After Redlining

The Urban Reinvestment Movement in the Era of Financial Deregulation

Rebecca K. Marchiel

• Publisher: University of Chicago Press
• Year: 2020
• Print ISBN: 9780226815862, 9780226723648
• eBook ISBN: 9780226723785
• Topic: History
• Subtopic: Real Estate
• Index: History

Focusing on Chicago's West Side, After Redlining illuminates how urban activists were able to change banks' behavior to support investment in communities that they had once abandoned.

American banks, to their eternal discredit, long played a key role in disenfranchising nonwhite urbanites and, through redlining, blighting the very city neighborhoods that needed the most investment. Banks long showed little compunction in aiding and abetting blockbusting, discrimination, and outright theft from nonwhites. They denied funds to entire neighborhoods or actively exploited them, to the benefit of suburban whites—an economic white flight to sharpen the pain caused by the demographic one.

And yet, the dynamic between banks and urban communities was not static, and positive urban development, supported by banks, became possible. In After Redlining, Rebecca K. Marchiel illuminates how, exactly, urban activists were able to change some banks' behavior to support investment in communities that they had once abandoned. The leading activists arose in an area hit hard by banks' discriminatory actions and politics: Chicago's West Side. A multiracial coalition of low- and moderate-income city residents, this Saul Alinsky–inspired group championed urban reinvestment. And amazingly, it worked: their efforts inspired national action, culminating in the federal Home Mortgage Disclosure Act and the Community Reinvestment Act.
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While the battle for urban equity goes on, After Redlining provides a blueprint of hope.

CHAPTER ONE

Beyond the Backlash

Organizing against Real Estate Abuse in a “Transitional” Urban Neighborhood

In 1971, a young white couple met with a real estate agent to discuss selling their home in Austin, a neighborhood on Chicago’s West Side. Austin’s population was 99 percent white at the time of the 1960 census, but black families had recently begun moving in. The real estate dealer assumed that the couple had requested the meeting because they wanted to leave Austin, as many of their white neighbors had in recent months. As he took a seat at their kitchen table, he praised their decision. “By the grace of God, you are making the greatest move in the world,” he said. “Their living habits are completely different than ours.” Black people “don’t live or act or even think like we do.” He went on to call Austin’s black newcomers “orangutans” and “apes” and sneered that they “cook in the bathtub.”1

Little did the agent know that the couple did not share his opinions about their new black neighbors, nor did they actually plan to move. As members of the Organization for a Better Austin (OBA), they had been working with community organizer Gale Cincotta to build an interracial neighborhood group to combat agents like him. Their guest had no idea that the kitchen meeting was a sting operation. A hidden tape recorder captured his sales pitch, providing evidence that the man instigated fear about the arrival of black neighbors in Austin. The Chicago activists had a name for agents like him: “panic peddlers,” real estate speculators who scared whites into selling their homes at undervalued prices, charged black families exorbitant rates for those homes, and reaped enormous profits in the process. The OBA members sent the tape to the Chicago Tribune, and the paper ran three full pages of its transcript.2

The members of OBA reflected a larger trend in the 1960s wherein residents bridged racial and homeowner-renter divisions in an effort to wrest control of their neighborhoods’ fates from powerful people and institutions who had written them off or, worse, exploited their alleged declines for profit. In “transitional” urban neighborhoods that had begun to integrate, powerful people with money to make shaped the possibilities and limitations for their neighborhoods’ futures. Real estate agents stoked fear that black residents would bring down property values, turning panic into quick money as they bought low from white sellers and sold high to black buyers. At the same time, residents of Austin and other transitional neighborhoods around the country also felt that their city governments had abandoned them, as many local governments reduced trash pickup or failed to allocate new resources to overcrowded schools. City officials often flagged these same communities for small-scale urban renewal projects, where cleared lots might sit vacant for months or years before new structures went up, leaving eyesores that added to the perception of neighborhood decline. In transitional neighborhoods like Austin, many residents had an overwhelming sense that something was being done to them, without their input, making it hard to envision a future for themselves in the communities they called home. The desire to gain control drove many to action.

As OBA’s activism suggests, transitional urban neighborhoods created conditions ripe for the development of a political worldview that united a neighborhood’s residents around their shared interest in their neighborhood’s future. Historians have shown that “transitional” neighborhoods across the country became seedbeds for the politics of racial backlash, as many white homeowners “defended” their neighborhoods from integration, conflating white racial exclusivity with high property values.3 But as OBA’s efforts reveal, the politics of white homeowners were only one option among many available to urbanites as their neighborhoods were in flux. Others embraced a kind of social democratic populism that challenged the logic of free markets in the realm of urban home financing and that aimed to make housing markets more fair than free. These urbanites drew heavily from the playbook of Saul Alinsky, a political theorist whose school of community organizing brought the methods of organized labor out of the workplace and into communities.4 The Alinsky method provided urbanites a framework for analyzing neighborhood problems in terms of power relations, rather than racial difference.

