Redlining and Reparations

20.01.18 Redlining and Reparations

SM Sarah McConnell

AS Audio Sample

LW LaDale Winling

TM Tim Murray

KH Kathryn Howell

BT Ben Teresa

VD Valentina Dimitrova-Grajzl

00:00:00

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SM The 2020 elections are heating up and the first contest in the Democratic primary is just around the corner. So, this week we're stepping back and taking a deeper dove into one of the issues the Democratic hopefuls have been discussing: race and housing discrimination. Here's Elizabeth Warren and the radio show The Breakfast Club.

AS It's not just discrimination socially. It's part of official government policy. Into the 1960s, it was official government policy in this country to subsidize the purchase of homes. That's a good thing, right? Good way to build wealth for middle class families - to subsidize the purchase of homes for white people, but not for Black people. To say that Black people are gonna be cut out of that - that's into the 1960s.

SM What was that official government policy? What were its effects? And what role, if any, should today's politicians have in correcting the unequal policies of the past? From Virginia Humanities, this is With Good Reason. I'm Sarah McConnell. Today on the show, we examine redlining and reparations. LaDale Winling is a professor of history at Virginia Tech and one of the co-founders of the project Mapping Inequality: Redlining in New Deal, America.

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SM He says housing policy in the 20th century explains a lot about racial inequality today. LaDale, what is redlining? Where does that term come from?

LW So redlining is the process and consequences of withholding and denying investment in neighborhoods and Communities of Color. The term comes from a series of maps that were created in the 1930s in the Roosevelt administration as a way of color-coding risk in neighborhoods in cities across the country. The Homeowners Loan Corporation, the agency of the Roosevelt administration that created this city survey and these maps, color coded desirable neighborhoods as green, stable neighborhoods as blue, declining neighborhoods as yellow and hazardous neighborhoods as red.

SM And what did they deem hazardous neighborhoods? What was a hazardous neighborhood in their view?

LW The neighborhoods and communities that kind of suffered or where deemed hazardous were largely ones of poor and working-class communities, especially minority communities - African American, European, immigrant communities. Those that already were suffering from disinvestment and overcrowding and kind of lack of infrastructure.

SM Were redlined areas from that era, almost always African Americans? Were the majority African American?

LW So every African American neighborhood across the country was redlined or deemed hazardous. Almost without exception. Although, as you know, there are many more immigrant and working class and poor white neighborhoods that were also redlined. So we cannot say that only African Americans were redlined, but we can say all African Americans were redlined.

SM So was there more redlining, downgrading of Black and other poor neighborhoods, going on in the south or the north?

LW It's pretty universal and pretty widespread. In, kind of, our stories that we tell ourselves in American history, the North is liberal and more tolerant, and the South is one of racism and segregation and Jim Crow. The legacy of the Homeowners Loan Corporation, or redlining, illustrates that there's not a stark distinction between North and South. Especially when federal programs or the federal government gets involved, it nationalizes the system of segregation and white supremacy happened under Roosevelt.

SM This redlining when he was trying to lift the country up out of the Depression. Do you think it was deliberate on his part to see African Americans not participate in the benefits of these government programs under the New Deal and the Fair Deal?

LW I would not say that it was deliberate on Roosevelt's part. This represents actually in the 1920s, in the 1930s, the leading thinking among economists, among policymakers, and even when African American advocates appealed to Roosevelt and say, we've heard that there's discriminatory practices and HOLC and FHA, he's - he turns to his advisers, asks them about this, and responds: This is the market. We're not segregating. We're not exacerbating racism. This is like society and we're merely like reflecting and trying to build the market up.

SM The wealth gap is large. Between Black and White Americans today. But it has widened 1900. And in 1900, we weren't that many generations away from slavery. How big a role do you think this plays in the wealth gap?

LW So studies have indicated that about two thirds of household wealth is owing to housing equity. So two thirds of the wealth that you have as a family, your assets, your investments, durable goods and so forth is due to housing. And so because there is such a significant wealth gap, recent studies have put the Black-white wealth gap, at about seven to one, with a median African American family having 11 thousand dollars of household wealth and the median white family having 130 thousand dollars of wealth. And two thirds of that is due to housing. Right. So if it's the largest investment that anyone would make in their lives, then if you freeze African Americans out, if you put Communities of Color at a disadvantage, they're unable to build this equity and this wealth generation after generation, and they're unable to take that wealth and invest it in other things like college education. And so, there is actually a relationship between household wealth and college, like college completion, for example, or college debt, that also is connected to the wealth gap.

