The American Dream and the Urban Crisis

*This post is part of our roundtable on Keeanga-Yamahtta Taylor’s ‘Race for Profit’

For decades, historians have chronicled manifestations of systemic racism in the placement, quality, and value of homes accessible to Black buyers. They measure the endurance of residential discrimination in terms of reforms stalled or insufficiently implemented. In contrast, Keeanga-Yamahtta Taylor’s Race for Profit argues that reforms intended to increase Black homeownership did not fail, but were structured to offer home ownership opportunities that ultimately reinforced segregation and generated profits by compelling vulnerable buyers to shoulder the most risk. The result she calls “predatory inclusion.” Viewing reform through this lens reveals a great deal about the late-twentieth century adaptations in racial segregation, and should change the way we teach the histories of capitalism and race, cities and suburbs, housing policy, liberalism, and civil rights. 

Taylor’s accounts of Black homeowners shackled to unsound and dangerous properties by exploitative terms and sellers’ deceptions are enraging, as is an early chapter that examines the urban housing crisis of the 1960s through the scourge of rats. The fictional account of the rat terrorizing Bigger Thomas’s family in the opening pages of Native Son resonates with the real-world examples of a sleepless mother fending off the vermin that stalk her children, or the autopsy of an infant disfigured by bites (Taylor, 27-8). Such accounts, which Taylor culls from news articles, lawsuits, and the reports of public agencies illuminate the life-and-death stakes of this complex policy history.  

In the midst of the 1960s uprisings, corporate leaders surveyed their burning cities and concluded that their own viability required a partnership with the federal government to launch a concerted response to the urban crisis. In collaboration with the Johnson administration, government officials and insurance companies infused cash and innovative financing into what had been fairly marginal programs to increase low-income home ownership. Taylor focuses on the critical subsidy programs passed through successive housing acts to incorporate the private sector in meeting these homeownership goals. At the heart of her analysis are provisions such as Section 221 (Housing Act of 1954 and 1960), which insured mortgage loans for new construction and rehabilitation of moderately priced multifamily housing. Section 223 targeted housing rehabilitation in declining city neighborhoods. The Housing and Urban Development Act of 1968 more tightly enmeshed the federal government and private lenders in the financing of low-income housing. Section 235, for example, subsidized heavily reduced interest rates and aid to families whose credit would disqualify them from conventional loans. All these programs required an expansion of the quasi-public federal support system that had underwritten spectacular post-war growth of segregated suburbs. The Government National Mortgage Association (Ginnie Mae), for instance, issued the first mortgage-backed securities in the late 1960s, facilitating the secondary mortgage market that enabled lending to low-income borrowers. 

This legislation alone would have been moot without robust private sector participation. Taylor examines this dimension through life insurance trade organizations, which joined forces to create the Joint Committee on Urban Problems. JCUP persuaded hundreds of insurance corporations to invest $2 billion “in areas of ‘blight or near blight’” in 1967 and 1968, guiding other lenders into what they perceived as a troubled, but potentially lucrative market of prospective homeowners [Footnote: Taylor, 67]. Their efforts, Taylor writes, “were intended to meet the obligations that Johnson’s administration was straining to fulfill” as his control over the War on Poverty faltered and opposition to the Vietnam War imperiled his presidency. Indeed, JCUP’s mobilization of the private sector “dwarfed the $600 million Congress had allocated for the Model Cities program in 1967. In fact, it was twice as much as Congress had allocated for the original War on Poverty legislation … in 1964″ (74).  

On the surface, this all may seem like an admirable effort to extend to many poor, working, and middle-class Black homebuyers the same opportunities that had earlier been afforded to their white counterparts. But shifting so many private resources to these ends entailed a negotiation with the federal government over what kind of risk private entities were willing to assume. In the end, many of these companies shifted risk back onto borrowers and the federal government. They also used their participation as leverage to override the regulations that would have protected homebuyers and given them recourse when they were misled and outright deceived by appraisers, real estate agents, and hostile FHA employees. But the problems surpassed unethical practices—as damaging as those were. Mortgage banks, insurers, and real estate agents simply profited from short-term investment in substandard properties that did little to enhance urban communities. Their influence over the urban housing market was compounded by federal policies, local zoning ordinances, and Supreme Court decisions that permitted suburban communities to reject fair housing provisions. Taylor’s analysis of George Romney’s fraught tenure at HUD is especially illustrative of these points.  

