Real Estate Agents as Agents of Social Change: Redlining, Reverse

Seattle Journal for Social Justice Seattle Journal for Social Justice

Volume 12 Issue 1 Article 2

2013

Real Estate Agents as Agents of Social Change: Redlining, Real Estate Agents as Agents of Social Change: Redlining,

Reverse Redlining, and Greenlining Reverse Redlining, and Greenlining

Mary Szto

Hamline Law School

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Greenlining,"

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: Vol. 12: Iss. 1, Article 2.

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Real Estate Agents as Agents of Social Change:

Redlining, Reverse Redlining, and Greenlining

Mary Szto

BSTRACT

This article examines the role of US real estate agents in redlining,

reverse redlining, and greenlining practices. Redlining was the practice of

the Federal government, private banks, and other institutions to deny credit

to neighborhoods based on race. Reverse redlining is marketing inferior

credit and other products to those same neighborhoods. Greenlining is

incenting investment in previously redlined neighborhoods. This article

argues that although many real estate agents used practices that unjustly

excluded access to neighborhoods, all can be faithful agents of inclusion to

global, flourishing communities. That is, while real estate agents took

leading roles in redlining and reverse redlining in the past, they can now

lead in greenlining efforts. Moreover, those who want to effect greater

access to global flourishing communities should consider becoming real

estate agents.

Associate Professor, Hamline Law School. BA, Wellesley College. MAR, Westminster

Theological Seminary. JD, Columbia Law School. Thank you to my research assistant

Kristie Lutz, the editors of the Seattle Journal for Social Justice, the Hamline University

Hedgeman Center for Student Diversity Initiatives and Programs, and Jamie Lee. This

article is for my Race and Law Seminar students.

2 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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I. INTRODUCTION 3



II. REAL ESTATE AGENTS AS FIDUCIARIES 4

III. REDLINING 9

A. THE ROLE OF REAL ESTATE AGENTS IN REDLINING 16

1. Blockbusting and Contract Selling 21

IV. REVERSE REDLINING 28

A. THE ROLE OF REAL ESTATE AGENTS IN REVERSE REDLINING 36

1. Steering 37

2. Promotion During Housing Bubble and Bust 42

V. GREENLINING AND OTHER SOLUTIONS 43

A. FLOURISHING COMMUNITIES 46

1. The Role of Real Estate Agents in Greenlining and Promoting

Global Flourishing Communities 52

VI. CONCLUSION 56

APPENDIX 1 59

LETTER OF HEALING AND HOPE 59

Real Estate Agents as Agents of Social Change 3

VOLUME 12 • ISSUE 1 • 2013

I. INTRODUCTION

This article examines the role of real estate agents in the US in redlining,

reverse redlining, and greenlining. Redlining was the practice of the Federal

government, private banks, and other institutions to deny credit to

neighborhoods based on race. Reverse redlining is marketing inferior credit

and other products to those same neighborhoods. Greenlining is incenting

investment in previously redlined neighborhoods.

For most Americans, homeownership is the chief means of accumulating

wealth.

A home not only provides physical shelter, but also provides access

to neighborhood resources such as sustenance, schools, transportation, jobs,

and faith communities. Home equity also funds higher education,

entrepreneurship, and other avenues of financial mobility. Real estate

brokers and agents are often gatekeepers of neighborhoods with higher

property values. While historically many agents unjustly barred access to

such neighborhoods, they may now be agents of inclusion to flourishing

communities. Flourishing communities offer more to residents than higher

property values. They draw from the strength of nature and multiple

cultures, and are fountains of healthful and sustainable access to creative

work and other cultural activity. They are places for vibrant artistic

expression and incubators for lively, locally-owned businesses.

First, I will discuss the beginning of the real estate profession in the US

and the choice to make realtors fiduciaries — both paralleled

industrialization and the rise of professionalism. Second, I will discuss the

role of real estate agents in redlining practices. Redlining began in the

1930s but its origin lies deeper in the aftermath of slavery and racial

hierarchy theories that peaked in popularity at that time. Mandated by

discriminatory real estate board codes of ethics and federal lending and

MELVIN L. OLIVER & THOMAS M. SHAPIRO, BLACK WEALTH/WHITE WEALTH: A

NEW PERSPECTIVE ON RACIAL INEQUALITY 8 (1995).

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appraisal standards, real estate agents prevented buyers from entering

certain neighborhoods or, through blockbusting practices, persuaded sellers

to move based on racial lines. Some were contract sellers who offered

onerous terms to minority buyers.

Third, I will discuss reverse redlining, which came to the forefront

around the 2000s and contributed to the housing market collapse and global

credit crisis of the early twenty-first century. Many real estate agents

encouraged borrowers to apply for subprime loans, which led to increased

defaults and foreclosures. Often, targeted borrowers were from

communities that previously had been redlined.

Finally, I will examine greenlining practices, which promote investment

in previously redlined neighborhoods and can promote global flourishing

communities. I conclude that although in the past many real estate agents

were agents of unnecessary exclusion by taking active roles in redlining and

reverse redlining, and almost no role in greenlining, all real estate agents

can become agents of flourishing inclusion. They can–and should—take the

lead in greenlining. This would be consonant with their original calling of

being faithful professionals and thriving entrepreneurs. Also, individuals

who want to effect social change should consider becoming real estate

agents.

II. REAL ESTATE AGENTS AS FIDUCIARIES

Full time real estate brokers appeared in the US in the 1800’s.

Their

appearance paralleled the industrialization and urbanization of the US. As

the US moved from an agricultural-based economy to an industrialized one,

real estate agents began to broker sales of land, rentals, and development of

JEFFREY HORNSTEIN, A NATION OF REALTORS: A CULTURAL HISTORY OF THE

TWENTIETH-CENTURY MIDDLE CLASS 14 (2010).

Real Estate Agents as Agents of Social Change 5

VOLUME 12 • ISSUE 1 • 2013

property. Some soon developed a reputation for being unscrupulous and

were called “curbstoners.”

To combat unsavory practices, in 1847, the first real estate board was

established in New York.

However, the board was unable to stave off the

housing bust of the late 1800s. Following the bust, the National Association

of Real Estate Associations was formed in 1908,

later becoming the

National Association of Real Estate Boards (NAREB).

In 1913, NAREB

adopted a Code of Ethics based on the Golden Rule.

The term “Realtor”

was approved in 1916 to identify men who were members of boards that

belonged to NAREB.

Boards in the fast growing cities of both the Midwest and West drove the

impetus for professionalism.

As much as possible, realtors wanted to be

associated with “the established professions of law, medicine, and, less

frequently, the ministry and engineering.”

The boards sought to protect

Id. at 14.

ROSE HELPER, RACIAL POLICIES AND PRACTICES OF REAL ESTATE BROKERS 173,

220 (1969).

