December 23, 2021
Christmas Eve is almost upon us, so it is appropriate to reflect on those for whom there is “no room at the inn”—or at least those in communities who historically have been faced with systemic obstacles to finding a safe, secure, and affordable place to lay their head at night.
I’m guessing that most folks reading this newsletter are familiar with “redlining”—the practice followed by banks and insurance companies offering subprime financial products to neighborhoods of color. The 1936 map shown here has “security” designations to aid such companies in making these discriminatory decisions. (note that Capitol Hill is marked as “definitely declining”.) It seems that the property ladder, such a well-loved metaphorical part of the American Dream, had extra slippery rungs for those in the yellow and red neighborhoods.

But there is a method of exploiting disadvantaged communities that was even more egregious than the methods described above, and it was called the Chicago Contract System. According to a joint report from Duke University and the University of Illinois, this predatory system extracted three to four billion dollars from Black communities in Chicago in the 1950s and 1960s.
How is this possible? In 1934, the dream of homeownership became a reality--for White families--when the newly created Federal Housing Administration began underwriting their home mortgages. This underwriting was not available to Black families, making it impossible to get a traditional mortgage. In Chicago’s Black neighborhoods, the Contract lending system emerged as a predatory alternative to the mortgages that the residents couldn’t obtain because of this lack of underwriting.

The terms of the Chicago contracts seem incredible to those of us that have taken out typical home mortgages. There was no equity accumulation, and buyers did not own their homes until the loan was paid in full. If a buyer missed the last payment, they lost their house and all payments made to that point. Needless to say, tax deductions amounting to thousands of dollars in mortgage interest--such a boon to homeowners--were not available to contract buyers either.

Price markups on contract homes were as high as 84%, as contract lenders took advantage of the White panic created by the Supreme Court's 1948 ruling against racial neighborhood covenants. When Black families began to move into formerly segregated neighborhoods, White people became desperate to sell their homes. Contract lenders would lowball a White family with a $12,000 offer, then sell the home to a Black family for $22,000. Over the life of the loan, contract buyers paid $587 more per month (in today’s dollars) than they would have paid with a standard mortgage.

The Chicago Contract system is but one part of a larger picture of housing inequity that started with the Homestead Act of 1862, continued with the Federal Housing Administration’s creation in 1934, redlining, and racial neighborhood covenants, and persists today with racial steering, racist home appraisals, and civic planning decisions that depress home values in Black neighborhoods.…

Things you can do about current housing inequities in our area:
- Donate to the Africatown Community Land Trust, an organization formed to counter the effects of redlining and gentrification on Seattle’s Black community.
- Research your neighborhood or at the following link to see if it ever had a racial covenant:
- Research your property records, if you are a property owner, and you may find that a racial covenant is still part of your title. Although these covenants are no longer enforceable, Washington State recently passed a law that creates a process for property owners to officially rescind these covenants. The process is described here:

Best wishes for a peaceful and reflective holiday season,


Photo by Karolina Grabowska from Pexels