Race for Profit

Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership is a 2019 work of non-fiction by Keeanga-Yamahtta Taylor, Assistant Professor of African-American Studies at Princeton University. The book, which was Taylor’s doctoral dissertation, focuses on the role played by discriminatory policies and corporate greed in the troubled history of black homeownership in twentieth-century America. Race for Profit was longlisted for the 2019 National Book Award.

Taylor begins her story in the aftermath of World War II, when successive governments began to push for more-widespread homeownership. These policies were structured to favor purchasers who could afford to buy in the newly built suburbs. Few black families fell into this category, and even those that did were often shut out of the market by realtors’ discrimination. Cheaper homes in urban areas were deemed “high-risk,” and therefore ineligible for federally backed mortgages. Taylor argues that these policies amounted to “racial judgments cloaked in the garb of objective economic analysis.”

The picture changed as the 1960s brought widespread civil unrest to America’s inner cities. Local and federal governments were forced to pay attention to the dilapidation of urban housing. At the same time, it was thought that homeownership would go a long way toward quelling the discontent of the urban black population. Inspired by proud homeownership, the argument went, the black residents of the inner cities would fix up the housing stock and revitalize their neighborhoods.



The result was Lyndon B. Johnson’s Housing and Development Act of 1968. Under an arrangement known as Section 235, private realtors, appraisers, mortgage brokers, and financiers would be overseen by the government’s Department of Housing and Urban Development. In theory, this legislation was designed to ensure that lenders and realtors gave black homebuyers equal treatment. In practice, it initiated a new form of discrimination, replacing exclusion with what Taylor dubs “predatory inclusion.”

Despite the federal insurance on Section 235 mortgages, traditional banks remained unwilling to lend to the new group of potential borrowers. Instead, a new form of lending emerged. Mortgage brokers pooled risky loans and sold them on as investment vehicles called mortgage-backed securities. Because they were selling the risk on, brokers had little or no incentive to ensure that borrowers could cover their mortgages. Nevertheless, they ended up with the sole responsibility for assessing the creditworthiness of would-be homeowners.

In many cases, mortgages were borrowed against property so dilapidated as to be worthless. A HUD investigation discovered “faulty plumbing, leaky roofs, cracked plaster, faulty and inadequate wiring, rotten wood in the floors, staircases and porches, lack of insulation, and faulty heating units.” Taylor notes that around a quarter of Section 235 houses were “in such poor condition that investigators concluded that they should have never been insured.”



Further investigation revealed that speculators were deliberately buying dilapidated houses and “flipping” them for sale to Section 235 buyers. This was made possible by the collusion of realtors, appraisers, and mortgage brokers, who inflated the prices of nigh uninhabitable homes. Thanks to the federal insurance backing Section 235 mortgages, lenders were happy to extend credit to anyone, regardless of their income or the value of the home they intended to buy: lenders actually stood to make money when borrowers defaulted. The HUD’s own investigation found that racist bias amongst its own officials had contributed to the scale of this abuse.

In 1973, Richard Nixon ended the subsidized housing program. Noting the corruption, wide-spread defaulting, and continued poor condition of urban homes, Nixon’s government distanced itself from the crisis by blaming the residents themselves, accusing them of failing to take responsibility for their neighborhoods and communities.

In order to make this narrative stick, the government had to ignore the thorough documentation, brought before Congress and reported in national newspapers, that the real estate industry had systematically manipulated poor and mostly black people into overpaying for run-down houses they couldn’t afford.



Newspapers reported that this exploitation had cost the government $4 billion in insurance payouts. Nevertheless, Taylor notes, the private-sector figures responsible escaped without so much as a public censuring.

Taylor argues that, in any case, the HUD shared much of the blame for the system’s corruption. She finds one government report that suggests that the president of the Mortgage Bankers Association had personally involved himself in the drawing up of HUD’s regulatory code. In the correspondence of mid-1970s HUD director Carla Hills, Taylor finds evidence that the HUD chose a light-touch regulatory approach for fear of scaring off private lenders. Some HUD officials, she finds, were also concerned that a tough regulatory approach would harm their chances of finding work in the private sector later.

In conclusion, Taylor argues that the public-private partnership model of affordable housing was, and is, doomed to failure. At its heart is an incompatibility between the needs of buyers—safe, affordable housing—and the needs of a profit-driven property industry, for which safety and affordability strike at the all-important bottom line. Taylor closes by underlining the importance of homeownership. It is historically—and today—the main way in which Americans accumulate wealth over generations. Black Americans continue to stand at a serious disadvantage in this crucial area.