poor and the whites, the problem of redlining cannot be reduced to poverty or racial discrimination, but it can be understood in terms of social exclusion. Redlining constitutes a “geography of social exclusion” (see Sibley 1995). The point is to arrive at a more comprehensive understanding of redlining. To understand redlining, we need not only to understand what is happening at the national, neighborhood, and city levels, but also to explore the functioning of mortgage markets, and the dynamics of exclusion processes, as they often – but not necessarily – reinforce one another.

This chapter will discuss the literatures on social exclusion and on financial exclusion, to examine how they work together on different scales, and to take the housing market as a relevant example of social and financial exclusion processes. Compared to the wide-ranging and voluminous literature on social exclusion, the literature on financial exclusion is rather focused and small in size. The concept of financial exclusion is a more recent addition to the social science dictionary than social exclusion, a concept which also has its roots in much older concepts such as poverty.

Social Exclusion

Concepts come and go. Sometimes they are themselves the latest fashion in social science, while new concepts try to embody the changing reality. Concepts in social science not only are influenced by academic debates, but also react to and are molded by what takes place in the political and bureaucratic arenas. The meaning of concepts often changes, and at times concepts become increasingly vague and frustrating to use. In fact, concepts in social science are value-laden and contested (Gallie 1995; Alden and Thomas 1998: 8). The concept of social exclusion is no different. First used in France, adopted by Chirac’s government in 1974, the concept traveled and became increasingly popular among academics, politicians, and bureaucrats alike. In recent years, in particular the use of the concept by the European Union and by the British government has received a great deal of attention. Many scholars attack the use of social exclusion as a concept, but just as many have embraced the concept and highlighted its usefulness in explaining and addressing exclusion processes.

It was René Lenoir, then Secrétaire d’État à l’action sociale in Chirac’s government, who in 1974 wrote Les exclus: Un français sur dix in which he identified up to 10 per cent of the French population as “the excluded.” They consisted of vulnerable groups which fell through the insurance-based social safety net; for example, single parents, people with disabilities not fully protected under social insurance principles at the time, suicidal people, the elderly poor, abused children, and substance abusers (Lenoir 1974; Silver 1994; Cannan 1997). The concept emanates from the French tradition of national integration and social solidarity. The opposite of social exclusion is “social inclusion,” with the idea of social bonds at its heart. In its French origins, exclusion refers to the rupture of the social bond (Lenoir 1974; De Haan and Maxwell 1998: 2). “Exclusion” itself is of course not a new term and was widely used in French sociology. Yet, the use of “social exclusion” as a key concept in social policy (research) was new. During the 1980s the term gained wider currency in France (C. Martin 1996). It was used to refer to various types of social disadvantage, related to a “new” set of social problems: large-scale unemployment, ghettoization, and fundamental changes in family life (Cannan 1997). While “old” poverty programs focused on the basic needs of the individual or the household, social exclusion programs focused on society and addressed the individual’s ties to society, at least in theory (De Haan 1998: 11, 14). Social exclusion as a social science concept and social exclusion as a policy concept have always been connected.

In the late 1980s and 1990s, there is what one could call the globalization, or at least the Europeanization, of the concept of social exclusion (see Levitas 1996) as the term gains use in many European countries, but also by researchers of the Global South (often Europeans) as well as by the European Union/Commission. So far, the concept has not been popularized in the US. Room (1995) has traced the development of the concept from EU anti-poverty programs. The first two (1975–80 and 1986–90) were based on the concept of poverty, but the third (1990–4) was focused on the integration of the “least privileged” and was explicitly discussed as addressing social exclusion. It was under the chairmanship of Jacques Delors, and under the influence of the French political debate, that the European Commission adopted the language of social exclusion. The EU included research on social exclusion within its Fourth Framework Research Programme, incorporating the term into the Maastricht and Amsterdam Treaties, and also in the objectives of the Structural Funds, as a commitment to combat social exclusion (Room 1999: 166). For this reason, Berghman (1995) argues that it was at the European rather than at the nation state level that the concept was promoted and operationalized. One of the reasons for this Europe-wide hospitality toward the concept was that

member states adhered to different definitions of poverty and consequently some denied that poverty was a problem within their borders. This hostility towards the idea of poverty was coupled to the enthusiasm of some member states for the notion of social exclusion. … The notion of social exclusion thus offered a way of avoiding a possible impasse by allowing member states to commit themselves to an imprecise, but nonetheless worthy-sounding, mission. (Marsh and Mullins 1998: 751)