Id. at 221.

The National Association of Real Estate Boards (NAREB) should not be confused

with the National Association of Real Estate Brokers (also called NAREB), which was

formed in 1947 for black brokers. About NAREB, available at http://nareb.com/about-

nareb/ (last visited Feb. 22, 2014). The National Association of Real Estate Boards later

became the National Association of Realtors (NAR). NAR’s Mission, Vision, and History,

available at http://www.realtor.org/about-nar/mission-vision-and-history (last visited

Feb. 22, 2014) [hereinafter NAR’s Mission].

NAR’s Mission, supra note 6; Frederik Heller, The Code Hits 100, REALTOR MAG.

(Nov. 2012), http://realtormag.realtor.org/law-and-ethics/ethics/article/2012/11/code-hits-

100; See also HORNSTEIN, supra note

2, at 58.

HELPER, supra note 4, at 221. The term “realtor” was coined by broker Charles N.

Chadbourn in Minneapolis in 1911. HORNSTEIN, supra note 2, at 76. In 1917, it

appeared in Webster’s Dictionary. Id. at 75-76. It became a registered trademark in 1950.

AVID BARRY, NINE PILLARS OF THE CITADEL: A REPORT SUBMITTED TO THE FEDERAL

TRADE COMMISSION/U.S. DEPARTMENT OF JUSTICE WORKSHOP ON COMPETITION

POLICY AND REAL ESTATE INDUSTRY, 43 (Nov. 2005), available at

http://www.justice.gov/atr/public/workshops/rewcom/213351.pdf.

HORNSTEIN, supra note 2, at 1.

Id. at 48.

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“civic virtue,”

“intelligently create great cities,” and “bring

homeownership to every American.”

Real estate brokerage was a calling,

requiring “risk taking, tact, and vision…’building cities’ and helping

families to acquire homes of their own, the foundation of civilization.”

Boards standardized practices, including lease forms, eviction

procedures,

commissions, and the collection and organization of data.

The national organization, based in Chicago, promulgated model licensing

and zoning laws, which were often adopted verbatim.

Boards also

promoted city planning and sought to “stabilize values.”

They established

multiple listing services (MLS) and ways to share commissions.

However,

access to the MLS was restricted to members.

Early on, NAREB decided that brokers would be agents instead of

independent contractors.

They also instituted the “exclusive agency”

agreement with owners; these were agreements for 60 to 90 days.

Any

broker who found a buyer had to share his commission with the listing

broker.

Agents are fiduciaries.

By adopting the fiduciary model, NAREB

promoted their members’ professionalism. A fiduciary is a selfless actor.

Id. at 19.

Id. at 35.

Id. at 51.

Id. at 21.

Id. at 15.

Id.

Id. at 16.

Id. at 17.

Thomas J. Miceli et.al., Restructuring Agency Relationships in the Real Estate

Brokerage Industry: An Economic Analysis, 20 J.

REAL ESTATE RESEARCH. 31, 34

(2000).

HORNSTEIN, supra note 2, at 17.

Id.

RESTATEMENT (SECOND) OF AGENCY § 1(1) (1958); RESTATEMENT (THIRD) OF

AGENCY §1.01 (2006).

RESTATEMENT (THIRD) OF AGENCY §8.01 CMT. B (2006).

Real Estate Agents as Agents of Social Change 7

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The fiduciary sets aside his or her personal interests to serve the principal.

Fiduciary duties originated in the common law, and ultimately from the

courts of equity, canon, and Roman law.

These duties are usually divided

into two main categories: duties of care and duties of loyalty.

Duties of

care include diligence.

Duties of loyalty include not making a profit at the

expense of the principal and conveying all relevant information to the

principal.

The breach of fiduciary duties is a tort, and, if breached, agents

must forfeit all profits and commissions.

A real estate broker runs a business, which is licensed by the state. State

licensing began around 1916.

Brokerages hire agents, who also must pass

licensing requirements.

For many decades, real estate brokers and agents were mainly white men.

However, this began to change during World War II when, in 1947, the

National Association of Real Estate Brokers was formed for blacks who

were excluded from the National Association of Real Estate Boards

(NAREB).

In 1972, NAREB changed its name to the National Association of

Realtors (NAR).

Since the 1970s, the NAR has been the largest trade

See Mary Szto, Limited Liability Company Morality: Fiduciary Duties in Historical

Context, 23 Q

UINNIPIAC L. REV. 61, 86–98 (2004) for the historical origins of agency.

See generally, RESTATEMENT (SECOND) OF AGENCY §376-396 (1958); RESTATEMENT

(THIRD) OF AGENCY § 8.01-8.12 (2006).

RESTATEMENT (THIRD) OF AGENCY § 8.08 (2006).

RESTATEMENT (SECOND) OF AGENCY § 381 (1958); RESTATEMENT (THIRD) OF

AGENCY § 8.11 (2006).

Robert Hayes, The Practice of Dual Agency in California: Civil Code Sections 2373-

2382, 21

U.S.F.L. REV. 81, 82 (1986); WILLIAM A. GREGORY, THE LAW OF AGENCY

AND

PARTNERSHIP § 71 (3d. 2001).

HELPER, supra note 4, at 221.

See generally, Barlow Burke, Law of Real Estate Brokers §12.01-12.04 (2007).

State of Housing In Black America, NAT’L ASS’N OF REAL ESTATE BROKERS,

http://www.narebshiba.com/page_id=2 (last visited Jan. 16, 2013).

NAR’s Mission, supra note 6.

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association in the US.

The National Association of Hispanic Real Estate

Professionals was founded in 1999.

And, in 2003, the Asian Real Estate

Association was founded.

The National Association of Real Estate

Brokers is now known as NAREB; this should hopefully not be confused

with the former National Association of Real Estate Boards, which is now

the NAR.

Today, almost two-thirds of agents are white women.

The average agent

today is female, 57-years-old, married, and has some college education.

While 72 percent of the US population is white,

87 percent of agents are

white.

While 13 percent of US citizens are African-American,

only four

percent of agents are African-American;

16 percent of Americans are

Hispanic or Latino,

while only 5 percent of agents are;

5 percent of

Americans are Asian,

while 4 percent of agents are Asian.

Id.

Hispanics and Homeownership, NAT’L ASS’N OF HISPANIC REAL ESTATE

PROFESSIONALS, ,http://nahrep.org/facts-and-figures (last visited Jan. 16, 2013).

About AREAA, ASIAN REAL ESTATE ASS’N OF AM.,

http://areaa.org/about.php?PHPSESSID=9285dcefac415bd4e315e5d22df003a1 (last

visited Jan. 16, 2013).

In this article, unless otherwise noted, NAREB will refer to the older organization that

was originally formed in 1908.