SM So we're African Americans, let's say, from the 1930s on and before applying for mortgages, applying for loans and not getting the loans?
LW They were not getting loans in the mainstream programs. And so, then they had to turn to these marginal and more exploitative and high interest rate kinds of financiers.

SM Kind of like loan sharks?

LW Yes, exactly. Contract buying as opposed to getting a mortgage was renowned as this way that would withhold equity, your house could be taken from you, you could lose your house and anything you had built in until the moment you had paid it off, for example. And you're paying higher interest rates. And it's like, kind of at the margins and in the gray market. It's not the major, federally defined market for mortgages and capital.

SM Redlining was banned in the 1960s. But is there evidence today, that places that were once red lined are still not getting a fair shake in the mortgage and loan industry?

LW Yes, absolutely. And there are both real estate companies that have illustrated this and there are ongoing investigations by journalists and the federal Department of Justice. So, for example, the Center for Investigative Journalism, or REVEAL, did a major study of mortgage data that illustrated that it's absolutely ongoing in 61 major metropolitan areas across the country. And that has prompted investigation by state attorneys general and the Department of Justice, and the federal Department of Justice Civil Rights Division has ongoing investigations into redlining.

SM Let me go back to the actual making of the maps in the 1930s. What about the kinds of language they would use to describe the blighted areas? What did you come across?

LW So on these forms, or on these surveys and questions that are asked, there's extremely blunt language with words like infiltration. What racial groups are, what ethnic groups are infiltrating and are like leading to the deterioration of a neighborhood. Every neighborhood has kind of comments or summary paragraphs, and in many cases, these appraisers and local of informants will call out the presence of one or two or three households of African Americans. Even the presence of regular paths of Black residents walking through a neighborhood would lead to a downgrade of the rating. But then there's also very blunt language about the best people or hazardous, already lost or undesirable properties, people and local institutions. Washington officials drew upon local knowledge, but also local bias and they institutionalize that. They took the local appraiser's words and they turned that into public policy with really billions of dollars and decades of federal action behind it.

SM If we want to see these maps ourselves, where do we go online?

LW So my project, along with several colleagues, is called Mapping Inquality. And in your browser, you can type in MappingInequality.us. It's part of a larger project called American Panorama, a digital history atlas hosted by the University of Richmond.

SM And what now?

LW The current federal administration is doing little. There has been an unfortunate De-emphasis on the Department of Housing and Urban Development or these kinds of measures of equity. I mean, the president, in fact, his father was a real estate developer who drew upon FHA subsidies for his developments. Right, and was discriminatory and faced civil rights lawsuits. And so in the Trump administration, there's no love for correcting these processes like redlining and segregation. However - however, I would say among a number of the presidential candidates, there is increased talk of housing equity as well as discussions about reparations, that has never been talked about before at such a high level of public policy discussions. So prior to her dropping out, Kamala Harris had discussions about reparations and Elizabeth Warren talks about housing, equity and modes or ways that the federal government might pursue reparations for these kinds of discriminatory housing policies.

SM Do you personally have thoughts on reparations and whether we should go in that direction?

LW I'll say that these red lining and the consequences of federal disinvestment came over the course of almost 100 years. And it helps explain so many ills that we face in American society. I would say there's no quick fix and that there needs to be a long term investment that basically gives us 80 years of righting these wrongs and helping rebuild the equity and household and intergenerational wealth that African Americans have been denied. If we want to take on those long-term series of ills.

SM So sort of a kind of reparations through policy reversal over time?

LW Yes, absolutely. That's, I'd say, what reparations is. It often gets kind of coded or rejected. But inequality was created, it was structured and designed intentionally. And then it was made invisible into the structures in society. We have to first put a lens on the history of these programs, on present day practices, and if we want to if we think of the government as a means to make people's lives better or to solve social problems, then knowing what we now know and are willing to talk about, then there has to be long term solutions to these long term problems that were created in the course of the 20th century.

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SM LaDale Winling is a professor of history at Virginia Tech and one of the co-founders of the project Mapping Inequality: Redlining in New Deal America.

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SM Coming up next, people who did manage to build wealth through housing are now nearing retirement. But the next generation may not be able to afford to do the same. Tim Murray is a professor of economics and business at Virginia Military Institute. He's interested in the economic fortunes of baby boomers as they age, especially when it comes to housing.

