How Good Principles Can Make Bad Rules
My former colleague, Ta-Nehisi Coates, writes that white flight was, in essence, a government policy:
It is increasingly clear to me that white flight was not a mystical process for which we have no real explanation or understanding. White flight was the policy of our federal, state and local government. That policy held that Americans should enjoy easy access to the cities via the automobile live in suburbs without black people, who by their very nature degraded property and humanity.
I wish I were exaggerating. From Beryl Satter's Family Properties:
In the 1930s, the U.S. appraisal industry opposed the "mixing" of the races, which it believed would cause "the decline of both the human race and of property values." Appraisers ensured segregation through their property rating system. They ranked properties, blocks, and even whole neighborhoods according to a descending scheme of A (green), B (blue), C (yellow), and D (red). A ratings went to properties located in "homogenous" areas--ones that (in one appraiser's words) lacked even "a single foreigner or Negro." Properties located in neighborhoods containing Jewish residents were riskier; they were marked down to a B or C. If a neighborhood had black residents it was marked as D, or red, no matter what their social class or how small a percentage of the population they made up. These neighborhoods' properties were appraised as worthless or likely to decline in value. In short, D areas were "redlined," or marked as locations in which no loans should be made for either purchasing or upgrading properties.
The FHA embraced these biases. It collected detailed maps of the present and likely future location of African Americans, and used them to determine which neighborhoods would be denied mortgage insurance. Since banks and savings and loan institutions often relied upon FHA rating maps when deciding where to grant their mortgages, the FHA's appraisal policies meant that blacks were excluded by definition from most mortgage loans.
The FHA's Underwriting Manual also praised restrictive covenants as "the surest protection against undesirable encroachment" of "inharmonious racial groups." The FHA did not simply recommend the use of restrictive covenants but often insisted upon them as a condition for granting mortgage insurance....the FHA effectively standardized and nationalized the hostile but locally variable racial biases of the private housing industry.
Ta-Nehisi goes on to detail the ways in which American housing policy in the 1930s and 1940s actively encouraged racial segregation. You should read the whole thing.
I would add one caution, however: we don't need to see this as deliberate policy. In fact, it might well be good policy gone terribly wrong when it collides with pervasive racism.
Homes in mostly black neighborhoods in the 1930s had a limited resale market among a group of people who were kept out of most of the better-paying jobs. Because the strength of the collateral is one of the best predictors of default, the FHA was probably right that lending into black neighborhoods was a relatively poor risk, even if the buyer had good credit. And that restrictive covenenants would protect the value of their collateral in white neighborhoods from the inevitable price decline that would follow if black people moved in--and most of the whites moved out.
The problem is that we don't want our government to treat the legacy of racism as a sort of natural hazard, similar to living on a flood plain. The racism that kept blacks out of good jobs and forbid them to live or eat where whites did was a terrible evil--and an evil that was, in substantial part, created and enforced by the power of the state.
We want our government to fight back against this sort of evil, not reinforce it. As it clearly did reinforce it well into the 1950s, when the difficulty of getting mortgages trapped a lot of aspiring middle class homeowners in black neighborhoods into rip-off "rent to own" deals. Decent, hard-working people were unable to get the same shot at the American dream as their white counterparts.
Why does this matter? Because it suggests more difficult arguments, and more difficult fixes. An FHA which is just refusing to lend into black neighborhoods because its staff doesn't like black people suggests some fairly simple fixes: change the rules, and replace any staffers who just don't want to lend money to members of other races. We are replacing a bad principle (black people shouldn't be allowed to live near white people) with a good one.
An FHA which is applying good principles ("be careful about collateral") to create substantively terrible rules with awful effects requires a different response. You need to have a careful conversation about why this principle is being trumped by an even more powerful principle ("don't reinforce systemic racism")--and also, to set limits on the exception. We don't want the FHA to stop worrying about collateral entirely. We just want them to avoid writing rules that reinforce a segregated economic order.
The point is that racism is not just something that bad people do from bad motives. It's a systemic issue--and if you ignore the systemic effects of your actions, you may end up perpetuating some terrible injustice.