NAT’L ASS’N OF REALTORS, MEMBER PROFILE 2010, 65–73 (2010) [hereinafter NAR

2010] available at http://www.realtor.org.

NATIONAL ASSOCIATION OF REALTORS, MEMBER PROFILE 2013, 7 (2013), available

at www.realtor.org/sites/.../2013-member-profile-highlights-2013-05.pdf .

Press Release, U.S. Census Bureau, 2010 Census Shows America’s Diversity, (Mar.

24, 2011), available at http://www.census.gov/newsroom/releases/archives/2010_census/

cb11-cn125.html.

NAR 2010, supra note 38, at 73.

U.S. Census Bureau, supra note 40.

NAR 2010, supra note 38, at 73.

U.S. Census Bureau, supra note 40.

NAR 2010, supra note 38, at 73.

U.S. Census Bureau, supra note 40.

NAR 2010, supra note 38, at 73.

Real Estate Agents as Agents of Social Change 9

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Today, the NAR has over 1.2 million members.

Although most real

estate brokers and agents do not belong to NAR, the organization’s policies

dominate the industry. Throughout its history, NAREB/NAR has promoted

single-family home ownership as consonant with the American dream and

in line with a better citizenry.

This dovetailed with federal housing

policies. The development of the realty industry thus contributed to the

discourse of the middle class, which came into being with

industrialization.

NAREB/NAR promoted its role as fiduciaries of the

American public.

III. REDLINING

Redlining is “[a] pattern of discrimination in which financial institutions

refuse to make mortgage loans, regardless of the credit record of the

applicant, on properties in specified areas because of alleged deteriorating

conditions.”

Official redlining practices began in the 1930’s during the Great

Depression. A housing bubble and bust preceded the Great Depression.

Before mortgage lending became affordable, only wealthy families could

buy homes. Banks would require 50-60 percent for a down payment and

Mission, Vision, and History, NAT’L ASS’N OF REALTORS,

http://www.realtor.org/about-nar/mission-vision-and-history (last visited Dec. 10, 2012).

HELPER, supra note 4, at 195.

HORNSTEIN, supra note 2, at 1–11.

Id. at 63.

BLACK’S LAW DICTIONARY 1279

(6th ed. 1990).

Evan Soltas, Housing Was at the Root of the Great Depression, Too, BLOOMBERG

NEWS, Sept. 25, 2012, http://www.bloomberg.com/news/2012-09-25/housing-was-at-the-

root-of-the-great-depression-too.html; Charles L. Nier, III, Perpetuation of Segregation:

Toward a New Historical and Legal Interpretation of Redlining Under the Fair Housing

Act, 32 J.

MARSHALL L. REV. 617, 619-20 (1999) [hereinafter Nier, III]. “During the five

year span from 1928 to 1933, residential property construction decreased by 95%, while

home repair expenditures dropped 90%. By 1933 half of all the nation’s residential

mortgages were technically in default, with foreclosures reaching the rate of over 1000

per day.” Id.

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repayment within one to three years.

In 1935, NAREB argued that the

federal government should subsidize mortgages and private ownership, not

public housing.

The federal government agreed and enacted multiple programs to revive

the economy and increase employment. These programs promoted

residential construction and made home ownership widely available.

This

was achieved by “standardized homebuilding procedures” to address the

“rising costs of construction,” and by providing mortgage insurance.

Such

mortgage insurance lowered interest rates from six to eight percent down to

four percent, and raised the amounts that could be financed from 50 to 70

percent of the purchase price to 90 percent.

After 1939, with a federally

insured mortgage, it was cheaper to purchase than to rent.

Unfortunately, three underlying assumptions of these federal programs

were the following: (1) people could be divided by race; (2) only white

communities held property values; and therefore; (3) segregation by race

was necessary to protect white property values. Thus, these programs

introduced official racial redlining

and allowed the government to

ANTERO PIETILA, NOT IN MY NEIGHBORHOOD: HOW BIGOTRY SHAPED A GREAT

AMERICAN CITY 72 (2010).

TIMOTHY MCDONNELL, S.J., THE WAGNER HOUSING ACT: A CASE STUDY OF THE

LEGISLATIVE PROCESS 138–39 (1957), available at http://historymatters.gmu.edu/d/5106

(citing Walter S. Schmidt, Report Concerning Certain Federal and Private Activities in

the Field of Real Estate and Housing)).

Nier, III, supra note 53, at 621–24.

HORNSTEIN, supra note 2, at 119.

BERYL SATTER, FAMILY PROPERTIES: RACE, REAL ESTATE, AND THE EXPLOITATION

BLACK URBAN AMERICA 41 (2009).

Id. at 41 (citing KENNETH T. JACKSON, CRABGRASS FRONTIER: THE

SUBURBANIZATION OF THE UNITED STATES 196, 204-06 (1985)). One could rent an

apartment in the city for $50 a month; with an FHA loan, one could purchase a home for

$5000 in the suburbs with a down payment of $550 and a mortgage payment of $26.91 a

month. Id.

Nier, III, supra note 53, at 620.

Real Estate Agents as Agents of Social Change 11

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promote restrictive racial covenants and segregation.

In effect, only whites

received federally insured mortgages.

Up until this time, banks had already decided not to lend to blacks.

Additionally, racial covenants, i.e., agreements not to sell or rent to persons

of non-Caucasian race, and statutory discrimination were common. These

restrictions paralleled eugenics theories of the 1800’s that attempted to

justify social and economic hierarchy based on physical characteristics.

American interest in eugenics peaked from the 1890’s through 1920’s,

and

the US was a leader in its promotion.

In eugenics, persons were divided

into the Caucasian, Negroid, and Mongoloid races; Caucasians were

considered superior to the other two.

Eugenicists studied characteristics

such as “skin color, hair texture, skull shape [and] brain size . . . .”

Among

Caucasians, Anglo-Saxons were the “peak of human existence,” followed

by Northern Europeans.

Others, including Mediterraneans, could only

succeed if they “assimilated” into Anglo-Saxon society.

Assimilation

meant adopting Anglo-Saxon language, and legal, religious, and economic

culture.

Ironically, because of immigration curbs, which attempted to keep

Stanley P. Stocker-Edwards, Black Housing 1860-1980: The Development,

Perpetuation, and Attempts to Eradicate the Dual Housing Market in America, 5 H

ARV.

BLACK LETTER J. 50, 55–56 (1988); 12 U.S.C. § 1701 (1934).

PIETILA, supra note 54, at 64.

See id. at 42–46, for a fascinating discussion of eugenics and its parallel development

to discriminatory housing practices.

Id.at 32.

Id.at 44.

