Tag Archives: Federal Housing Administration

FHA Whitewash, Redux

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Richard Brooks and Carol Rose have recently published their book Saving the Neighborhood:  Racially Restrictive Covenants, Law, and Social Norms.  This well-written book brings to mind my recent post on the FHA Whitewash which reviewed a recent paper by HUD-affiliated researchers.  The paper minimized the role that the FHA played in furthering housing discrimination.  I mentioned that Kenneth Jackson’s classic book, Crabgrass Frontier, documented this sorry chapter of the FHA’s history.  Saving The Neighborhood covers some of the same ground, but from a legal and legal history perspective.  By doing so, it adds depth and texture to the historic record.

The book makes clear just how much of a role the FHA played.  The FHA’s

Underwriting Manual reflected private developers’ and brokers’ views of the kinds of features that made housing values stable and secure. Those features clearly included racial segregation.  In a section on “Protection from Adverse influences,” the Manual stated bluntly that “[a] change in social or racial occupancy generally leads to instability and a reduction in values” (par. 233). Thus property evaluators were to investigate the surrounding areas for the presence of “incompatible racial and social groups” and to assess whether the location might be “invaded” (par. 233). The Manual specifically noted that deed restrictions on “racial occupancy” could create a “favorable condition” (par. 228). in the section on subdivisions that were still in the development stage, the Manual recommended deed restrictions that included, among other matters, “. . . (g) Prohibition of the occupancy of properties except by the race for which they are intended” (par. 284(3)). (109)

The authors argue that these preferences gave developers, even those who did not favor segregation, an incentive to employ racially restrictive covenants in their projects. (110)

The FHA’s record of racial discrimination during the first few decades of its existence is clear, for all to see.

FHA Whitewash

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While preparing for my talk tomorrow on The FHA and Housing Affordability, I was reviewing some of the recent literature on the FHA. I came across a recent HUD working paper with some interesting data about recent FHA crises but also with a disturbing spin on the FHA’s history. The FHA Single-Family Insurance Program: Performing a Needed Role in the Housing Finance Market states that in its early years “race was not explicitly regarded as a factor in FHA’s mortgage insurance operations.” (9) This is flat out wrong and has been known to be flat out wrong at least since Kenneth Jackson published Crabgrass Frontier in 1987. Jackson clearly demonstrated that race was “explicitly regarded as a factor in FHA’s mortgage insurance operations.”

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Jackson writes that the FHA’s Underwriting Manual from those early years stated that “[i]f a neighborhood is to retain stability, it is necessary that properties shall be continued to be occupied by the same social and racial classes” and recommended that owners employ restrictive covenants to exclude African Americans (and some other groups). (208) The working paper has other extraordinary statements that minimize the FHA’s central role in promoting segregation during the mid-20th Century. For instance, it states that the FHA’s “early policy may have inadvertently promoted redlining practices.” (18) There was nothing “inadvertent” about it.

I typically find that federal government reports make great efforts to be factually accurate, so this paper is a great exception.  One might think that the authors deserve some leeway in their interpretation, but Jackson’s history has only been confirmed by later research, such as last year’s Do Presidents Control Bureaucracy? The Federal Housing Administration During the Truman-Eisenhower Era which was published in Political Science Quarterly. It makes much the same point as Crabgrass Frontier. I would be curious to hear the authors’ response to my assessment, but I really can’t see how they can deny it.

“Those who cannot remember the past are condemned to repeat it.” (Santayana)

FHA 2012 Annual Report on MMIF Shows Great Stress on Agency

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The report‘s findings show that the academic critics (here and here) of the FHA’s risk analysis were on to something over the last couple of years.