Lingering Effects of Racially Restrictive Covenants

Image by US Census as modified by Ruhrfisch

The York Daily Record quoted me in York County Neighborhoods That Once Barred ‘Any Negro or Mongolian’ Still Do Harm. It opens,

When the Rev. David and Eulamae Orr moved into the Fayfield neighborhood in Springettsbury Township in 1963, they were the first to break the color barrier in the all-white suburban subdivision.

While the Orrs were a well-known and respected York-area black couple, owners of several business enterprises and active in civil rights, their purchase of the South Harlan Street home was uncommon enough at the time to draw headlines in local newspapers.

“My parents were very dignified about it,” Charles Orr, who inherited the home, said in a 1999 interview. “They simply said it was our right, that they had worked hard, that they always had wanted a larger, nicer house and were now able to afford it.”

The color barrier that the Orrs broke through, however, was multi-layered and resilient. People found other ways to keep minorities out of the white neighborhoods even after the Orrs had crossed the line. In fact, social and economic obstacles blocking access to fair housing for minorities remain today.

And urban planning experts say such racial barriers must come down if the city and the county of York are to reach their full potential.

Restrictions elsewhere in York County

By 1963, the 1947 Fayfield subdivision restriction prohibiting the occupancy of any Fayfield home “by any Negro, or any person of Negro extraction, excepting domestic servants …” had disappeared.

The same discriminatory restrictions against minority ownership were found in the 1931 subdivision plan for the proposed Wyndham Hills area. That covenant prohibited home ownership or occupancy by any “negro” or “Mongolian.”

Brooklyn Law School Professor David Reiss, Academic Program Director for The Center for Urban Business Entrepreneurship, explained the term “Mongolian” in that time period was used to refer to “various people of Asian descent, including those of Chinese and Japanese heritage.”

The Wyndham Hills deed restriction placed minority home ownership under its “Nuisances” clause along with operating a foundry, a slaughterhouse, bone-boiling “or other establishment offensive to the neighborhood.”

And, it wasn’t just in the middle- and upper-class York County suburbs either. Two city homes a block apart on West Kurtz Avenue and West Maple Street, for example, carried the same minority ownership restrictions.

That initial covenant restriction against minority home ownership in Fayfield was to be open to a vote among home owners in the neighborhood in 1952. Fayfield homeowners were to vote whether the prohibition against minority ownership was to be removed, rescinded, altered, changed or extended for definite periods of time or perpetuity.

If that vote ever took place, York County historical records don’t easily reveal any documentation of it.

Now illegal, but effects remain

Steve Snell, former president of Realtors Association of York and Adams Counties, said those covenants and restrictions — while apparently legal when written — became blatantly unlawful. He couldn’t be sure if Fayfield homeowners took any action against them or if they were quietly removed as houses in the neighborhood were resold.

These covenants and restrictions kept minorities concentrated in impoverished neighborhoods, primarily in the city of York. The effects of this concentration of poverty remain today, according to acclaimed urban planner David Rusk and others who have studied York. Those effects are seen in everything from the rate of homicide to the school dropout rate.

 

Multifamilies for Retirement Income

photo by Laurent Montaron

Financial Advisor quoted me in More Retirees Turning To Multifamily Homes For Income. It opens,

Many clients are investing in multifamily residences as a way to generate retirement income.

“A common way for people nearing retirement is to buy a triplex or fourplex, live in one unit and rent out the others,” said Keith Baker, a financial advisor and professor of mortgage banking at North Lake College in Irving, Texas. “They sell their home and use the equity they have built up to do this, and if they still owe some debt, it will be paid down more quickly.” Among the best multifamily properties to acquire for supplemental income is one that has separate entrances with no shared common areas so that each family has their own space, according to Michael Foguth, a financial advisor in Brighton, Michigan.

“Townhomes are very popular,” Foguth told Financial Advisor. “Also popular are duplexes where you have one unit on the ground level and one unit on the second level.”

But clients should not spend so much money to acquire a property that their retirement income ends up undiversified. “If the bulk of your retirement income is tied up in one property, you are exposed to natural disasters like floods as well as economic downturns in that market,” said David Reiss, a professor at Brooklyn Law School who teaches real estate finance.

An alternative to buying a property is modifying an existing residence with the intent of renting out rooms on websites like AirBnB or HomeAway. “You would need to make sure that deed restrictions, zoning and city ordinances allow this,” Baker said. “It also will require property insurance and additional liability coverage.”

When a multifamily rental property is also a primary residence, a portion of the mortgage is tax deductible, according to Carla Dearing, CEO of SUM180, an online financial planning service. There may also be the opportunity to leverage tax benefits like depreciation.

“Selling your home and taking out a loan on a rental four-unit apartment complex allows you to deduct from your income the pro-rated interest expense along with the depreciation expense of the portion of the units you don’t live in so that much of the income is sheltered,” Baker said.

Over time, the income support received from a rental property can be greater than the interest income from investing in the stock market. “You’re likely to receive a nice stream of income when you are renting to people with guaranteed incomes,” said James Brewer, CFP, in Chicago. Nationally, the average price-to-rent ratio is 11.5, meaning that the average property owner is buying a property for a price of 11.5 years worth of rent, which is an estimated 8.7 percent yield on her investment, according to data from Zillow.

A house that cost $200,000 should bring in $1,450 per month in rent using the national price-to-rent average, according to Matt Hylland, an investment advisor with Hylland Capital Management in Virginia Beach. That’s compared to 10-year government bonds, which yield 1.7 percent and the S&P 500 index, which yields about 2 percent.

“But this 8.7 percent is before any costs,” Hylland noted. In other words, clients who add rental property to their portfolios should also add cash to their emergency funds so that have money on hand to maintain and repair the house. “If the roof needs replacing, do you have $5,000 available to fix it?” asks Hylland.

Ideally, a multifamily acquisition will be move-in ready. “Homes that require construction or renovation can easily turn into a money pit, costing twice what you estimate up front,” Dearing said.

The Unzoned City

Matt Festa has posted an interesting, short article, Land Use in the Unzoned City, to SSRN. He writes,

The popular conception that Houston is unzoned because it is some sort of ultra-Texan free-market landscape is not accurate. Houston’s land use is in fact highly regulated. While no Houston ordinance explicitly uses the “z-word,” and its rules for the most part don’t prescribe limitations on use, there are numerous land use regulations that, in any other city, would be part of the zoning code. Houston defines certain areas as “urban” versus “suburban,” with different regulations.There are laws prescribing minimum lot sizes, which in turn restrict density. There are setbacks from the street, buffer zones for development, and regulated street widths. There are other laws that affect land use, such as the new historical preservation ordinance, which allows citizens to petition the council for designation as a historic area, which comes with additional restrictions. These are all government measures that, in my opinion, operate as “de facto zoning”— they prescribe different land use rules based partly on geographic location. And even these rules pale in comparison to the extensive regime of private covenants and deed restrictions that govern a majority of the property in Houston. (17)

Festa explains that this lack of zoning may have some partial explanations that have to do with the culture of the city. But he finds a more compelling explanation in the ban on zoning contained in the Houston City Charter. This ban, which can only be overturned by referendum, has been challenged three times but zoning supporters have come up a bit short each time.

Festa is certainly correct that land use scholars (Edward Glaeser, for instance) use Houston as a foil to communities that heavily limit new construction with restrictive zoning provisions. So Festa’s thesis is an important one that I hope he develops in a longer article. Until we determine how much less restrictive Houston’s land use regime is than other American cities’ formal zoning ordinances, we can’t fully understand the interaction between restrictive land use policies and the housing crisis affecting cities across the country.