Most important for the trajectory of the urban reinvestment movement, activists in transitional neighborhoods like Austin identified the people and institutions who shaped real estate markets as manipulating transitional housing markets for their own profit. Members rejected the imperatives of what real estate agents claimed was a race-neutral market based on supply and demand, instead charging that panic peddlers exploited both buyers and sellers in a dual housing market that was entirely color conscious. They challenged “slum landlords” whose unwillingness to maintain their properties hurt not only their tenants but also the whole neighborhood as deteriorating buildings further incited panic. They also chastised their local savings and loan institutions for refusing to grant mortgages in the neighborhood when it began to integrate. Their attempt to create an integrated Austin ultimately failed, but their efforts mattered for other reasons and had national implications. Their organizing laid the groundwork for the urban reinvestment movement, a collective, sustained effort at the national level whose members sought to redirect public and private resources to end the inequities that real estate abuse helped to create.

Community Organizing to Manage Integration

Before Austin was a hotbed of real estate protest, it was an all-white community with a mix of homeowners and renters. Chicagoans talked about the neighborhood as one entity, but with two populations divided, north from south, by its major artery, Lake Street. North Austin’s bungalows and small-frame single-family homes gave the area above Lake Street a suburban feel. Its historic Midway Park subneighborhood boasted majestic nineteenth-century homes, as well as several structures designed by Frank Lloyd Wright and his students. It also included a golf course and several manicured parks. Homeowners and renters mixed in South Austin, on the other side of Lake Street, where row houses, brick two- and three-flats, and corner apartment buildings lined the streets. But locals often flattened these north-south distinctions when referring to Austin in general. So did the city’s demographers, when they counted residents on both sides of Lake Street as part of the Austin “community area.” The neighborhood had a reputation as a “city within a city” and a “posh” place to live in the early 1960s.5 “It was a place where you didn’t go shopping unless you wore a hat and gloves,” recalled one longtime resident.6

By the mid-1960s, Austin was the last all-white neighborhood on Chicago’s West Side, but it seemed it wouldn’t remain so for much longer.7 “We knew that transition was going to start coming,” OBA member Mary Volpe recalled. “In cities like Chicago, you can tell where the transition’s going to be” based on the trends visible to local people.8 White Austinites described a sense of creeping racial change with reference to the specific streets that served as the neighborhood’s racial boundaries. Cicero Avenue seemed impenetrable during the mid-1960s because, as OBA member Ed Bailey put it, locals assumed that the white homeowners west of Cicero would “resist” new black residents. Bailey, one of the first black homebuyers on his block, recalled the “rumor” he heard “when one or two families moved in across on the west side of Cicero.” The sense in the neighborhood was “Well, the blacks done broke the barrier,” he said, “and that started the whole stampede of whites moving out and blacks moving in.”9

The “transition” of racial change came late to Austin, and the timing mattered because Austin’s residents had already witnessed other Chicago neighborhoods undergo racial change. As historian Amanda Seligman has shown, the West Side had a “block by block” pattern of racial change that began in the southeast corner of the area and moved northwest toward Austin, at Chicago’s westernmost boundary.10 Black southerners moved in great numbers to northern cities in the wake of World War II. In Chicago, real estate agents “steered” new arrivals only to blocks where other black families already lived, or to the blocks just adjacent. Black residents first moved to the neighborhoods east of Austin: East Garfield Park, then North Lawndale, and finally West Garfield Park, which shared a border with southeast Austin. These neighborhoods never actually integrated, however. Instead, most whites fled, and the demographic shifts were dramatic. North Lawndale, for example, jumped from less than 1 percent black in 1940 to 91 percent black in 1960, and 96 percent in 1970.11 With other West Side neighborhoods showing similar trends, observers noted that the end point of block-by-block racial change was “resegregation”—a nearly complete turnover from a white block to a black block. “The history of racially changing communities,” a local journalist said, “bears out the grim fact” that racial change “breeds not integration but resegregation.”12

Most white West Siders identified panic peddlers, or “blockbusters,” as the primary agents that ensured that so-called racial transition ended in resegregation. By the time Austin began to integrate, as Seligman has shown, real estate dealers had a well-established process for changing the racial composition of resident blocks in Chicago.13 They combed one small area at a time in search of anxious white homeowners, stoking fears that black residents would soon be moving in. Some whites sold because they refused to live near black neighbors. Others sold because they thought the presence of black residents would make their property values decline. Many whites accepted low offers on their homes based on a perception that the longer they waited to sell, the lower their property values would fall.14 With the titles in hand, panic peddlers sold those homes to black families, whom they could charge more owing to the “dual housing market.” In the block-by-block pattern of racial change, black buyers could only purchase homes in area that had already been “busted.” This racial steering in the real estate market created a smaller supply of available homes for black people, thus driving housing prices up. As a result, a black family paid the panic peddler much more to purchase a home than the white family who previously owned it had received for the sale. Real estate agents reaped enormous profits in these deals, at times selling a home for more than twice what they paid for it.15