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SM Tim, you were working on your dissertation when your dad retired and he started wrestling with the question of where he should spend the rest of his life. Should he stay in his house? Should move elsewhere? What did that get you thinking?

TM Yeah. So he started wrestling with this idea, and what made me start thinking about if - if he's asking this question, everybody else is probably asking the same question. Is where I'm living right now, where I want to spend the rest of my life? Do I want to die in this house or is there somewhere else I'd rather live? Most people decide to actually stay in the house that they lived in throughout their working years. Then you look at it and say, okay, if you're actually going to stay in this house, what are you going to do with the money? All right. We've been told that the house is an investment. People think about, oh, I own property because it's an investment. There's value to it. But when they retire, they don't actually treat the house the same way they do stocks and bonds. When you - you put money in your stock market, when you retire, you extract it, you put it into other types of savings. But we don't actually extract that equity out of the home. And so I started looking at why isn't it that people are - don't - don't treat the home the same way they do stocks?

SM It depends on what income bracket you're in. If you're very poor, you may not own your own home. If you are middle class, you may need to sell that home and move into something smaller just to live off the proceeds.

TM Yeah, it's very true. People that are in a lower income bracket could definitely benefit from extracting equity, moving into a rental unit. But the vast majority retirees own some sort of a house. And so when we think about what's the optimal way for people to consider their retirement portfolio, for most people, the house is a large portion of - of it. And so thinking about how we can maximize people's spending and income and retirement, failing to consider what value you have in your house is a potentially lost opportunity for retirees.

SM Arenít most retirees, though, thinking, I'm so lucky I have a house and it's paid for - check. I don't have a mortgage payment anymore and I can simply live rent free in this house and pass it on to my kids.

TM Absolutely. And there are some people that want to pass their house on to their kids. The question is, what is the best way to leave wealth to your kids? Is it inheriting a house? Or would inheriting an index fund or something like that be a better way to pass on your wealth? And so, if you know that you have a place to live. Yes, that's great. But if you can take your - your big house and maybe move to something smaller, you can take the proceeds from that house, put it into an index fund, a stock market. Let it grow and then pass that along to your kids. And then you also have that there if you need it for maybe you have some kind of a medical emergency or whatever, something you have money for. It's a more liquid form of an asset that you have that's not tied up necessarily in a house.

SM Youíre thinking in your research that everything has changed since the Great Recession, that the generation growing up now and even the boomers have very different financial circumstances than they had pre-Great Recession.

TM Yeah. So historically, companies and the government offer pension plans. You work 30 years at your job and you're going to get a certain percentage, your income throughout your retirement. It is guaranteed. And that is a real security. And when you're living in retirement to have guaranteed income every year, no matter what happens, you have and you add that with your Social Security, that is historically been what retirees have relied upon. But however, over the last 30 years, companies have wanted to go away from that. They are more into 401Ks. The generation that is retiring now, a lot of baby boomers and even more so, future retirees are going to be relying on what they contribute to 401K and the 401K carries a lot of risk with it. If the stock market happens to crash five years before you retire, you could lose half your retirement savings. And in fact, there were a lot of people in the Great Recession that lost a lot of their retirement savings within 10 years of retirement. And so, one of the reasons people don't really think about the house as part of their savings or retirement portfolio is because historically these retirees have had these pension plans from work. Going forward, it may be something that is more necessary or something that retirees should be more willing to consider as they have this risk in their 401K. And you don't really know what you're - may not necessarily know exactly what you're going to have going into retirement. So, you know, when you're 40 years old and you're starting to meet with a financial adviser as to what's my optimal way to save for retirement, it might be something worth asking them. What role is could the house potentially play? You know, for some people, it may play a better role than others, depending on the value of your house, your financial situation. You are somebody that is middle class, lower middle class, and - and you really could use that extra two to three thousand dollars a month, taking out a reverse mortgage could be something that is really valuable.

SM Did you notice what the trends were before and after the Great Recession, when it came to whether people sold or didn't sell their houses?

TM Yeah, so households that had pension plans, they stayed in their house throughout the Great Recession before and after. But there were about three percent of households that had 401Ks or similar type of plans, that actually ended up selling their house after the Great Recession. My thought is, is that people lost money in the stock market and now they needed to find a way to make that wealth up. And they saw I have a couple hundred thousand dollars sitting in my house. I can sell it, rent, and that will offset some of those losses.

SM And they might have had to.

TM And they might have had to in order to be able to survive in retirement. It may have been a necessary thing to offset those losses.

