Racial Real Estate Steering




Racial real estate steering occurs when home seekers are guided by housing providers to communities where their race is already highly concentrated. So as racial minorities are channeled to integrated or predominantly non white neighborhoods and whites are shown homes primarily in white communities, steering con tributes directly to the segregated housing pat terns  that  have  long  persisted  in urban communities and the many costs associated with that separation.




Steering can take several forms. Information steering occurs when minority homeseekers are shown or given information on fewer homes or neighborhoods than non minority homeseekers. Segregation steering occurs when minorities are shown homes in areas with larger minority populations than areas shown to non minorities. And class steering occurs when neighborhoods shown to minority homeseekers are of lower socioeconomic status than those shown to non minorities. Several actors in the housing industry engage in steering. Mortgage lenders and insurance agents often provide less information and offer fewer, more expensive, and lower quality products to non white households or residents of non white communities than they do for whites and predominantly white communities. These practices influence the location and range of housing options for minority families. However, racial steering is most closely associated with the practices of real estate agents who are often the gateway to housing opportunities, which often differ for white and non white families.

Historically, steering was virtually required by law and widespread industry practice in many communities. Early in the twentieth century steering took the form of restrictive zoning laws that apportioned particular city neighborhoods for different racial groups. Blacks and other minorities were prohibited by law from living in certain neighborhoods of several cities, North and South. When these policies were ruled unconstitutional by the Supreme Court in the 1917 case of Buchanan v. Warley, they were replaced by the racially restrictive covenant. These covenants generally took the form of deed restrictions stating that the property could not be occupied by members of certain ethnic groups. They were promulgated and often instigated by real estate agents and mortgage brokers who would encourage entire neighborhoods to participate. The National Association of Real Estate Boards (NAREB) promoted this practice by stating in its code of ethics up until 1950 that ”a realtor should never be instrumental in introducing into a neighborhood … members of any race or nationality … whose presence will clearly be detrimental to property values in that neighbhorhood” (Massey & Denton 1993: 37). While judicial enforcement of racially restrictive covenants was declared unconstitutional in 1948, and the words ”race” and ”nationality” were eliminated from NAREB’s code of ethics in 1950, the practice of steering between already established segregated neighborhoods has continued.

Racial steering has been motivated by several factors. Real estate agents generally serve selected neighborhoods within metropolitan areas and rely heavily on word of mouth advertising to recruit new clients. Many fear loss of business if they introduce a minority family into a white neighborhood. Historically, some agents feared strong reprisals from area residents if they introduced a household that could have a ”detrimental” effect on the neighborhood. Some maintain they are simply responding to the preference of renters and buyers who prefer to live in homogeneous neighborhoods. And others no doubt still assert that they are helping to maintain property values by steering home seekers to such communities.

A combination of statutes, court cases, and regulations has declared racial steering to be unlawful. In 1968 Congress passed the federal Fair Housing Act (Title VIII of the Civil Rights Act of 1968), prohibiting discrimination on the basis of race, color, national origin, sex, or religion, and in 1988 persons with disabilities and families with children were added as protected classes. While the law does not specifically use the word “steering,” case law has generally found steering to be in violation of section 3604(a) of the Act, which states that it is unlawful ”to otherwise make unavailable” housing because of a protected class status. Both rental and sales steering have been successfully challenged in court, and not always by actual homeseekers who were steered. In Trafficante v. Metropolitan Life Insurance Co. (1972), the white plaintiffs claimed that they had been injured because they had lost the social benefits of living in an integrated community; they had missed the business and professional advantages which would have accrued if they had lived with members of minority groups; and they had suffered embarrassment and economic damage in social, business, and professional activities from being stigmatized as residents of a ”white ghetto.” Other significant steering cases included Glad stone, Realtors v. Village of Bellwood (1979) and Havens Realty Corp. v. Coleman (1982) where the court gave standing under the Fair Housing Act to other local residents and investigators with fair housing centers who claimed that steering by real estate agents was destroying the racial balance of their neighborhood or community and denying residents the benefits of integrated living. In the 1985 case of Heights Community Congress v. Hilltop Realty, Inc., the Sixth Circuit held that a real estate agent who engaged in intentional racial steering violated the Fair Housing Act. Perhaps more significantly, the court held that even if the statements made by the agents about the racial makeup of the neighborhoods were truthful, if the effect of the statements was to discourage people of particular races from considering those neighborhoods, it violated the Act.

In addition to the statutory and case law, when the Fair Housing Act was amended and strengthened by the Fair Housing Amendments Act of 1988, the US Department of Housing and Urban Development (HUD) promulgated regulations prohibiting steering, which it defined as any effort to ”restrict or attempt to restrict the choices of a person by word or conduct in connection with seeking, negotiating for, buying or renting a dwelling so as to perpetuate or tend to perpetuate, segregated housing patterns, or to discourage or obstruct choices in a community, neighborhood or development.” These regulations state that unlawful steering includes but is not limited to: (1) discouraging any person from inspecting, purchasing, or renting a dwelling because of the minority status of the person, or the minority status of the persons in a community, neighborhood, or development; (2) discouraging the purchase or rental of a dwelling because of a protected class reason by exaggerating drawbacks or failing to inform any person of desirable features of a dwelling or of a community, neighborhood, or development; (3) communicating to any prospective purchaser that he or she would not be comfortable or compatible with existing residents of a community, neighborhood, or development because of a protected class reason; or (4) assigning any per son to a particular section of a community, neighborhood, or development, or to a particular floor of a building, because of a protected class reason.