Charles A. Gallagher, White, in HANDBOOK OF THE SOCIOLOGY OF RACIAL AND

ETHNIC RELATIONS 11 (Hernán Vera & Joe R. Fagin, eds., 2007).

PIETILA, supra note 54, at 42.

Id.

JUAN F. PEREA, RICHARD DELGADO, ET AL., RACE AND RACES: CASES AND

RESOURCES FOR A DIVERSE AMERICA 508 (2d. ed.) (2007) (citing Joe Feagin, Old

Poison in New Bottles: The Deep Roots of Modern Nativism, in I

MMIGRANTS OUT! (Juan

F. Perea ed., 1997)).

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America’s Caucasians “pure,” jobs in the North opened up for blacks from

the South.

The first great Northern migration of blacks occurred in the 1910’s and

1920’s.

Much violence, including bombings, ensued as whites tried to

prevent blacks from moving near them.

In 1910, Baltimore enacted the

first statute in the US that forbade blacks and whites from moving into each

other’s neighborhoods.

In 1917, the Supreme Court struck down such laws

in Buchanan v. Warley for violating the due process clause of the

Fourteenth Amendment.

However, the same year, the Supreme Court

held that private racial covenants were enforceable in Corrigan v. Buckley.

Racial covenants remained legally enforceable until 1948.

A typical restrictive covenant stated, “At no time shall said premises . . .

be sold, occupied, let or leased . . . to anyone of any race other than the

Caucasian, except that this covenant shall not prevent occupancy by

domestic servants of a different race domiciled with an owner or tenant.”

Early California covenants excluded Chinese.

Other covenants specifically

excluded Jews, Catholics, Mexicans, and Italians.

One black

PIETILA, supra note 54, at 47.

Stocker-Edwards, supra note 61, at 51.

Id. at 55.

PIETILA, supra note 54, at 22–23.

Buchanan v. Warley, 245 U.S. 60 (1917).

See generally Corrigan v. Buckley, 271 U.S. 323 (1926).

See generally PIETILA, supra note 54. Baltimore had a three-tiered housing market:

whites, Blacks, and Jews. See id. at 15, 18, 56-57. Neighborhood succession went from

“white” to Jewish to black. Id.; see also Buchanan v. Warley, 245 U.S. 60 (1917).

SATTER, supra note 58, at 40 (citing CLEMENT E. VOSE, CAUCASIANS ONLY: THE

SUPREME COURT, THE NAACP, AND THE RESTRICTIVE COVENANT CASES (1967)).

PIETILA, supra note 54, at 48.These were “struck… down as a violation of the most-

favored-nation clause of an 1868 U.S. Treaty with China.” Id. Subsequently, violence

was used against the Chinese. Id.

PIETILA, supra note 54, at 49.

Real Estate Agents as Agents of Social Change 13

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neighborhood excluded whites.

Thus, redlining paralleled racial

covenants.

The federal Home Owner’s Loan Corporation (HOLC) “initiated and

institutionalized . . . redlining.”

With the use of secret color-coded maps

that spanned the nation, the HOLC had four designations: green, blue,

yellow, and red.

Properties, blocks, and neighborhoods were rated.

White areas were “green” and were recommended for lending.

Neighborhoods with Jews were ranked blue or yellow and considered

risky.

A neighborhood with blacks was rated red, no matter what

economic level the blacks had.

Redlined areas were considered “worthless

or likely to decline in value[,]” and no loans could be made for “either

purchasing or upgrading.”

Thus, redlining was the real estate kiss of death.

HOLC’s unfortunate innovation was to make racial discrimination in

lending uniform across the nation.

The Federal Housing Administration (FHA) and the Veterans’

Administration (VA) adopted HOLC’s discriminatory practices and granted

loans only to buyers whose homes were located in “stable and desirable”

communities.

The FHA had detailed maps of “the present and likely future

Id. at 48.

Reggie Oh, Apartheid in America: Residential Segregation and the Colorline in the

Twenty-First Century, 15 B.C.

THIRD WORLD L.J. 385, 390–91 (1995); Nier, III, supra

note 53, at 621–24. The HOLC was designed to offer low-interest loans to individuals

who were in danger of losing their homes or had already lost their homes. Benjamin

Howell, Exploiting Race and Space: Concentrated Subprime Lending as Housing

Discrimination, 94 C

AL. L. REV. 101, 107–08 (Jan. 2006).

PIETILA, supra note 54, at 61.

SATTER, supra note 58, at 41.

Id. at 41-42.

Id. at 42.

Id.

PIETILA, supra note 54, at 64.

Oh, supra note 82, at 391–92. These “stable” and “desirable” neighborhoods were

usually “comprised exclusively or almost exclusively of white families.” Nier III, supra

note 53, at 624–26. The Federal Housing Administration and Veterans Administration

14 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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location[s]” of blacks.

Even a block with a single black home could be

redlined; this gave whites even more incentives to exclude blacks.

The

FHA Underwriting Manual warned against creating incompatible racial

neighborhoods.

The organization also drafted a model racial restrictive

covenant

and often insisted upon imposing them when granting mortgage

insurance.

Even after a racial covenant had expired, the FHA tried to

enforce them!

Although redlining began in the 1930’s, its repercussions

can be felt today. “[The FHA] and VA programs subsidize nearly one-half

of all mortgaged homes…”

“Between 1930 and 1970, 98 percent of all

federally subsidized mortgages went to white families.”

Interestingly, the definition of “white” changed over time. Originally, it

meant those of British and northern European ancestry.

However,

gradually, Italians, the Irish, and Jews also became classified as “white.”

100

“completely altered the residential housing market in the United States by financing

suburbanization.” Id. The Federal Housing Administration favored financing of “single-

family detached homes over multi-family projects,” favored new homes over repairing

old homes, and required appraisers to guarantee loans. Id. at 625. All of these factors

encouraged white families to move out of the city rather than repair their city homes. Jon

C. Dubin, From Junkyards to Gentrification: Explicating a Right to Protective Zoning in

Low-Income Communities of Color, 77 M

INN. L. REV. 739, 751 (Apr. 1993); Alex M.

Johnson, Jr., How Race and Poverty Intersect to Prevent Integration: Destabilizing Race

as a Vehicle to Integrate Neighborhoods, 143 U.

PA. L. REV. 1595, 1612–13 (May

1995).These programs opened a cheap market for homes in the suburbs, but denied

access to blacks through the official policies and manuals of each institution. Id.

SATTER, supra note 58, at 42.

Id. at 45.

Dubin, supra note 90, at 751.

Stocker-Edwards, supra note 61, at 55.

SATTER, supra note 58, at 42.

PIETILA, supra note 54, at 73.

Dubin, supra note 90, at 752.

Oh, supra note 90, at 393.

PEREA ET AL., supra note 70.