SM It sounds like you're telling young generations to go ahead and invest in a house. Don't just read, because in addition to your 401K, that may be virtually all you have to retire on later.

TM Possibly, yeah. And if - if you're 401K, you know, if you just happened to retire in an unlucky year, or an unlucky time when the stock market happens to not be performing well, the house is an asset that you can always sell your house because people always need somewhere to live. And so owning a house, while it may not get the same rate of return the stock market gets, there is value to having a tangible physical asset that you might be able to sell if you need to do.

SM The other thing is that boomers who are retiring are straddling generations of before and after the pension plan. Some boomers have it. Probably the majority don't have a pension plan and therefore are looking around and deciding that they haven't saved enough.

TM Yeah, I think that the boomers are a very interesting group of retirees because you do have about 20 percent of them have pension plans, but that's much lower than the than the 50 percent or 60 percent that we saw from their parents generation. And going forward, it's - it's less than five percent have these pension plans unless you work for a federal or state government, it's almost unheard of to have a pension plan today. And so I think we see a lot of baby boomers as they're either recently retired or entering their retirement stages trying to figure out do I have enough money to potentially live 30 years in retirement? Right. It's possible now with as healthy as people are, that you may live as long in retirement as you were working. And so making sure that you have enough money to survive and be able to live the lifestyle that you want to maintain is very important. And if you haven't saved enough then - and you own a house that two to four hundred thousand dollars or whatever it is, is something that you might be able to use to boost your income every year.

SM So what are younger people doing? What are you finding your students feel about saving for the future and realizing they're not going to have a safety net, quite possibly?

TM Yeah, well, a lot of lot of younger people coming right out of college or people in their 30s. They're really focused right now on paying off student loans. Not many of the people that I know in that age group own a house. And homeownership rates in this age group are a little bit lower than what they were for the baby boomers. We look at wages over the last 40 years, they haven't been increasing at the rate that they were previously. And so with wages not growing as fast, with a much higher rate of student loans, millennials and GenZ as they're coming out of college now, that is something that they have to pay off. I mean, you have a lot of people coming out of college with somewhere in between a car loan and a mortgage, that they have to pay off at 22 years old. Making sure that you can pay that off becomes a priority, because if you have this student loans, it's something that's sitting on your credit report before you're able to buy a home. And so younger generations probably aren't going to be buying their first home until later compared to what we saw with baby boomers.

SM So I think not only are not going to get a pension, they're not going to have the security, the investment in this asset.

TM Yeah, and it's possible that we may see millennials altogether. Just say, you know what? I don't want to own a house. I don't want to deal with that burden. I'm going to be paying off my student loans until I'm 50. And by the time I'm 50, my life's already where it is and I don't feel a need to change.

SM Will we have an entire generation living in poverty?

TM I don't necessarily think we have entire generation are living in poverty, but I think that we have potential for retirees to hit a point in retirement where they run out of money and run out of money with still 20 years left to live. I think that's a - in the future a real possibility. And so that is scary to think about that you could be 85 years old, still relatively healthy, and all of a sudden you just run out of your 40 - you just drained your 401K. That is why I think the house is something that you can use to supplement your 401K, supplement Social Security and make all of these port - all these different savings, your assets that you have, last longer.

SM Coming back to your father and the decision he had to make when he approached retirement, do I stay in my house? Do I sell it and move elsewhere? What did he do?

TM So he stayed in his house. He has made a couple of renovations to the house and he currently lives there today.

SM Does he do a reverse mortgage?

TM He does not do a reverse mortgage.

SM He didn't need to.

TM He didn't need to. My father was lucky that he had a pension plan from his job. He is one of the few baby boomers that do. So, not only does he have a pension plan, he has a 401K. And so the losses that made that occurred during the Great Recession will be it will be mitigated by the fact that he had this pension plan. But if he didn't have this pension plan from his job and he lost the money, he didn't as 401K, the house may have been something he had to consider. So, yes, if you are lucky enough as a baby boomer or somebody in a future generation to have a pension plan from work, it gives you a whole set of flexibility that you may not have if your entire savings, retirement savings are in 401K.

SM Watching your parents generation, how has that influenced you and your friends and colleagues of the same age about how you want to plan your financial future?

