School and housing segregation, and their detrimental effects on students, are directly linked. A report by Richard Rothstein reveals the role of the federal government in promoting housing segregation. Rothstein’s article is about Baltimore, but Chicago’s policies are similar in their racism.
- Restrictive covenants made it illegal for home-owners to sell their house to African American buyers. These were in effect in Chicago from 1916 to 1948, mostly on the south and near north sides. The Federal Housing Authority (FHA) required developers seeking its financing to include restrictive covenants in their homeowner deeds.
- The FHA also barred African Americans themselves from obtaining bank mortgages for house purchases even in suburban subdivisions which were privately financed without federal construction loan guarantees.
- Both Richard J. Daley and Richard Nixon spoke out against “forced integration” and implemented policies that created public housing only in predominantly Black neighborhoods.
Unable to get mortgages, and restricted to overcrowded neighborhoods where housing was in short supply, African Americans either rented apartments at rents considerably higher than those for similar dwellings in white neighborhoods, or bought homes on installment plans. These arrangements, known as contract sales, differed from mortgages because monthly payments were not amortized, so a single missed payment meant loss of a home, with no accumulated equity.
Because federal and city policies prevented African Americans from accumulating housing equity during the White suburban boom of the 1930’s to 1960’s, Black household wealth today is only 5 percent of White household wealth.
The legacy of segregation continues. In the period leading up to the recession of 2009, banks and other financial institutions targeted African Americans for the marketing of subprime loans. These policies were commonplace nationwide, but federal bank examiners responsible for supervising lending practices made no attempt to intervene. Subsequent foreclosures forced black homeowners back into apartments and devastated the middle class neighborhoods to which these families had moved.