According to a new report from Duke University’s Samuel Dubois Cook Center on Social Equity, between 1950 and 1970, racist real estate policy and predatory lending practices undermined black wealth in Chicago. During that 20-year period, black Chicagoans lost the equivalent of at least $3.2 billion in wealth in today’s money.
This was largely due to a particular kind of illusory mortgage called “home sale contracts.” Of the 60,000 homes purchased by black people in Chicago during the time, 75% were part of these home sale contracts.
“These contracts offered black buyers the illusion of a mortgage without the protections of a mortgage,” the report read.
That’s because buyers under these contracts do not build equity in the homes until the property is paid in full. It does not belong to the resident but to the bank or firm that sells the land. In some ways, this makes it the worst of both worlds between renting and buying. It also means that a single late payment can lead to eviction.
And the markup on these contracted homes was, on average, 84%. In today’s money, the average contract home was purchased for $71,000 more than the homeowner would’ve paid with a mortgage, according to the Duke report.
So why did black Chicagoans buy these homes in such large numbers? There weren’t other choices for building wealth through homeownership.
Lenders made it impossible to get a mortgage on homes in particular areas to aspiring homeowners of color by declaring the risk of default too high for people of color in predominantly white neighborhoods. The practice is known as redlining, named for the often literal red line drawn around these neighborhoods.
“By bringing this largely hidden and misunderstood story to life, over time, we hope that it can play a role in moving Chicagoans towards a common understanding of and genuine reckoning with our past,” said Bruce Orenstein, artist in residence at Duke’s Samuel Dubois Cook Center.
Orenstein has based a five-part film series called “Shame of Chicago” on the report.
And there is a lot of reckoning to be had with this past. According to a 2018 report, fewer than four in ten black Chicagoans own their homes today, in contrast to more than seven in ten white Chicagoans.
Katelyn Kivel is a contributing editor and senior legal reporter for Grit Post in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.