TM Yeah. So I think one thing that Iíve seen a lot of my friends see with the baby boomer generation is they live in bigger houses than they need. One of the concerns some economists have going forward is what are we going to do with all these big homes when the baby boomer generation dies and the millennials don't want them? That's a real interesting question going forward. But we look at it and say, while owning a house is nice, we don't need as big of a house and potentially once we retire. Do I still want to live in my four bedroom or three bedroom, two and a half bath house? Do we really need this large house? And so I think that that'll be an interesting thing going forward is to look at how that dynamic plays out as people that are in their 30s move up into their 40s and 50s. It's very possible we'll see that nothing changes. But we just don't know. We do know that millennials are buying houses later. And we do know millennials have a lot of student loan debt. And we look at baby boomers and say we're not going to have some of these same financial assets you had, we may need to make different decisions.

SM What have you done so far?

TM So right now I rent. Having just finished my my Ph.D. and just starting my job - I rent and it's not something I am in the meantime, considering - looking to buy a house.

SM And do you also have student debt?

TM I do have student loan debt. Yes. So I - I don't have a - a ton of student loan debt compared to some of the some people. I was fortunate throughout my PhD that I was - I got to teach classes and they paid for my tuition. But there are people that are coming out of undergrad at 22 years old with - at a four-year college with hundreds of thousand dollars of debt. You know, and even if you have sixty thousand dollars of debt at 22 years old, that's a lot of money just starting out at your job. And so regardless of whether you go in-state or out-of-state, if you're not lucky enough to have parents that are able to pay for your college - which I was, my dad paid for my college, I took out student loans to pay for my masters and a little bit to supplement my PhD. But if you were to take out student loans to pay for four years of college, in-state or out-of-state, you're looking at a at a significant burden coming right out of right out of college.

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SM Tim Murray is a professor of economics and business at Virginia Military Institute. This is With Good Reason. We'll be right back.

00:27:50

SM Welcome back to With Good Reason from Virginia Humanities. Soaring rents and low wages has hit the poorest families hard, leaving many people just a car repair or hospital visit away for missing payment and possibly out on the street. A study led by Pulitzer Prize-Winning sociologist Matthew Desmond at Princeton's eviction lab looked at evictions on a national scale. Kathryn Howell and Ben Teresa were part of the RBA eviction lab at the Douglas Wilder's School of Government and Public Affairs at Virginia Commonwealth University.

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SM Kate and Ben, how large is the eviction problem for renters in the US? We know many people own their own homes, many others rent, but eviction?

KH That's a huge issue for families, particularly, you know. Yeah, we have a homeownership rate in the country that is 65 percent now. But that means you've got a lot of people that are still renting, and eviction is an incredibly disruptive process that has larger implications for schools and for individual kids and families, for jobs and for transportation, not just for housing.

SM It's been called a nationwide eviction crisis. Why crisis?

BT So by crisis I think we mean that the effects are intensely felt by people and that's been sustained for at least 10 or 15 years now.

SM How have we learned just how big the eviction rates are?

KJ Sure. Matthew Desmond, who is a researcher at Princeton University, released the most comprehensive nationwide data set of evictions that we've seen so far. Other places have done this on a smaller scale, particularly in the Bay Area of California. But this was really the first time we understood the scale of what was going on and that it wasn't just a small thing that happens in some places, but it's nationwide, as Ben said. And we also found internationally the rate of eviction is around three percent. But in some places, you see much higher rates. And so, for example, the city of Richmond, sustained rate over the past 16 years has been about 11 percent. And you see that pop up in places like Atlanta and North Charleston, South Carolina. But really across the country, you see these pockets of high eviction rates relative to the rest of the country.

SM So where there are most evictions, you imagine you have the hugest population of poor people renting homes?

BT Right. That holds up to a certain extent, but what we actually find is that the racial composition of the neighborhood is the most influential factor on those eviction rates.

KH You know, we're not necessarily saying that a landlord is looking at two tenants, one that's white and one that's Black, and they're saying, ëyou're out, you're iní. It's not as simple as that. Some neighborhoods have different types of housing options and different access to jobs, different access to education. And so all of that ultimately plays into this larger conversation about eviction.

BT What we're talking about is access to mortgage credit, the ability to own a home. And so that has been historically limited for African American people and families, which meant that they were always more likely to be renters than white people.

KH It's also things like background checks. African Americans are disproportionately criminalized. And so that add something to your background check. Credit check, likewise. All of these things ultimately shift the kind of housing options that are available. People are getting shunted into less desirable housing options in less desirable neighborhoods, and that disproportionately falls on African Americans.

SM The two of you have created something called the RVA Eviction Lab, the Eviction Lab analysis of these rates for the Richmond area in Virginia. Did you do this after you were startled by the eviction rates that were exposed by the Princeton Eviction Lab?

