D. St. Germain's Reviews > Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership

Race for Profit by Keeanga-Yamahtta Taylor
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bookshelves: housing, inequality, us-history

The private-public partnership has been a model long touted by politicians as a panacea for solving social problems without the bloat of government programs. But in Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, Keeanga-Yamahtta Taylor shows us how this model repeatedly failed black homeowners. She illuminated the low-income housing programs to encourage home ownership that enabled a new class of real estate professionals to profit off substandard housing, with the full backing of the federal government.

When housing policy shifted from building public housing to underwriting public private partnerships, she writes, “the HUD-FHA guarantee to pay lenders in full for the mortgage of any home in foreclosure transformed risk from a reason for exclusion into an incentive for inclusion.” She notes that by 1971, “federal subsidy programs were paying the real estate industry $1.4 billion a year and financing one in four new housing units produced.” In this way the shift in housing policy was a handout to the private sector while failing to regulate the activities of that sector, leading to scores of bad actors and bad outcomes for the people who fell prey to them.

Taylor brings us dozens of examples of these bad actors in practice. She writes of one study of Berkeley and Oakland, California, where “dilapidated homes were sold to low-income families for three and four times more than they were worth. The houses were “largely incapable of passing honest FHA inspection and certainly failed to meet minimum FHA standards.” In 1971, after a large outcry against the government’s failure to oversee these loans and guarantees, a study by HUD (overseen at the time by George Romney) found that eighty-eight percent of existing housing guaranteed by FHA and HUD had significant problems, while with 43 percent of new subsidized housing that had been build with federal handouts had serious defects.

The private / public model of affordable housing has at its heart a conflict of interest, and this plays out particularly along race and class lines. As the economist Paul Collier has succinctly put it, “people have two motives for buying a house. For most people it is a home; for some it is an asset.” There are fundamental mismatches in motivation between the public interest of providing housing for people and the private interest in maximizing profits from housing. As Taylor notes, the private (real estate) market tends to ignore the public call for safe and affordable housing, as the profit motive considers safe and affordable non-lucrative and thus a non-starter. But the rise of low-interest mortgage loans backed by the Federal Housing Authority (FHA) and Housing and Urban Development (HUD) created opportunities for those real estate speculators to profit from real estate sales that might otherwise be considered risky. The government diffused that risk, thus creating a moral hazard whereby real estate dealers were protected from the consequences of their actions, knowing they could be bailed out by the government.

Homeownership matters for so many reasons. It has historically been the primary way wealth is accumulated in America. Exclusionary housing practices in communities of color have ensured that intergenerational wealth created by housing has accrued primarily to white families only. As Taylor shows through careful historical analysis and reams of data that private/public partnerships have only entrenched and intensified the battle for decent housing, while making the most vulnerable evermore vulnerable. This book is a serious work of scholarship showing how the actual results of political ideas are a far cry from the reality they produce.
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Reading Progress

Finished Reading
October 10, 2019 – Shelved
October 10, 2019 – Shelved as: housing
October 10, 2019 – Shelved as: inequality
October 10, 2019 – Shelved as: us-history

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