Blockbusting

Blockbusting was a business practice of U.S. real estate agents and building developers meant to encourage white property owners to sell their houses at a loss, by implying that racial, ethnic, or religious minorities — Blacks, Hispanics, Jews et al. — were moving into their previously racially segregated neighborhood, thus depressing real estate property values.^[1] Blockbusting became possible after the legislative dismantling of legally-protected racially-segregated real estate practices after World War II, but by the 1980s it disappeared as a business practice after changes in law and the real estate market.^[2]

Background

Beginning around 1900, with the Great Migration (1915–30) of black Americans from the rural Southern United States to work in the cities and towns of the northern U.S., many white people feared that black people were a social and economic threat, and countered their presence with local zoning laws requiring them to live and reside in geographically defined areas of the town or city, preventing them from moving to areas inhabited by white people.

In 1917, in the case of Buchanan v. Warley (1917), the Supreme Court of the United States voided the racial residency statutes forbidding blacks from living in white neighborhoods, as violating the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution.^[3] In turn, whites used racially restrictive covenants in deeds, and real estate businesses informally applied them to prevent the selling of houses to black Americans in white neighborhoods. To thwart the Supreme Court’s Buchanan v. Warley prohibition of such legal business racism, state courts interpreted the covenants as a contract between private persons, outside the scope of the Fourteenth Amendment; however, in the Shelley v. Kraemer (1948) case, the Supreme Court ruled that the Amendment’s Equal Protection Clause outlawed the states’ legal enforcement of racially restrictive covenants in state courts.^[4] In the event, decades of racist laws which compelled black Americans to live in over-crowded and over-priced ghettos created economic pressures to avail black people of housing in racially-segregated neighborhoods. Freed by the Supreme Court from the legal restrictions against selling white housing to blacks, real estate companies sold houses to those who could buy — if they could find a willing white seller.

Generally, “blockbusting” denotes the real estate and building development business practices yielding double profits from U.S. anti-black racism; aggravating, by subterfuge, the white home owners’ fears of mixed-race communities to encourage them to quickly sell their houses at a loss, at below-market prices, and then selling that property to black Americans at higher-than-market prices. Given then-standard banking criteria for mortgage-lending, black people usually did not qualify for mortgages from banks and savings and loan associations; instead, they recurred to land installment contracts at above market interest rates to buy a house — a racist economic strategy eventually leading to foreclosure.^[2] With blockbusting, real estate companies legally profited from the arbitrage (the difference between the discounted price paid to frightened white sellers and the artificially high price paid by black buyers), and from the commissions resulting from increased real estate sales, and from their higher than market financing of said house sales to black Americans.^[2] The documentary film Revolution ’67 (2007) examines the blockbusting practiced in Newark, New Jersey in the 1960s.

Popular culture

The serio-comic television series All in the Family (1971–79), featured “The Blockbuster”, a 1971 episode about the practice, illustrating some real estate blockbusting techniques. One of the characters in An Education, a 2009 drama film set in the UK, makes his fortune through this practice.

References

^ William Dennis Keating (1994). The Suburban Racial Dilemma: Housing and Neighborhoods. ISBN 1-56639-147-4
^ ^a ^b ^c ^d ^e ^f ^g Mehlhorn, Dmitri (December 1998). “A Requiem for Blockbusting: Law, Economics, and Race-Based Real Estate Speculation”. Fordham Law Review 67: 1145–1161.
^ Buchanan v. Warley, 245 U.S. 60 (1917).
^ Shelley v. Kraemer, 334 U.S. 1 (1948).