100

See James R. Barrett & David Roediger, How White People Became White and Karen

Brodkin Sacks, How Did Jews Become White Folks? reprinted in R

ACE AND RACES:

CASES AND RESOURCES FOR A DIVERSE AMERICA, 508–13, 516–24 (2d. ed.) (2007).

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Redlining, unfortunately, became a self-fulfilling prophecy. “As real

estate appraisal became professionalized in the 1930’s, the reigning

consensus was that homeowners should be separated by both class and

race.”

101

FHA appraisers “channeled mortgage insurance to white, suburban

areas and away from black, inner-city neighborhoods.”

102

Minority housing

values decreased due to the lack of loans (and thus home purchases).

103

White neighborhoods experienced an increase in appraisal value because

white buyers received federally funded loans to purchase those homes.

104

Also, because blacks could not receive mortgage loans, they became

victims of contract selling. White speculators received mortgages for

redlined areas by offering kickbacks to banks.

105

They then bought

properties at market rate, and then sold them for at least double their market

value to blacks on contract.

106

If the contract buyers missed one payment,

they were evicted.

107

The results of all these practices were violence, white flight from urban

neighborhoods, hyper-segregation, and slum conditions in redlined black

neighborhoods. In the 1948 landmark case of Shelley v. Kraemer, the

Supreme Court held racial covenants legally non-enforceable.

108

The FHA

101

Howell, supra note 82, at 110. “This consensus was premised on the belief that the

influx of certain races into an area would cause property values there to decline.” Id.

102

Id. at 112.

103

Id. at 113–15. Additionally, it became even more unlikely that whites would purchase

homes in minority areas if occupying such residences meant they would pay higher

interest rates for loans and insurance. Id.

104

Id. at 113–15.

105

SATTER, supra note 58, at 114.

106

Id. at 3. It was not uncommon for a speculator to sell property to a black buyer at three

times its market rate. Id. For example, in 1955 a white real estate agent bought a house

for $4,300 and one week later sold it for $13,900 to a black family. Id.

107

Stocker-Edwards, supra note 61, at 83 (citing V. FRANKLIN, THE EDUCATION OF

BLACK PHILADELPHIA: THE SOCIAL AND EDUCATIONAL HISTORY OF A MINORITY

COMMUNITY, 1900-1950 63 (1979)). It appears that Blacks were also exploited in the

1920’s by brokers who threatened to evict black tenants unless these tenants bought their

homes at inflated prices. Id.

108

See Shelley v. Kraemer, 334 U.S. 1 (1948).

16 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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insisted, at the time, that the decision would not change its policies.

109

Eventually, by the early 1950s, the FHA implemented a policy of equal

opportunity, but it did not begin to address the discriminatory practices of

private lenders until 1968.

110

Until 1965, the FHA did not offer mortgage

insurance “in most black neighborhoods and in all racially changing

ones…”

111

A. The Role of Real Estate Agents in Redlining

I don’t object to selling to minority people, but there is one thing I

will not do and never have done . . . It is being the first to sell in a

white neighborhood to a colored family or some race that is not

wanted in the neighborhood, because you lose your prestige . . .

your insurance business, because they get mad at you . . . my

goodwill is worth more to me than a few sales.

112

[A]ll men are created equal as far as the Good Book says . . . I just

let conscience be my guide.

113

- Chicago brokers interviewed in 1955-56

Like many other institutions, the National Association of Real Estate

Brokers (NAREB) maintained explicit racially discriminatory policies for

several decades. The FHA and NAREB’s discriminatory policies were

exacerbated by blockbusting practices of brokers,

114

which in turn

109

SATTER, supra note 58, at 43.

110

Dubin, supra note 90, at 752.

111

SATTER, supra note 58, at 357.

112

See HELPER, supra note 4.

113

Id. at 128.

114

Garrett Power, Apartheid Baltimore Style: The Residential Segregation Ordinances of

1910-1913, 42 M

D. L. REV. 289, 320 (1983).

Real Estate Agents as Agents of Social Change 17

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aggravated apprehension of integrated living.

115

Physical separation

increased racial stereotypes.

116

After the US Supreme Court outlawed statutory racial restrictions in

1917, real estate boards resolved to nevertheless prevent nonwhites from

living in white neighborhoods.

117

The Chicago Real Estate Board decided

they would only sell property to blacks on blocks with blacks, and only

after such blocks were filled solidly, to contiguous blocks.

118

In 1921, the

Chicago Real Estate Board voted to expel “any member who rented or sold

property on a white block to blacks.”

119

Chicago’s work became a model for

other Boards and NAREB.

120

Restrictions included Japanese buyers.

121

For

example, the Board of Portland, Oregon, put in its Code of Ethics that “[n]o

member of the Board will directly or indirectly sell or be a party to the sale

of Portland residential property to persons of the Negro or Oriental races

now inhabited almost exclusively by white persons.”

122

In response to actions by local boards around the country, NAREB

revised its Code of Ethics in 1924, including the introduction of Article 34.

From 1924 through 1950, under Article 34, a broker was forbidden from

“introducing into a neighborhood a character of property or occupancy,

members of any race or nationality . . . whose presence will clearly be

detrimental to property values in that neighborhood.”

123

“Thirty-two states

115

Keith Aoki, Race, Space, and Place: The Relation Between Architectural Modernism,

Post-Modernism, Urban Planning, and Gentrification, 20 F

ORDHAM URB. L.J. 699, 751–

52 (1993).

116

Id. at 752. Racial stereotypes were furthered by the use of African Americans as

“scab” labor. Id. Companies used minorities to break up strikes through the 1930s. Even

though this practice disappeared, the negative feelings towards minority workers did not.

Id.

117

HELPER, supra note 4, at 226.

118

SATTER, supra note 58, at 40.

119

PIETILA, supra note 54, at 50.

120

SATTER, supra note 58, at 40.

121

HELPER, supra note 4, at 227.

122

Id. at 228.

123

Id. at 201.

18 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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adopted ‘model real estate licensing acts’ that authorized state commissions

to revoke the licenses of agents who violated NAREB’s Code of Ethics.”

124

Therefore, legally and by its Code of Ethics, NAREB members were

required to enforce segregation. Those who did not were considered

traitors.

125

According to one account:

Even in neighborhoods without restrictive covenants, the

[Baltimore Board’s] standard real estate sales contract decreed that

‘at no time, shall the land included in said agreement or any part

thereof, any building erected thereon, be occupied by any negro or

negroes, or persons of negro or African extraction or descent, in

whole or in part.’

126

Therefore, just as federal lending was synonymous with racial

discrimination, so racial discrimination was with being a licensed realtor.

Following the Supreme Court’s 1948 ban of the legal enforcement of

racial covenants, in 1950, NAREB removed the language “members of any

race or nationality” from its Article 34.