BT Right. So in order to inform any kind of changes in laws or policies that would reduce evictions, we needed to know more about why evictions were happening and how they were happening

KH Because that's the only way you can really start to look at the policy levers and change really what's going on. And it's not as simple as people just can't pay their rent. Right. If it was that easy, I'm sure we would have solved it years ago. Right. But there's more to it than that. It can be anything from medical bill that sets their entire budget off. So, it means that you miss the rent payment and that starts a really chain reaction of things. It can be a car breakdown, as I said, things that kind of - the one bad day idea that really ultimately blows your budget.

BT We actually have students that work with us in the eviction lab. And then at one point they told their story in which they said, when I was in fourth grade, my family did not have a home. I missed most of my fourth-grade year because of that situation.

KH Yeah. That's one that's stayed - that sticks with me, and I think the other one for me is the difficulty of then finding housing the next time. A woman that I interviewed talked about that, she said it's as bad as - as having a criminal record, you know, that sticks with you, that you can't get housing in the next space. And so that the cascade of housing instability is, I think what to me has been really alarming.

SM Who's doing most of the evicting? It a sort of mom and pop who have a couple of places and they are letting people go or booting them, or is it larger corporations that run giant apartment complexes?

BT So a large share of all the evictions come from a small set of landlords, there's no question about that. We know that corporate landlords, so larger scale landlords that own tens or even hundreds of properties evict at higher rates than smaller landlords. And we also know that landlords that are corporate, that are tied to larger investment firms, financial Wall Street type firms that back these landlords - that they evict at even higher rates. And so it is a matter of who is the landlord, who is the owner and who is financing, because that really alters the role that eviction plays in landlords adding as a business.

SM Are we also finding the states that have the cities with the highest eviction rates are states that have laws that favor landlords over tenants?

KH Yeah, I think that's - that's definitely a trend that we're seeing. And you see cities that have improved tenant protections or better tenant protections, whether it's a right to counsel or general sort of information, different timelines. We find that they the eviction rates are lower. And a report came out, I believe, this week about New York when that introduced a right to counsel, which has dropped their eviction rates significantly in New York City. And so the more information tenants have, the more equal playing field they have, that tends to reduce the eviction rate.

BT We have pretty much in this country completely forfeited the idea of public housing as playing a role and playing a part in the solution here. And so while we should acknowledge the real problems historically that public housing has in our cities, there has to be a role. There is a role for public investment in housing, that it's not just sort of a housing of last resort. What we have seen since the 2008 financial crisis is a growing share of renters in the United States who are increasingly squeezed by unaffordable rents. And so that public housing, a public option for housing, a public investment in housing can benefit more than just the very poor, that it can actually provide something that market housing with or without rental protections cannot.

SM That's so true. There was a sea change after the market crashed and so many people, young or poor or otherwise, said we have to or want to turn to renting instead of buying. And of course, there was also this sort of period after urban renewal when everybody thought public housing is the way to go, and that's been really discredited. So how to think of public housing in a more uplifting way where we're not crushing the souls of people but giving a leg up during either transition or need.

BT Many of the failures that we know from public housing in terms of their destructiveness of existing neighborhoods, in terms of racial segregation and neglect. A lot of those stem from the problems that public housing was always structured by the private rental market and by private real estate interests. And so even though it was public housing, it was relegated to certain parts of the city, it wasn't provided the resources in terms of the costs, meaning the cost of operating those buildings. And so I think we need to be clear about why there were the failures of public housing that there that there have been.

SM Have you seen one city or one area where they've managed to scale up affordable housing and make it appealing and workable to the people who live there?

KH Yeah, you see it in places that are investing significant funding in affordable housing, and they're investing it in even ways across their city. They're not putting all their affordable housing into the poorest communities, but they're starting to really say, OK, wealthy communities, you need to have your fair share. And I think that's actually been very effective. But again, it takes investment. You know, we have in the city of Richmond a million dollars in our trust fund just up the road in D.C., which is only three times the size - they have 100 million every single year. A million dollars is about, I don't know, less than 10 units. It's couch cushion change, right. So it's a really if we want to solve this problem, we can't put a small scale solution to what is actually a large crisis, and has been a large crisis building over time. And, you know, it's - it's not changing.

SM What are other steps that people are contemplating that would help lower eviction rates?