As a result of all these factors, legislation that putatively outlawed redlining and included Black homebuyers in the American Dream, actually reinforced segregation while leaving many borrowers in worse financial straits. Taylor argues, “Redlining could only really end when there were lenders willing to extend credit to people in formerly excluded locations.” These programs promised to do just that. Yet explicit prohibitions on redlining were regularly skirted by appraisers and later reclaimed in all but name as a justifiable form of risk calculation. Deep into the 1970s, Taylor shows, appraising guides considered rising enrollments of minority children in public schools and racial and ethnic heterogeneity as proxies for risk. They advised agents to limit Black homebuyers’ options. Behind a democratization of credit in the form of subsidized mortgages came a reconfiguration of the very speculation and exploitation that had segregated the “ghetto” decades earlier. Closing fees, “fast foreclosure,” a point system that disincentivized accurate appraisal, and widespread fraud were hallmarks of “predatory inclusion.”  

Taylor reminds readers that the claims about market failures and market imperatives through which real estate is understood have been consistently honed by social and cultural commitments to racial discrimination, commitments that naturalized the forms of exclusion and inequality they produced. This is particularly evident in chapters four and five. The gears of “predatory inclusion” were lubricated by lenders’ disdain for low-income Black borrowers. HUD leadership, FHA employees, and local real estate agents deemed undeserving and “unsophisticated,” the Black women who pursued homeownership in hope of achieving stable, decent housing for their families. Agents justified coercing women into bad loans by insisting they were incapable of understanding the financing process and fortunate to land any home, no matter the cost and condition. 

Taylor’s work is primarily an account of negotiations among federal agencies, mortgage lenders, insurance companies, and real estate interests to reshape a market that putatively complied with new equal opportunity laws. The most powerful grassroots force in this story are the unnamed thousands who took to the streets during the uprisings of the 1960s, sending panicked corporate leaders into a more explicit partnership with the federal government. National civil rights organizations such as the Urban League and NAACP also sought to shape these deliberations, but they often appeared sidelined, forced to compromise in a system knotted by impenetrable tensions and contradictions (Taylor, 90). Black homebuyers courageously exposed the real estate companies and lenders who defrauded them—their testimony was key to legal victories that unraveled some predatory practices.  

But as Johnson’s domestic agenda shriveled, his relationship with insurers and bankers became increasingly one-sided. It began to seem less like a partnership as lenders leveraged their role to extract more concessions and federal agencies scrambled to chalk up loans regardless of the condition of the properties insured. Understaffing at federal agencies imperiled regulatory control. As a result, Taylor found, “the federal government welcomed the resources of private companies and their potential investment into troubled areas with open arms and few questions (75).

The work of groups such JCUP have often been dismissed as mere “riot insurance,” but Taylor’s analysis goes beyond provisional appeasement or superficial public relations. These companies may have at first perceived reforms as a concession but they soon seized them as an opportunity to commodify the urban crisis. Their actions were also framed by debates over economic development strategies: Was the best course a “nation within a nation” style consolidation of Black labor, capital, and political power? Or, as those who denounced such positions as “gilding the ghetto” argued, was it the suburban dispersal of Black residents who were crowded into troubled public housing high-rises far from the best jobs? (105-111). These disagreements overlapped with questions about whether fair housing legislation should prioritize new construction, as had been the case with post-war suburban expansion; or, rehabilitation of existing housing excluded from earlier programs and threatened by urban renewal. The collaboration between reformists and opportunists emerging from these debates may not have taken so predatory a turn had white officials, homeowners, and businesses not so thoroughly retreated from integration and strict enforcement of antidiscrimination laws. By the 1970s, however, Nixon’s ambiguous New Federalism was tilting every rightward. The debate over integrating the suburbs and reinvesting in the urban core sharpened to the point where even advocates of the most expansive vision of Black economic freedom felt forced to take sides.  

Throughout Race for Profit, Taylor questions how economic risk has been calculated and who carries the burden of that risk. If fully integrated into our understanding of the late twentieth century, her insights clarify the broader function of public-private partnerships. While these follow old and enduring patterns, nearly every presidential administration and policy trend over the past half century claims to have devised some novel pairing of the two. While corporate leaders were applauded—and ultimately compensated—for taking a chance on low-income Black homebuyers, Taylor often finds them incalcitrant. Lenders required handholding in the form of guarantees, softened regulations, activist pressure, and massive public subsidies every step of the way. It was homeowners like Annie Jeminson, deceived about the condition of the home on which she spent all her hard-earned savings, who risked and lost all they had (180,181). 

Taylor’s methodically researched and persuasive explanation of the shift from conventional redlining to predatory inclusion may prompt readers to wonder what else was possible. After all, private sector organizations like JCUP were able to raise and deploy billions on short notice during a brief moment when the urgency of the urban crisis seemed to shape every conversation on the future of U.S. cities and civil rights. At the same time, the association of Black renters and homeowners with disorder and decay—long inscribed in cultural stereotypes and written into housing policy—was often assumed even by officials who sought to end discrimination. Could other choices by the various groups described above have yielded significantly different results? Taylor suggests this could have been the case had they not so swiftly abandoned suburban integration. Perhaps federal actions could have produced more equitable results had officials been willing and properly equipped to enforce antidiscrimination laws and sound building and finance regulations.