The Color of Law: Chapter 6 Summary & Analysis

Rothstein recalls that the FHA’s justification for denying financing to African American people was its belief that their presence “in or near” white neighborhoods “would cause the value of the white-owned properties to decline,” and in turn threaten the FHA’s own finances by making white people default on their mortgages. The FHA had no evidence for this—it could only site one anecdotal article from the 1930s, which argued that “racial segregation must be an obvious necessity because it [is] a worldwide phenomenon.”

In Part I of this chapter, Rothstein explains that the FHA was simply wrong about black neighbors reducing white residents’ property values. First, middle-class African American people were always forced to pay more than white people for the same housing, which would have “prevented property values from falling” in itself. In fact, a federal court ruled that restrictive covenants made property values fall by preventing African American people from paying more for the same houses and increasing neighborhoods’ value. The FHA itself came to the same conclusion in 1948, as did a study of San Francisco neighborhoods in 1952.

In Part II, Rothstein notes that the FHA’s failure to insure mortgages ultimately caused the same reduction in property prices it hoped to prevent: because black families could not get mortgages, blockbusting (buying at low prices from white people and selling at high prices to middle-class African American people) became a lucrative business. Blockbusters even paid African American people to walk around white neighborhoods or pretend to be interested in buying homes, just to scare white homeowners into selling at low prices. Unable to get mortgages, African American people bought their houses on a contract system, paying monthly without gaining equity. If they could make every payment for 15-20 years, the house was theirs; but if they missed just one, they would get evicted and blockbusters could resell the house. When the FHA saw African American residents move in and then property sale prices plummet, they were seeing the effects of blockbusting, which was itself a response to housing discrimination.

In Part III, Rothstein explains how, beyond redlining, this contract sale system used by blockbusters also drove black neighborhoods to deteriorate. A historian whose attorney father defended evicted black residents explained that, since such residents “could [easily] lose their homes,” they did anything possible “to make their inflated monthly payments,” including renting out rooms and avoiding maintenance. The resulting population growth led to overcrowded schools, and in turn to crime, especially when school districts cut black students down to half days. As their neighborhoods worsened and suffered white flight, “black contract buyers did not have the option of leaving” because they needed to finish paying off their houses, lest they lose everything. To add insult to injury, the white blockbusters who sold these homes to black residents on contract often originally bought them through precisely the bank and government mortgages that African American people could not get.