127

However, in studies done in the

1950s and 1960s, brokers confirmed that the amended language of Article

34 still meant racial discrimination in practice.

128

Although the NAREB

disclosed in both 1926 and 1945 statements that it would aid “Negroes and

other minority groups” with housing, this meant only in segregated

neighborhoods.

129

It was not a coincidence that NAREB and federal housing policies were

both racially discriminatory. Richard Ely, a professor at the University of

Wisconsin, and a progressive movement leader, worked closely with

124

PIETILA, supra note 54, at 50.

125

HELPER, supra note 4, at 276.

126

PIETILA, supra note 54, at 53.

127

HELPER, supra note 4, at 232–33.

128

Id. at 232–335.

129

Id. at 236. Unfortunately, disparaging remarks about women and other minorities

including “Chinamen” were common at meetings and banquets of local boards.

HORNSTEIN supra note 2, at 25.

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VOLUME 12 • ISSUE 1 • 2013

NAREB to promulgate a body of “land science” that justified the

professionalism of real estate brokers. Ely commissioned Frederick

Babcock to write a text on real estate appraisal in the 1920s.

130

Babcock became head of the FHA’s underwriting division, during which

time he drafted appraisal guidelines for the FHA, including its mortgage

risk grid.

131

Babcock wrote “that ‘the desirability’ of a neighborhood rested

‘primarily on its [racial, ethnic, and class] homogeneity.’”

132

Moreover, in

his 1932 book, The Valuation of Real Estate, he wrote the following:

Among the traits and characteristics of people which influence

land values, racial heritage . . . seem[s] to be of paramount

importance . . . [and] can result in a very rapid decline. Usually

such declines can be partially avoided by segregation and this

device has always been in common usage in the South where white

and negro populations have been separated.

133

Unfortunately, Ely himself held that Negroes were more suited to being

tenants than owners.

134

Homer Hoyt became the FHA’s chief economist in 1934 following his

time as a real estate broker in Chicago.

135

In his 1933 dissertation, Hoyt

ranked nationalities in terms of real estate ownership: “English, Germans,

Scots, Irish, Scandinavians” ranked highest, and “Negroes” and “Mexicans”

ranked lowest.

136

Until the 1960’s, appraisal manuals used Hoyt’s hierarchy

and also advised neighborhoods to have covenants.

137

130

HORNSTEIN, supra note 2, at 143.

131

HELPER, supra note 4, at 202.

132

HORNSTEIN, supra note 2, at 107.

133

HELPER, supra note 4, at 202.

134

HORNSTEIN, supra note 2, at 108 (citing Richard T. Ely and Charles J. Galpin,

Tenancy in an Ideal System of Land Ownership, A

M. ECON. REV. 9, no.1, 180–212 (Mar.

1919)).

135

PIETILA, supra note 54, at 62.

136

Id.

137

Id. at 64.

20 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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The official policy of the American Institute of Real Estate Appraisers

was also explicit. It stated that racial diversity contributed to the devaluing

of property because, “when a new class of people of different race, color,

nationality, and culture moves into a neighborhood, there is a tendency on

the part of the old inhabitants to . . . move to other districts.”

138

Other standard real estate texts also equated property value with racial

homogeneity and stated that property values decline with an increase of

black residents.

139

One text cited “racial invasion” as a prime reason why a

seller leaves.

140

A 1956 text refers to entrance of “Mexican nationals” and

Negro farm workers as reasons for prior residents to leave.

141

In 1946, “no Japanese could buy property in Spokane unless the sale was

reviewed by a special board set up by the Spokane Realty Board for that

purpose.”

142

In 1948, when the US Supreme Court decided Shelley v.

Kramer, which held racial covenants unenforceable, NAREB filed a brief in

favor of racial covenants.

143

In the 1960s, NAREB vowed to fight open occupancy, i.e., non-

segregated neighborhoods, and fair housing legislation.

144

In 1963, the

NAREB set forth its Policy on Minority Housing, emphasizing that it

opposed “open occupancy,” that brokers were marketing intermediaries, and

that the “right of property owners free to determine with whom they will

deal is a right fundamental in the American tradition . . . [and] that the

broker fully performs his legal and social responsibilities when he faithfully

138

HELPER, supra note 4, at 201.

139

Id. at 202.

140

Id. at 211.

141

Id. at 215.

142

Id. at 231.

143

PIETILA, supra note 54, at 107.

144

SATTER, supra note 58, at 192.

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engages to find a purchaser acceptable to his principal . . . .”

145

Even until

the 1970s there existed separate multiple listings for Jews.

146

Black brokers were excluded by many real estate boards; they formed

their own boards in the 1920s, and a national association in 1947.

147

The

local boards spun off of the National Business League, which was founded

by Booker T. Washington in the beginning of the 1900’s.

148

The boards

called members “realtists.”

149

As noted earlier, the national black group was

called the National Association of Real Estate Brokers. It was founded in

Tampa, Florida, “as an equal opportunity and civil rights advocacy

organization for African American real estate professionals, consumers and

communities in an overtly racist America.”

150

In Baltimore, blacks were not

allowed to become realtors until the 1960s.

151

Blacks formed the Real Estate

Brokers of Baltimore as realtists.

152

The national association played a

significant role in promoting the “first local fair housing legislation in 1962

in New York City, the first state fair housing legislation in 1963 in

California and the first national fair housing legislation in both 1947 and

1968.”

153

1. Blockbusting and Contract Selling

[T]hese brokers go out into other neighborhoods and for cash

bonuses persuade the savings and loan officers out of the

neighborhood to make . . . 80 percent loans . . . I bought a home

145

HELPER, supra note 4, at 286–87.

146

PIETILA, supra note 54, at 143.

147

HELPER, supra note 4, at 237.

148

NAREB History, NAT’L ASS’N OF REAL ESTATE BROKERS,

http://www.narebshiba.com/?page_id=2 (last visited Jan. 16, 2013) [hereinafter NAREB

History].

149

Id.

150

Id.

151

PIETILA, supra note 54, at 144.

152

Id.

153

NAREB History, supra note 148.

22 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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from a speculator. He had paid $12,000 for it. He had a loan for

$11,500 and had to put out only $500. (Chicago broker in

1950s).

154

[I]n April 1957 . . . Albert and Sallie Bolton . . . were being

evicted from their home . . . . They had paid . . . .$13,900 for a

cramped, one-hundred-year-old wood-frame house . . . the white

real estate agent, Jay Goran . . . had himself purchased the building

only the week before—for $4,300 . . . the scam went deeper . . .

Goran never told the Boltons that he was the building’s owner. He

convinced them to . . . sign some complicated documents that

stipulated [the current owner remained owner] . . . until they had

entirely paid off the property’s cost, plus 6 percent interest,

through high monthly installments.

