The Color of Law: A Forgotten History of How Our Government Segregated America

by Richard Rothstein

IN ONE respect, however, the FHA’s theories about property values could become self-fulfilling. An African American influx could reduce a neighborhood’s home prices as a direct result of FHA policy. The inability of African American families to obtain mortgages for suburban dwellings created opportunities for speculators and real estate agents to collude in blockbusting. Practiced across the country as it had been in East Palo Alto, blockbusting was a scheme in which speculators bought properties in borderline black-white areas; rented or sold them to African American families at above-market prices; persuaded white families residing in these areas that their neighborhoods were turning into African American slums and that values would soon fall precipitously; and then purchased the panicked whites’ homes for less than their worth. Blockbusters’ tactics included hiring African American women to push carriages with their babies through white neighborhoods, hiring African American men to drive cars with radios blasting through white neighborhoods, paying African American men to accompany agents knocking on doors to see if homes were for sale, or making random telephone calls to residents of white neighborhoods and asking to speak to someone with a stereotypically African American name like “Johnnie Mae.” Speculators also took out real estate advertisements in African American newspapers, even if the featured properties were not for sale. The ads’ purpose was to attract potent...

The full cycle went like this: when a neighborhood first integrated, property values increased because of African Americans’ need to pay higher prices for homes than whites. But then property values fell once speculators had panicked enough white homeowners into selling at deep discounts. Falling sale prices in neighborhoods where blockbusters created white panic was deemed as proof by the FHA that property values would decline if African Americans moved in. But if the agency had not adopted a discriminatory and unconstitutional racial policy, African Americans would have been able, like whites, to locate throughout metropolitan areas rather than attempting to establish presence in only a few blockbusted communities, and speculators would not have been able to prey on white fears that their neighborhoods would soon turn from all white to all black.