KH Well, I think one of the exciting ones to think about is the recent Medicaid expansion. So we've had some research come out nationally about the impact of Medicaid expansion on eviction rates, and it actually decreases the eviction rates. What the Medicaid expansion does is actually makes your medical expenses more predictable. You weren't going to get a 20-thousand-dollar bill that you have to sort of try to pay off over time. You've got insurance that you can go to the doctor, you can get your medicine filled. You don't have to pay out of pocket when you have to take your kid to the pediatrician because they have the flu.

BT So I think I think what we're talking about is that there's things that can be done to reduce evictions, and then there's things that can be done to reduce the causes or address the causes of evictions.

SM I see what you mean, because reducing the evictions is a little bit of a Band-Aid step. What you want is for people to feel enough secure that they have housing, they have shelter they can count on, a job that they can depend on and a livable life.

BT That's right. This crisis has long term cyclical effects that increase economic and political inequality. And so what I mean is, you're not able to organize politically if your community is destabilized by high eviction rates, if you yourself are being displaced and are - or don't have, as you said, a shelter, a decent home to know that they're safe and secure. That is going to demobilize people politically. And if you're demobilized politically, then you're not going to be able to address these underlying causes.

SM You can't elect people to the positions of power where they can designate money for more secure housing.

KH And you can't even get it together to get everyone to show up at a council hearing to say, hey, this is wrong, or this is right and we support this. So even the small-scale things were showing up to community meetings, it's awfully hard to sort of get that together when you're still sort of trying to keep your house stable. I think if we if we take evictions down to what really is the problem and I always tell my students this, I'm like, OK, what's what are we actually upset about? And what we're actually upset about his housing instability. At the end of the day, we really have to take a step back and realize what is actually bad about evictions, and that is that it causes immense instability.

SM Why should people who have stable housing care about whether a minority of their fellow citizens in a given city or community don't?

BT Great - yeah, a great thing to think about. And I think that's what the last 10 years since the 2008 financial crisis have shown us, is that you may think you have stable housing, but for a lot of people, the financial crisis demonstrated that they really don't. And so just because you think that you are protected, you may have more in common with people who are being evicted or in common with producing that unstable housing.

[music]

SM Ben Teresa and Kathryn Howell are professors at the Douglas Wilder School of Government and Public Affairs at Virginia Commonwealth University. Coming up next, access to credit for some, but not all.

00:42:00

SM A recent study found redlining is happening on or near American Indian reservations.
Valentina Dimitrova-Grajzl is a professor of economics at Virginia Military Institute. She joins me to talk about her findings.

[music fades]

SM Valentina, you and your colleagues looked into something that is aggravating already terrible economic conditions on Indian reservations across America. What was that?

VD Access to credit. Credit facilitates transactions and it makes sure that you have some protection against risk. For example, if you have a medical emergency or if your car breaks down or if the government shuts down and you don't get a paycheck right, you do not have anything to rely on to get access to funds.

SM So how did you determine this? How did you find out that people who were living on or near reservations across America were really distinctly lacking access to credit?

VD We started out by looking at a study done in 2001, that there is a scarcity of banks, financial institutions on or near reservations, American Indians on average, have lower credit scores and they have lower access to traditional banking. And so, we started researching individualsí access to credit through a database that Equifax, one of the main credit bureaus, has put together. And what we found is that the racial composition of the geography actually had a significant effect on credit limits.

SM And what did you conclude?

VD Our findings seem to suggest that there is what's called redlining.

SM So what exactly is redlining? How do you see that?

VD Yeah. So redlining is the practice of giving either less credit to people in a particular geographic region or giving them more credit, but with worse terms. That's a - you charge them higher interest. You have more fees. And even though somebody might be credit worthy, simply because they live in an area that is predominantly a particular race, they might be denied credit. I think of it as a geographic discrimination. It's not a discrimination based on your individual race, but it's based on the characteristics of the majority of people who live in your zip code, for example.

SM And who would do the redlining. These would be employees of banks that are nearby?

VD Correct. So whether it's employees of banks or the banks purposefully decide that they would not give as much credit to people, in particular zip codes, for example.

SM And couldn't they be doing that because they said, hey, our experience is, these people are constantly defaulting. Let's don't even do it.

VD Yeah. So what our research does is it actually controls for that. It controls for the fact that some people might be less credit worthy or they might have some history of filing for bankruptcy or defaulting on their loans. We found that even if people had good credit history, they would still be, on average, getting lower credit limits if they lived in areas that had a higher percent of American Indian residents.