While its relative vagueness was a key quality leading EU member states to adopt the notion, the United Kingdom embraced the concept and gave it a British twist. In the UK, the concept turned out to be a rising star, as almost no social scientist or policy-maker used it in 1990, while it was almost impossible not to use, or at least criticize, it in the year 2000. Originally the British saw the concept “as rather unhelpful, combining as it did the traditional alleged imprecision of the French social philosophical debates with echoes of earlier, discredited right-wing accounts of the ‘underclass’ ” (Room 1999: 166). In 1992, Room, who would later become one of the defenders of the concept, argued that “there cannot in any real sense be said to have been a general debate concerned with ‘social exclusion’ in the UK” (Room 1992: 33, cited in Silver 1996: 118). But the election of the new Labour government in May 1997 changed this situation:

The Prime Minister has established in Downing Street itself a Policy Unit concerned with social exclusion; the Economic and Social Research Council has established at the LSE [London School of Economics and Political Science] a high profile Centre for the Analysis of Social Exclusion; and “social exclusion” recurs as a central point of reference throughout a wide range of government policy documents. However, it remains too incoherent and confused to serve as a reference point for policy and research, despite various efforts at clarification. (Room 1999: 166–7)

Within a few years, social exclusion obtained “a virtual monopoly position in policy discourse” (Marsh and Mullins 1998: 749). As the UK took over the concept of social exclusion, the concept also changed in meaning. French solidarist connotations were replaced by British social conceptions of class-based “new” poverty; questions of solidarity and community were dropped in favor of questions of citizenship as well as racial equality (Silver 1996: 119–20). In the UK, social exclusion came to replace notions of poverty and Townsend’s (1993) relational conceptualization of poverty is almost naturally included in the UK concept of social exclusion (Levitas 1996: 7).

In effect, two different traditions provide different conceptualizations of social exclusion. The UK tradition seeks to measure and quantify the dimensions of the problem as a fundamental building block of knowledge. Counting the number of households in poverty and categorizing them is not what the French tradition focuses on, looking rather at social mechanisms, processes, and the different elements which lead to exclusion (Room 1995; see also Marsh and Mullins 1998). Castel (1991, 1995) even argues that it is not so important what people are excluded from in the first place, as it allows flexibility in thinking about a social problem. This viewpoint is heavily criticized by Martin (1996: 387) who argues that it is impossible to speak in terms of exclusion if it is unknown what one is excluded from. More generally, the literature on social exclusion suggests that we should acknowledge the multi-dimensional nature of exclusion and look at exclusions in the plural (Somerville 1998). I will return to this issue below.

The concept of social exclusion, which is more dynamic in the sense that it does not describe a condition (like poverty) but rather a process, provides an alternative (albeit a contested one). It is often confused with other concepts, such as poverty, marginalization, polarization, fragmentation, segregation, unemployment, lack of participation, deprivation, hardship, and ghettoization (Room 1995; Social Exclusion Unit 2000; Seyfang 2003: 699; Murie and Musterd 2004: 1442). It is further used as an umbrella term or catch-all term to cover a wide diversity of ideas and is therefore open to multiple interpretations (De Haan and Maxwell 1998; Ratcliffe 1998; Williams and Hubbard 2001). Like other umbrella terms, “the umbrella is open to anyone who wishes to place new meanings, or a variety of stereotypes, accusations and stigmas under it” (Gans 1996: 151). Social exclusion is also seen as a problematic term by some critics who argue that it divides society into two groups and this involves a static view of the excluded and the neglected people at the margins (Blanc 1998; Levitas 1998, 2000); as long as those at the bottom of that structure have some economic, social, or cultural functions to perform in the rest of society, they cannot be totally excluded (Gans 1995: 91–102; Gans 1996: 146). This last criticism can be countered by arguing that people can be less or more excluded or included. The umbrella problem is harder to tackle, but it can be asserted that social exclusion was meant as an umbrella term exactly because it aspired to show the multi-dimensionality of exclusion. Therefore, the “language of exclusion” provides a bridge between research traditions which have developed in their own ways and have grown apart but essentially discuss related issues, such as poverty/unemployment and spatial segregation. The idea of social exclusion has allowed researchers from different traditions to approach one another.