155

The term,“blockbusting,” was named after the Allied bombs that were

used in World War II, which had the potential to destroy an entire city

block.

156

The practice of Blockbusting, in the real estate sense, occurred

most between the 1950s and 1970s.

157

The practice generally proceeds as

follows: brokers or speculators urge white homeowners to move because of

rumors of an influx of black residents, resulting in white owners selling

their homes at low prices out of panic.

158

The broker then guides black

buyers towards these homes and sells them at an elevated price,

159

subdivides properties and rents at a premium.

160

This practice arose in the 1940s because of the federal policy of

redlining, NAREB and state policies of racial segregation, personal

convictions by brokers, and a growing black buyer market. By offering

154

HELPER, supra note 4, at 181.

155

SATTER, supra note 58, at 3–4.

156

PIETILA, supra note 54, at 96.

157

Dmitri Mehlhorn, A Requiem For Blockbusting: Law, Economics, and Race-Based

Real Estate Speculation, 67 F

ORDHAM L. REV. 1145, 1147 (Dec. 1998).

158

Note, Racial Steering: The Real Estate Broker and Title VIII, 85 YALE L. J. 808, 812

(May 1976) [hereinafter Racial Steering].

159

Id. at 812.

160

Aoki, supra note 115, at 751–52.

Real Estate Agents as Agents of Social Change 23

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kickbacks to bank officers, blockbuster-speculators obtained loans for

redlined properties, or they “were financed by syndicates of private

investors, often headed by lawyers . . . .”

161

They sometimes rigged auctions

of properties.

162

On the one hand, the white homeowner was willing to sell at a lower

price because speculators offered cash. Homeowners also might sign an

exclusive agency agreement with a speculator and then be locked in.

163

Panic selling created an oversupply, which lowered prices.

164

Also, white

buyers disappeared with rumors of a black transition.

165

On the other hand, black buyers were willing to pay a higher price to

speculators because they could pay with a small or no down payment and

on contract.

166

They had no alternative because they were uniformly denied

credit by banks due to redlining. Blacks were often not told that the broker

was also the owner of the property, nor that they would be saddled with

oppressive repair costs. The contract for deed was paid in monthly

installments to the speculator. If a black buyer defaulted on only one

payment, the speculator could reclaim the property and still resell at a

profit.

167

Many speculators resold properties multiple times.

Contracts for deeds were not recorded, nor was an appraisal conducted; a

purchaser could move in right away.

168

Contract selling also had a

secondary market. Contract sellers raised more cash by selling their

contracts at a discount to “reputable doctors, dentists, lawyers, and other

business and professional[s].”

169

Lenders stayed away from initial black

161

PIETILA, supra note 54, at 99.

162

Id. at 100.

163

HELPER, supra note 4, at 179.

164

Id.at 86.

165

Id.

166

Id. at 177.

167

HELPER, supra note 4, at 179.

168

PIETILA, supra note 54, at 99.

169

SATTER, supra note 58, at 75.

24 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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purchases because of the frequent violence, vandalism, and arson that

accompanied them. However, after this danger subsided, lenders aided

further purchases.

170

Who were blockbusters? In interviews done with Chicago brokers in the

1950s and 1960s, many brokers denied being the first to introduce a black

owner or tenant to a white neighborhood because this often led to violence

and police intervention.

171

Brokers who lived in such neighborhoods

expressed dismay at bringing upheaval to white homeowners who feared

crime, declining schools, intermarriage, and depressed property values.

172

They also feared losing business from white clients and the disdain of other

local brokers. However, once they believed change was inevitable, local

brokers sold homes to subsequent black owners on a block. Therefore,

blockbusters appeared to be brokers from outside the neighborhood.

173

Brokers saw an enormously profitable practice: borrowing money at low

rates, buying homes at low prices, selling at high prices often multiple

times, and earning money on both interest rates and sales prices.

174

One

broker stated that there were probably “15 or 20 white brokers that

specialize in . . . being first.”

175

Blockbusters may also have been local

firms that secretly collaborated with outside firms.

176

In Baltimore, blockbusters sometimes used straw black buyers so they

could withstand the violence in being the first blacks on a block.

177

Many

170

HELPER, supra note 4, at 90.

171

Id. at 121.

172

Id. at 80. Sadly, blockbusting is reminiscent of a prior practice of speculators.

Speculators would buy land in a prominent neighborhood, announce construction of a

nuisance, and then blackmail residents to buy them out. HORNSTEIN, supra note 2, at

21.

173

HELPER, supra note 4, at 176.

174

Id. at 4.

175

Id. at 256.

176

Id.

177

PIETILA, supra note 54, at 145. It is unclear who these straw buyers were; how long

they stayed, and how they were compensated.

Real Estate Agents as Agents of Social Change 25

VOLUME 12 • ISSUE 1 • 2013

blockbusters hired part-time salesmen, such as milkmen and mailmen,

because they knew the neighborhood well.

178

They would knock on doors

and plead for a listing.

179

After the first house had been sold to a black

family, other homes would be “bombarded with solicitation cards and

letters, telephone calls at all hours, and personal visits.”

180

Agents were not

beyond telling crude lies such as, “Did you hear about the rape?”

181

Not all blockbusters were white. In at least one account, an African-

American blockbuster saw his work as part of the civil rights movement,

opening up home owning opportunities to blacks.

182

The speculators not only victimized black buyers, but also banks. When

buyers could not afford their monthly payments, speculators defaulted on

their bank loans.

183

Banks then sold these foreclosed buildings at rock

bottom prices, which speculators then repurchased!

184

Speculators also

intentionally destroyed properties to earn money from arson insurance.

185

In 1962, blockbusting was brought to public attention and outrage

ensued.

186

Some communities enacted anti-solicitation ordinances and for-

sale sign restrictions.

187

Anti-solicitation ordinances prohibit brokers from

contacting uninterested or unwilling homeowners.

188

Similarly, for-sale sign

restrictions regulated the size and placement of signs.

189

178

Id.

179

Id. at 146.

180

Id.

181

Id.

182

Id.

183

SATTER, supra note 58, at 333.

184

Id. at 334.

185

Id. at 335.

186

Mehlhorn, supra note 157, at 1153.

187

Mark W. Zimmerman, Opening the Door to Race-Based Real Estate Marketing:

South-Suburban Housing Center v. Greater South Suburban Board of Realtors, 41

EPAUL L. REV. 1271, 1287 (1992).

188

Id. at 1287.

189

Id. at 1290. “Tipping characterizes a phenomenon in which an increasing ratio of

blacks to whites in a neighborhood triggers white flight from the neighborhood, resulting

26 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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Eight days after the murder of Dr. Martin Luther King, Jr. and the

ensuing riots across the nation, the Civil Rights Act of 1968 was passed.

