Black families in Chicago lost between $3 billion and $4 billion in wealth because of predatory housing contracts during the 1950s and 1960s, according to a new report released Thursday.
The Samuel DuBois Cook Center on Social Equity at Duke University and the Nathalie P. Voorhees Center at the University of Illinois-Chicago sought to calculate the amount of money extracted from black homeowners on the city’s South and West sides from home contract sales. The report is titled “The Plunder of Black Wealth in Chicago: New Findings on the Lasting Toll of Predatory Housing Contracts.”
Contract buying worked like this: A buyer put down a large down payment for a home and made monthly installments at high interest rates. But the buyer never gained ownership until the contract was paid in full and all conditions were met. Meanwhile, the contract seller held the deed and could evict the buyer. Contract buyers also accumulated no equity in their homes. No laws or regulations protected them.
Home contract sales were a ruthlessly exploitive means of extracting capital from African Americans with no better alternatives in their pursuit of homeownership, the report said. Contract loans were rampant all over the West Side — in East Garfield Park, West Garfield Park and North Lawndale — but also in Englewood on the South Side.
The report concluded:
Between 75 percent and 95 percent of homes sold to black families during the 1950s and 1960s were sold on contract.
The price markup on homes sold on contract was 84%.
African Americans who bought on contract paid, on average, an additional $587 (in current dollars) more a month than if they had a conventional mortgage.
“The takeaway is that we have a history that so many Chicagoans are really not aware of that has really shaped the city and shaped the racial politics of the city. It shaped the economy of the city. In order to move forward and address issues that confront us in terms of poverty and racial discrimination, we have to have a common understanding of what happened in the past,” said Duke University’s Bruce Orenstein, the study’s project director who is doing a documentary series on Chicago’s housing segregation.
That past has roots 100 years ago with white people not understanding that they created black ghettos, he said.
“The scaffolding of segregation gets built after the race riot of 1919 in Chicago. And the main player in the scaffolding are the real estate brokers,” Orenstein said. “The real estate industry wanted to keep black residents and white residents separate. They built a white wall to keep out black residents.”
Home contract sales were prevalent for black homebuyers who had little choice because of racial segregation. Redlining denied black homeowners conventional mortgages that white Americans received backed by the federal government. Meanwhile, white neighborhoods were opened up in the 1950s because the U.S. Supreme Court struck down racially restrictive covenants, which for decades had blocked the access of African Americans to those communities.
But those white homeowners were frightened by black people coming to their neighborhoods. Contract sellers were often realtors who stoked that fear by getting whites to sell their homes below market prices, purchasing them for themselves and then offering them on contract to black families at inflated prices.
“For example, homes in racially changing neighborhoods purchased by a speculator for $12,000, would be resold days or weeks later on contract to a black buyer, for $22,000,” the report states.
More recently, historian Beryl Satter and journalist Ta-Nehisi Coates have written groundbreaking accounts of the contract system in Chicago. This new report builds upon other years of research and activism.
In a grassroots effort to protest the contracts, West Side black homeowners organized the Contract Buyers League in the late 1960s. The league filed two federal lawsuits that were instrumental to the research behind the study. The team of 10 researchers (which also included individuals from Roosevelt and Loyola universities) poured over thousands of documents from those lawsuits and other records to come up with the findings.
“Maybe we can get something done about it. The damage that was done and the horror that was created by the dominant culture, which is us — white folks, it’s a pretty depressing experience,” said Jack Macnamara, 81, who was an organizer with the league. “With these numbers and this amount of money legally stolen from the African American community in a very short time of 20 years, that’s a debt that we owe to the African American community and something for which we should make restitution.”
Alfonso Vaca-Loyola was one of the researchers.
“If this paper or this report comes out just to be an academic report, we have failed. This isn’t the culmination of research but the beginning of something much bigger and much more important, which is restitution,” Vaca-Loyola said.
Natalie Moore is a reporter on WBEZ’s Race, Class and Communities desk. You can follow her on on Twitter @NatalieYMoore. WBEZ's Alyssa Edes produced this story for broadcast. You can follow her on Twitter @alyssaedes.