The concept of social exclusion is repeatedly contrasted with that of poverty. Defenders of the concept of poverty have often argued that social exclusion is a useless concept as it is not clear what is meant by it; different authors adhere to different definitions. This problem is not unique to the concept of social exclusion. Indeed, the concept of “poverty itself is a contested term, subject to many different definitions and interpretations” (De Haan and Maxwell 1998: 4) and “overloaded with value judgements and prescriptive meanings” (Kazepov and Zajczyk 1997: 151). As Baulch (1996: 2) notes, poverty is “a portmanteau term which has different meanings to different people.” For some, poverty is simply about levels of income; for others, it is about much wider concepts like well-being, security, autonomy, and self-esteem (see Chambers 1997). Critics then argue that social exclusion in its dominant form becomes similar to the concept of “new poverty,” a concept which, like social exclusion, encompasses multi-dimensionality and focuses at least as much on processes as on outcomes. Contrary to new poverty, social exclusion puts institutional processes at the heart of the debate (De Haan and Maxwell 1998); and more than new poverty, social exclusion goes beyond simplified understandings of inequality as low income, by addressing the multiple dimensions of inequality and deprivation. One could argue that poverty is an important and a possible, but not a necessary, ingredient of social exclusion. Social exclusion deals with relational issues; that is, social participation, lack of social integration, and lack of power (Room 1995: 105; Murie and Musterd 2004: 1441; Kesteloot, Murie, and Musterd 2006), also further referring to health, housing, education, and training. The focus on processes and institutions becomes clear in Berghman’s (1995: 19) definition of social exclusion as a failure of one or more of the following systems: the democratic and legal system, for not promoting civic integration; the labor market, for not promoting economic integration; the welfare state system, for not promoting what might be called social integration; and the family and community system, for not promoting interpersonal integration. In addition, Berghman (1995: 21) argues that “income poor” and “multiply deprived” do overlap but are not identical as poverty can be an atypical and temporary position for some households (e.g., students, people changing jobs). Poor people neither are necessarily multiply deprived individuals nor necessarily lack social integration. However, the border between the concepts of poverty and social exclusion should not be drawn too rigidly. The rigid distinction, which is sometimes made, can be misleading given the breadth of thinking within both literatures (Walker 1997; Marsh and Mullins 1998: 752).

Some critics also argue that social exclusion echoes the idea of an underclass (Myrdal 1962) or a culture of poverty (Lewis 1968), two heavily criticized concepts (e.g., Gans 1996). De Haan (1998: 14) argues that some definitions of social exclusion suggest that the poor are permanently excluded, and that French social exclusion policies are built on the fear that a permanent underclass may be formed. Defenders of the concept of social exclusion have argued that social exclusion is fundamentally different from the concepts of underclass and culture of poverty. Rather than “blaming the victim” or proposing cultural explanations, the idea of social exclusion hinges upon more structural, institutional explanations (Marsh and Mullins 1998: 753) and on issues of participation, redistribution, and rights (Murie and Musterd 2004: 1441). In a reply to the social exclusion critics, Room (1999) admits that some branches of the social exclusion literature are too close to cultural and “blaming the victim” approaches (see also Peace 2001), but he also contends that there is a larger part of the social exclusion literature which does show the added value of the concept. He distinguishes between five different elements, four of which are discussed here,¹ that signify a shift to social exclusion and argues that “none of these elements is sufficient by itself to justify the scholarly and political interest that the notion of social exclusion has generated, although together they probably can. None is so novel as to render irrelevant previous research into poverty. Nor does the notion of social exclusion provide some wondrous new approach as far as policy is concerned” (Room 1999: 171). The four elements in Room’s (1999; see also De Haan 1998) reconfiguration are:

1 A shift from financial to multi-dimensional disadvantage: “Financial indicators such as low income are insufficient as providers for general hardship: multi-dimensional indicators are needed, directly revealing different aspects of disadvantage. It is important … to disentangle different elements of hardship and to identify their interrelationships” (Room 1999: 167). In other words, a social exclusion framework “goes beyond the analysis of resource allocation mechanisms. And includes power relations, agency, culture and social identity” (De Haan 1998: 12).

2 A shift from a static to a dynamic analysis: “It is not enough to count the numbers and describe the characteristics of those who are disadvantaged; it is also necessary to identify the factors which can trigger entry or exit from this situation and to understand how the duration of disadvantage shapes how it is experienced and what are its consequences” (Room 1999: 168).

3 A shift from a focus on the resources of the individual or household to a concern also with those of the local community.

4 A shift from distributional to relational dimensions of stratification and disadvantage: “The notion of poverty is primarily focused upon distributional issues: the lack of resources at the disposal of an individual or a household. In contrast, notions such as social exclusion focus primarily on relational issues: in other words, inadequate social participation, lack of social integration and lack of power. Relational approaches also tend to stress the role of the welfare state and welfare state bureaucrats in supporting or, to the contrary, disempowering people more than the distributional approach” (Room 1999: 171).

Combining the second and the fourth, social exclusion “refers to processes, to the mechanisms by which people are excluded. The focus [is] on the institutions that enable and constrain human interaction” (De Haan ...

Table of contents

• Cover
• Series page
• Title page
• Copyright page
• List of Illustrations
• Series Editors’ Preface
• Preface and Acknowledgments
• Introduction
• Part I: The Exclusion, Urban, and Market Lenses
• Part II: Redlining Research in the United States, Italy, and the Netherlands
• Part III: Conclusions
• References
• Index