Emergence of Exploitative Contract Selling, Part 2: Restrictive Covenants and Real Estate Boards

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Restrictive covenants for neighborhoods have been around for a long time in this country, and in fact, still exist today.  They are essentially rules put in place that are tied to the deed or title of a property so that a level of coherency within a neighborhood, subdivision, or street can be maintained.  The premise being that this approach preserves or increases property values for the individual homeowners.  Examples of covenants might be limits on the acceptable range of colors someone can paint their house, or whether a basketball hoop can be placed on a driveway.  However, restrictive covenants have not always been associated with such benign neighborhood preferences.  There was a time when restrictive covenants were commonly used to expressly deny certain racial or ethnic groups from living in certain neighborhoods.  The pervasiveness of this in Chicago was evident in the fact that by the 1940’s about half of the city’s neighborhoods had racial deed restrictions in place. 1

 The restrictive covenants adopted by various neighborhoods to keep blacks from moving in were also buttressed by local real estate boards.  The onset of World War I ushered in the Great Migration.  It was during this time that thousands of African Americans were moving to Chicago, as well as other northern industrial-based cities, from the rural south in search of labor opportunities.  In response to the housing pressures created by the huge influx of new residents to the city, the Chicago Real Estate Board (CREB) in 1917, appointed a Special Committee on Negro Housing to make recommendations.  What they came up with was “a policy of block-by-block racial segregation, carefully controlled so that ‘each block shall be filled solidly and. . . further expansion shall be confined to contiguous block.’” 2  

 Additionally, the National Association of Real Estate Board’s (NAREB) Code of Ethics, contained the following,  “A realtor should never be instrumental in introducing into a neighborhood. . .  members of any race or nationality or any individual whose presence would be clearly detrimental to property values in that neighborhood.” 3

 In 1948 the Supreme Court ruled on a case specific to racially-based restrictive covenants.  The court ruled in Shelley vs Kraemer that courts could not uphold those covenants because they violated the Fourteenth Amendment’s Equal Protection Clause.  In response to the court ruling, the  NAREB subsequently revised its Code of Ethics in 1950 to remove the reference to race or nationality,  “A realtor should not be instrumental in introducing into a neighborhood a character of property or use which will clearly be detrimental to property values in that neighborhood.”  This would seem to have set the stage for an opening up of the housing market to blacks, however, this token revision really only veiled the real estate industry’s inclination to continue business as usual.

Emergence of Exploitative Contract Selling, Part 1: An Introduction

Emergence of Exploitative Contract Selling, Part 3: The Federal Housing Administration

Emergence of Exploitative Contract Selling, Part 4: The Fair Housing Act of 1968 and the Community Reinvestment Act of 1977

1 Plotkin, “Deeds of Mistrust” 266-67. Also see Satter, “Family Properties” 40-41.
2 http://www.wikitree.com/articles/Daley/racism.htm 
3 McPherson, “‘In My Father’s House There Are Many Mansions—and I’m Going to Get Me Some of Them Too’: The Story of the Contract Buyers League.” The Atlantic Monthly Apr. 1972: 52.