Even with the passage and strengthening of the Fair Housing Act, studies have shown that racial steering continues. These studies generally take the form of a housing audit and utilize ”matched paired testing” where white and minority testers posing as homeseekers are identically matched on all relevant housing related characteristics (e.g., income, occupation, housing preference) and sent to visit real estate offices. While many local housing audit studies have been conducted, the most comprehensive national audits have been sponsored by HUD and conducted by the Urban Institute. In 1979, 1989, and 2000, national paired testing studies were conducted. Due to methodological differences, it is not possible to draw comparisons between the 1979 research and the two subsequent studies. But the latter two studies, each of which covered more than 20 metropolitan areas, do permit some conclusions about the changing nature of housing discrimination.

The key finding from the 1989 and 2000 studies is that overall discrimination has dropped considerably, but still remains a central feature of the nation’s urban and metropolitan housing markets. The share of black and His panic homebuyers and renters experiencing discrimination dropped from approximately one third of all homeseekers in 1989 to about one out of every five in 2000. However, these studies understate the actual level of discrimination, for several reasons. The studies included only housing units that were advertised in major daily newspapers. Homes in minority neighborhoods are less likely to be advertised in these outlets than are homes generally. This is also the case for homes in exclusively white neighborhoods where racial discrimination may be the most explicit. And testers did not follow up their initial contact with housing providers, so the study did not capture behavior that occurs during subsequent visits, after an offer is made, or when insurance or mortgage loans are applied for in the homebuying process. Consequently, the 2000 study reports a conservative estimate of the actual level of discrimination that occurs in the housing market (Turner et al. 2002).

Despite the lower incidence of racial discrimination overall in 2000 compared to 1989, the frequency of racial steering actually increased. For example, the percentage of tests in which whites were shown homes in communities that had a higher white population than the communities in which black testers were shown homes increased from 7.5 percent in 1989 to 11 percent in 2000. When whites and Hispanics were paired, the share of white favored tests on this measure increased from 7.4 percent to more than 14.7 percent. However, steering most commonly occurred through informal, unsolicited comments directed to white homesekeers about the racial composition of selected neighborhoods. Among these comments were the following:

”I would not recommend (area), it’s totally black. And I don’t like (area), it’s pretty mixed.”

”There are lots of Latinos living there … I’m not supposed to be telling you that, but you have a daughter and I like you.”

”(Area) is very mixed. You probably wouldn’t like it because of the income you and your husband make. But I don’t want to sound pre­judiced.”

”(Area) is different from here; it’s multi­cultural … I’m not allowed to steer you, but there are some areas that you wouldn’t want to live in.” (Galster & Godfrey 2003: 19, 23).

If racial discrimination has declined in recent years, it persists at very high levels in the nation’s urban and metropolitan communities.

And steering has increased. Steering, along with other forms of discrimination, contributes to the ongoing segregation of American cities and its many social costs. Segregation nurtures the concentration of poverty, and particularly the concentration of poor minorities. Housing values and the wealth accumulation associated with homeownership are undercut for racial minorities because of their continued isolation from more favored neighborhoods. Consequently, racial minorities are disproportionately trapped in neighborhoods where school achievement is lower, crime rates are higher, and most public services and private amenities are of lower quality or not available at all.

But fair housing enforcement appears to be working. Reductions in discrimination during the 1990s suggest that the efforts of HUD and other law enforcement authorities, along with the work of nonprofit fair housing organizations around the country, are having the intended effect. During the 1990s lawsuits filed by nonprofit housing centers generated more than $180,000,000 for plaintiffs. But the fair housing agenda remains unfinished. Racial steering is clearly one of the issues that should be the focus of future enforcement efforts. Persisting high levels of discrimination (even if lower than in previous years) indicate that equal housing opportunity, though the law of the land, is not yet the reality.

References:

  1. Cashin, S. (2004) The Failure of Integration: How Race and Class are Undermining the American Dream. Public Affairs, New York.
  2. Galster, G. & Godfrey, E. (2003) By Words and Deeds: Racial Steering by Real Estate Agents in the US in 2000. Paper presented at the Urban Affairs Association Annual Meeting, Cleveland, OH (March).
  3. Goering, J. & Squires, G. D. (Ed.) (1999) Commem­orating the 30th Anniversary of the Fair Housing Act. Cityscape: A Journal of Policy Development and Research 4(3): 1 220.
  4. Gotham, K. F. (2002) Race, Real Estate, and Uneven Development: The Kansas City Experience, 1900 2000. SUNY Press, Albany, NY.
  5. Logan, J. R., Stults, B. J., & Farley, R. (2004) Segregation of Minorities in the Metropolis: Two Decades of Change. Demography 41(1): 1 22.
  6. Massey, D. S. & Denton, N. A. (1993) American Apartheid: Segregation and the Making of the Underclass. Harvard University Press, Cambridge,MA.
  7. Turner, M. A., Ross, S. L., Galster, G. C., & Yinger, J. (2002) Discrimination in Metropolitan Housing Markets. US Department of Housing and Urban Development, Washington, DC.
  8. Yinger, J. (1995) Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination. Russell Sage Foundation, New York.

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