SM Why do you think that was happening? Do you think that was just a longstanding practice from more overtly discriminatory days that had carried over till now?

VD I think so. So redlining really goes back to the 1930s and it started out with mortgage markets and with insurance markets.

SM With African American communities?

VD Yes. African American communities and actually, the practice refers back to this idea of taking a map and drawing a red line around a particular region and essentially saying we're now going to give loans to people in this particular area because we believe they're going to default. Even if this is just purely based on prejudice and bias. And there have been a lot of measures sort of taken over time to ensure that everybody has equal access to credit, irrespective of their race or national origin. But it's very difficult to ensure that this type of discrimination doesn't happen.

SM And if redlining is against the law, but it's happening on these reservations and mirror them, what's the remedy?

VD One of the things that has taken off in the past 15 years is something called community development financial institutions. And they usually open in areas that are underserved by traditional banks. They usually understand the culture of reservations and they're really specifically focused on building financial literacy and building credit histories so that then they can allow residents of reservations or near reservations to build credit and be able to go and use credit from traditional banks.

SM It interests me that you grew up in Bulgaria and did so much of your early research on the forms of government following the collapse of the Soviet Union in the Eastern Bloc countries. How has that, do you think, influenced your ability to see what's happening on Indian reservations in America?

VD Yeah, I think that my experience in Bulgaria has showed me how important culture is in economic development and how important it is for us to consider the cultural context of a country or a reservation or state for the policies that we enact. So, for example, in the context of American Indian reservations, a lot of the policies that have been put in place took away some of the legitimacy of governance on reservations. And so they led to worse governance. They led to lack of trust. They led to increase in crime on reservations because people did not trust the law enforcement, they did not trust state courts. The state courts impose the American paradigm, which is very adversarial. It's the idea that you go to court and there is punishment. The only focus is really on punishing the person who has committed a crime, while in the indigenous paradigm there's so much more focus on community and restorative justice, which is really more focused on - on harmony. And so what my Bulgarian experience sort of guided me toward is this idea of being very aware of the importance of context and culture and norms - social norms, and that when we think about economic development, we cannot be thinking about it without thinking about people's mindsets.

SM How did you see that in Bulgaria?

VD So Bulgaria was a socialist country until 1989. In 1989, the Berlin Wall fell, and then Bulgaria started to transition from socialism to capitalism or this idea of a market economy. Bulgaria had no memory of a market economy, right. There was no private ownership before socialism before World War Two. And so people had a really hard time understanding what the right approach was to transition and how to build institutions that would support a market economy. How do you make sure that the court's function in a way that makes it easy to - to resolve disputes? How do you make sure that people understand democracy and how democracy works? Right, these are all things that take a long time to develop. And in the case of Bulgaria, we went from a socialist system to a capitalist system overnight. Sometimes you might want to have a gradual transition or you might want to read it carefully, evaluate people's mindsets and people's memory and people's historical experiences before imposing a path of development that might have worked somewhere else.

[music]

SM Valentina Dimitrova-Grajzl is a professor of economics at Virginia Military Institute. She was named the 2013 Outstanding Faculty Member by the State Council of Higher Education for Virginia. Major support for With Good Reason is provided by the law firm of McGuire Woods and by the University of Virginia Health System, connecting doctors and patients through telemedicine to deliver high quality care throughout Virginia, the U.S. and the World, UVAHealth.com. With Good Reason is produced in Charlottesville by Virginia Humanities. Our production team is Allison Quantz, Cass Adair and Matt Darroch. We had help this week from Georgiana Reid and Bill Foy of Virginia Tech. Some of the music is by Blue Dot Sessions. For the podcast, go to WithGoodReasonRadio.org. I'm Sarah McConnell, thanks for listening.

Comments (1)

One Comment on “Redlining and Reparations”

Roy Smith says:

January 22, 2020 at 10:07 am

Broadcast gave me insights into home building, financing and ownership.
It explains a lot of the continuation of difficulty in improving housing
for poor people, especially African Americans. The poor people in
America are charged more for loans and makes the “mountain”
too steep , thus tougher to get out of poverty. I am eager to
get the transcript.

Skip to show segment

Mapping Inequality

Downsizing and Debt

America’s Eviction Crisis

American Indians and Credit Deserts

Transcript

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Redlining and Reparations

Skip to show segment

Mapping Inequality

Downsizing and Debt

America’s Eviction Crisis

American Indians and Credit Deserts

Transcript

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One Comment on “Redlining and Reparations”

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