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

Tuesday, June 11, 2013

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

The Fair Housing Act of 1968 and the Community Reinvestment Act of 1977 are two key acts of federal legislation that were passed to combat various discriminatory housing practices around the country.

The Fair Housing Act of 1968, also known as Title VIII of the Civil Rights Act of 1968, was signed into law by President Lyndon B. Johnson on April 11, 1968, one week after the assassination of Martin Luther King, Jr. It was the final piece of Civil Rights legislation in the 1960s, and came from the recommendations of the Kerner Commission, which stated that residential segregation was the primary cause for urban unrest, only after the rioting following Martin Luther King’s assassination.1 The Fair Housing Act made illegal the discriminatory practices of redlining, racial covenants, and blockbusting that resulted in segregation. It prohibits discrimination in the sale and rental of housing by landlords, real estate companies, banks, lending institutions, and insurance companies on the basis of race, color, religion, or national origin. Sex, disability, and familial status were included in later amendments.2 The Civil Rights Act of 1866 had prohibited discrimination in housing, but there were no enforcement provisions until 1968 with the creation of HUD’s Office of Fair Housing and Equal Opportunity.3

The Community Reinvestment Act of 1977 was passed to ensure banks make credit available to all parts of the communities they serve, including low- to moderate-income, and minority communities.4 Banks would accept deposits from African Americans, but then refused to extend credit to those families because they were in "redlined" neighborhoods. The CRA was passed to promote banking services in these communities and to move private funds back into urban neighborhoods. Gale Cincotta, of Chicago’s National People’s Action, led the fight to pass the CRA through Congress and enforce it.5 The Home Mortgage Disclosure Act of 1975 was passed to collect data and ensure disclosure, and the CRA was passed to use that data to implement policy. The two were meant to work together. It was Gale Cincotta’s belief and efforts to get these acts of legislation passed to improve the lending conditions in urban neighborhoods.

Emergence of Exploitative Contract Selling, Part 1: An Introduction

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

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

1 “Kerner Report”. Wikipedia.
2 “1968: Federal Fair Housing Act”. bostonfairhousing.org.
3 “The Fair Housing Act of 1968”. legal-dictionary.thefreedictionary.com.
4 “Community Reinvestment Act (CRA)”. occ.gov.
5 “Community Reinvestment Act”. Wikipedia.

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Background Information

Historic Lawndale

North Lawndale, having transitioned from a largely Italian and Irish based population at its inception in the mid 1800s, emerged as a community largely dominated by a Bohemian and, nominally, Catholic population, particularly in the south end of the neighborhood. In the early 1900s, Lawndale transitioned again, rapidly becoming the third largest Jewish community in the world after Warsaw, Poland and New York City.

The strong Jewish presence began to animate much of the personality and architectural character of the neighborhood, with residents as notable as Golda Meir and Benny Goodman, and an architectural landscape with the largest concentrations of synagogues in the country and some of the first large theaters in the country. The industrial infrastructure was second-to-none and included Sears Roebuck and Co. and Western Electric. Following World War II, the neighborhood began a slow, then rapid transition to become the first African-American community on Chicago's west side. Notable residents included Dinah Washington and Dr. Martin Luther King, Jr.

Homebuyers

The Contract Buyers League consisted of working class African Americans who had arrived to Lawndale from the overpopulated black-belt on Chicago's south side in search of available housing. These same families had previously arrived to the south side from the segregated American South after World War I in search of industrial labor opportunities.

Exploitative Contract Selling

In racially changing neighborhoods across America, federally insured mortgages were unavailable, which left no other option than contract buying as a home purchasing method. The speculative sellers preyed on white homeowner's fears of plummeting real estate values associated with racially changing neighborhoods. The sellers bought homes from those white residents for well below-market value, and in turn sold those homes on contract to black homebuyers at highly inflated values. The terms of these contracts included maximum interest rates, all maintenance responsibilities, and the eviction of homeowners with total loss of investment for failure to pay at any time. Essentially, these contracts denied buyers the benefits traditionally associated with home ownership.

Collective Protest

When the contract buyers realized the unfairness of their home purchase, they attempted to renegotiate with their seller. This was essentially a case-by-case scenario. However, when only a few of these attempts resulted in re-negotiation, the CBL formed and began to picket the offices and homes of sellers, handed out pamphlets and flyers to the neighbors of sellers, filed a series of class-action lawsuits, collectively withheld payments, and resisted and dismissed eviction efforts.

CBL Legacy

The effects of the CBL had and continues to have both local and national implications. Nationally, these efforts gained an audience beyond North Lawndale and were a major contributing factor to national structural changes. This activity was one of several factors in Congress passing the Community Reinvestment Act, the FHA changing its underwriting policy, and the formation of the Gamaliel Foundation as well as the Jewish Council on Urban Affairs. Locally, one of three lawsuits filed on behalf of the CBL led to changes in the Illinois Forcible Entry and Detainer Law to allow for a broader defense in eviction cases. The two additional lawsuits filed by the CBL against the sellers lost in court, but led to contract sellers agreeing to renegotiate all of their contracts according to the CBL formula. While achieving renegotiation at a fair price was the main goal, quite possibly the greatest result of the CBL was the unification and empowerment of the community, and the lifelong impact that had on individuals involved in the CBL.