In many ways, Chicago’s Austin was not a unique neighborhood in the 1960s United States. At the same time Mary Volpe and Ed Bailey discussed Austin’s future as a transitional urban neighborhood, other residents in other cities had similar conversations. In Buckeye-Woodland, a Hungarian neighborhood on Cleveland’s East Side, white residents believed their community would soon “transition” based on their city’s trends.16 In northeast Baltimore, white neighbors assumed the same. Indeed, in the mid-1960s, nearly every older industrial city in the Frost Belt corridor had at least one white neighborhood, if not several, that locals believed was on the verge of racial change: the northwest Bronx in New York City, a stretch of Michigan Avenue in Detroit, Jamaica Plain in Boston, Bond Hill in Cincinnati, Federal Hill in Providence, a North Side neighborhood in Wilmington, a South Side neighborhood in Minneapolis. The list went on and on. In these places, which occupied both a spatial and an imagined middle ground between the suburbs and the “inner city,” conditions were ripe for the white racial backlash that historians have documented in neighborhoods in Detroit, Boston, and more. But conditions were also ripe for other responses—for democratic experiments in integration, for interracial community organizations, for creative solutions to combat real estate abuse. Indeed, white racial backlash to black in-migration was not predetermined. Rather, the way that whites responded to racial change was shaped by the specific people and specific ideas that gained the power to define neighborhood problems in their specific communities. In other words, white responses hinged on the options in front of them. And at a time when the movement for black freedom gained achieved its most visible national victories, some urban whites embraced the vision of black and white Chicagoans living together in neighborhoods like Austin not only as a pragmatic option that allowed whites to stay put, but also as the only moral option in a racist society.17

So when blockbusting panic peddlers appeared in such neighborhoods in the mid-1960s, white residents faced a choice. They could move to another all-white community, which many did. Between 1950 and 1960, over 399,000 whites in Chicago alone fled to nearby suburbs. Alternatively, whites could resist the arrival of black families, which many also did. In nearby West Garfield Park, that choice took the form of a homeowners’ rights organization called the United Property Group that closed ranks against black newcomers in the name of protecting property values. Several went so far as to target black families with violence, “firebomb[ing] a black family’s home” in one case and hanging an effigy on a black family’s porch in another. But still another option was stay in their neighborhoods and live among new black neighbors. Whites made their choices by weighing circumstances specific to their households—the cost of buying a new home versus paying down an existing mortgage, ties to the neighborhood church, proximity to friends and family—but within the larger context of the dominant assumption among whites that racial integration drove down property values. Many of these choices were discussed in private conversations that have been lost to the historical record. But some whites had these conversations in public. And in some of these older urban neighborhoods, residents left a paper trail that provides a glimpse into one way that “transitional” communities responded to racial change, which would soon reshape national conversations about the relationships among race, risk, and neighborhood in urban real estate markets. They worked across racial lines to form community organizations that fought real estate abuse instead of their new neighbors.18

The Austin priest Monsignor John E. Egan was a driving force behind the formation of OBA. He believed that community organizing could achieve what some sociologists called “managed integration.”19 He thought it would give whites an alternative to irrational fear and flight, while giving black people a vehicle for becoming part of the neighborhood and gaining a sense of belonging.20 Egan had first become interested in community organizing when he met renowned community organizer Saul Alinsky in 1954, while attending an organizer training for Chicago priests. “I was attracted to Saul,” Egan said, “because he wanted to do for people what I believed God wanted done—t...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• introduction.    Neighborhoods First
• chapter 1.    Beyond the Backlash: Organizing against Real Estate Abuse in a “Transitional” Urban Neighborhood
• chapter 2.    The FHA in the City: Red Lines and the Origins of the Urban Reinvestment Movement
• chapter 3.    It’s Our Money: Defending Financial Common Sense in a Collapsing New Deal Order
• chapter 4.    Communities Must Be Vigilant: The Financial Turn in National Urban Policy
• chapter 5.    Reinvestment for Whom? The Limits of Bank-Led Reinvestment
• chapter 6.    Let’s Make the Market Work for Us: The Lost Fight for Credit Allocation and the Rise of Community-Bank Partnerships
• conclusion
• Acknowledgments
• List of Abbreviations for Archival Collections
• Notes
• Index