1937: Blockbusting
As this development was occurring, real estate speculators were increasing their use of a prejudice-driven tactic called blockbusting to clear entire neighborhoods once populated by middle- or upper-class whites and selling or renting houses at large profits to African Americans who had few choices for home ownership. At its most basic level, blockbusting was the process of scaring white people out of neighborhoods so corrupt investors could buy their houses at a reduced price and then sell or rent those same houses to African Americans at a huge profit. Historian Edward Orser (1994) noted that blockbusting was
The intentional action of real estate speculators to place an African American resident in a house on a previously all-white block for the express purpose of panicking the whites into selling for the profit to be gained by buying low and selling high. Blockbusting stepped into the artificial void created by the dual housing market [where whites could buy wherever they wanted but Blacks could not], relying upon African American housing needs and white racial fears to manipulate the process of racial change for their own ends. In doing so, they provided a commodity to African Americans that they previously had been illegitimately denied. But the transaction was typically exploitative, victimizing both sellers and buyers. (p. 84-85)
Journalist Alfred Balk’s detailed, first-person account of real estate speculation, also known as “panic peddling,” that turned white neighborhoods into African American neighborhoods nearly overnight.
Source: The Newberry
Once white owners sold their houses to speculators at a loss, African Americans were then duped into contract or lease option housing schemes that prevented them from owning the homes they thought they were buying. Home contracts did not require down payments or closing costs from buyers. These terms were initially attractive to African Americans with little or no credit and considered “high-risk” because of their race and lower income. But, unknown to the buyers, these housing contracts were not real mortgages (Orser, 1994, p. 91). The person who listed the home sale—a real estate speculator—held the home title and maintained the mortgage with a bank or lender. In turn, the speculator established a legally binding contract with the “buyer,” usually an African American family.
Within these complex home contracts small-print terms allowed the speculators to raise rent or terminate contracts at any point for almost any reason, which happened frequently. Some of these contracts were even verbal agreements, and so even easier to dissolve. Once the speculator declared the contract null and void, the family would have to vacate the home. Then the process would start all over again with another unsuspecting “buyer” eager to escape old and neglected neighborhoods (Orser, 1994, p. 91). Rothstein (2017) notes that it was “[t]he FHS’s redlining [that] necessitated the contract sale system for [B]lack home owners unable to obtain conventional mortgages, and this created the conditions for neighborhood deterioration” (p. 97).
In Baltimore, the Edmonson Village (Orser, 1994, p. 4) and Fulton Avenue (Pietila, 2010, p. 89) areas experienced this cycle of blockbusting and contract housing. But there were many other neighborhoods that collapsed into a cycle of poverty due to blockbusting and contract housing. The rapid increase of blockbusting and new availability of GI Bill suburban homes led to the massive out-migration of white people from U.S. cities including Baltimore. This became known as “white flight.” In turn, the tax base of the city collapsed, leaving urban areas depressed and African Americans with fewer and fewer properties they could purchase. This situation made an already bad housing shortage worse (Orser, 1994, p. 4).
Today, the results of this destructive process are evident by the thousands of vacant rowhouses throughout Baltimore in neighborhoods like Park Heights, Druid Hill, and Ashburton (Orser, 1994, p. 94). The long, brutal history of slavery, segregation, redlining, blockbusting, contract housing, prejudiced employment, and other forms of systemic racism eventually led people to organize and rise up in resistance through the civil rights movement of the 1950’s and 1960’s.