190

Title VIII of the Act (more commonly known as the Fair Housing Act)

declared redlining, blockbusting, and lending discrimination illegal.

191

Further responses from the federal government included enacting the Home

Mortgage Disclosure Act (HMDA) and the Community Reinvestment Act

(CRA),

192

both of which focused on whether lending institutions were

meeting the needs of their communities.

193

Unfortunately, NAREB opposed the Fair Housing Act.

194

Also, in the

1970’s the FHA was riddled by scandal. By this time, the FHA had

extended mortgage insurance to low-income, minority areas. However,

speculators abused this program too. Across the country, real estate

in resegregation.” Note, Benign Steering and Benign Quotas: The Validity of Race-

Conscious Government Policies to Promote Residential Integration, 93 H

ARV. L. REV.

938, 941–42 (Mar. 1980) [hereinafter Benign Steering]. Tipping occurs because whites

and minorities have different ideas of what an integrated neighborhood should look like

in terms of percentages of minority members. Id. ”Black entry creates white

apprehension, leading to white exit and a decline in white entry, which further increases

white apprehension, encouraging still more whites to leave and fewer whites to enter.

Ultimately a new black ghetto is created.” Id. at 943.

190

NICK KOTZ, JUDGMENT DAYS: LYNDON JOHNSON, MARTIN LUTHER KING, JR. AND

THE

LAWS THAT CHANGED AMERICA 420 (2005).

191

Nier, III, supra note 53, at 630–31.

192

A. Brooke Overby, The Community Reinvestment Act Reconsidered, 143 U. PA. L.

REV. 1431, 1461–65 (May 1995); Craig E. Marcus, Beyond the Boundaries of the

Community Reinvestment Act and the Fair Lending Laws: Developing a Market-Based

Framework for Generating Low- and Moderate-Income Lending, 96 C

OLUM. L. REV.

710, 713, 720 (Apr. 1996). Under the Community Reinvestment Act, institutions were

“graded” under four categories of compliance, yet most institutions were rated

“Outstanding” or “Satisfactory,” regardless of the differences in their practices and

whether they were meeting community needs. The only incentives for financial

institutions to work toward better ratings were the possibilities of denial of an expansion

application and negative publicity

. Instituitions that lacked a desire to expand ceased

efforts to obtain a better rating because the grading was not consistent and denials of

applications were nearly unheard of. Id.

193

Nier, III, supra note 53, at 632–34. The HMDA worked to discover “red flags,” and

the CRA worked to enforce those institutions’ obligations to their communities. Id.

194

Stocker-Edwards, supra note 61, at 71.

Real Estate Agents as Agents of Social Change 27

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agencies bribed “[FHA] appraisers to overlook structural flaws and inflate

the values of homes sold . . . .”

195

Then speculators sold buildings at an

inflated price to blacks and Hispanics.

196

Speculators falsified loan

applications so lenders would provide FHA-insured mortgages.

197

Mortgage

companies made more money when borrowers defaulted because the FHA

paid interest and service fees.

198

In the 1970s, real estate brokers told white homeowners that their

neighborhoods were considered FHA areas to get them to sell their

homes.

199

Because these longstanding homeowners had mortgage loans at

rates as low as 3.5 percent, mortgage companies were eager to see them

move so they could finance new buyers at much higher rates. In the 1970s,

banks in Philadelphia still refused to lend to whites or blacks who wanted to

purchase homes in neighborhoods of the other race.

200

By the 1980s and early 1990s, blockbusting ceased to exist in the public

eye.

201

However, flipping appeared in the mid-1990s. This involved brokers

purchasing property for dirt cheap, not making any repairs, and then selling

them to black buyers for exorbitant amounts, such as five times the original

sales price.

202

These broker/sellers then offered financing at twice the

market interest rate.

203

They offered kickbacks to appraisers whose

fraudulent documentation was accepted by greedy mortgage brokers and

195

Michael H. Schill & Susan M. Wachter, The Spatial Bias of Federal Housing Law and

Policy: Concentrated Poverty in Urban America, 143 U.

PA. L. REV. 1285, 1312–13

(May 1995).

196

SATTER, supra note 58, at 340.

197

Id.

198

Id.

199

Id.

200

Stocker-Edwards, supra 61, at 88 (citing P. MULLER, METROPOLITAN PHILADELPHIA:

A STUDY OF CONFLICTS AND SOCIAL CLEAVAGES 16 (1976)).

201

Mehlhorn, supra note 157, at 1158–59. Federal courts were hearing less and less cases

involving blockbusting allegations, evidence of blockbusting had disappeared, and cities

began “dismantling their blockbusting regimes.” Id.

202

PIETILA, supra note 54, at 257.

203

Id. at 257–58.

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title companies.

204

Sadly, as with contract selling a few decades earlier,

many black families lost their homes because of flipping practices.

205

Unfortunately, the practices of redlining, blockbusting, contract selling,

and flipping prepared the way for reverse redlining, which contributed to

the global financial crisis of the first decade of the 2000’s.

IV. REVERSE REDLINING

As she describes it, Beth Jacobson and her fellow loan officers at

Wells Fargo Bank ‘rode the stagecoach from hell’ for a decade,

systematically singling out blacks . . . for high-interest subprime

mortgages . . . . Ms. Jacobson said that she made $700,000 one

year and that the company flew her and other subprime officers to

resorts across the country.

[In his affidavit, Mr. Paschal stated] Wells Fargo created a unit . . .

to push expensive refinancing loans on black customers . . . . They

referred to subprime loans as ghetto loans . . . they hired blacks to

call on African-American churches.

206

Reverse redlining is the practice of targeting vulnerable communities,

often previously redlined, for predatory lending. These borrowers often

suffer a lack of access to information about other means of credit. Like the

contract sellers of prior years, predatory lenders offer onerous terms, which

are likely to lead to default. Although not all subprime lending is

predatory,

207

much subprime lending uses oppressive tactics with disastrous

consequences. As described below, subprime borrowers may end up paying

204

Id. at 258.

205

Id.

206

Michael Powell, Bank Accused of Pushing Mortgage Deals on Blacks, N.Y. TIMES,

June 7, 2009, http://www.nytimes.com/2009/06/07/us/07baltimore.html?_r=0.

207

Ashley N. Young, The Real Estate Agent’s Role in the Housing Crisis: A Proposal for

Ethical Reform, 24 G

EO. J. LEGAL ETHICS 973, 978 (2011) (citing Harold L. Levine, A

Day in the Life of a Residential Mortgage Defendant, 36. J.

MARSHALL L. REV. 687, 688

(2003)).

Real Estate Agents as Agents of Social Change 29

VOLUME 12 • ISSUE 1 • 2013

thousands of dollars more in interest and fees than prime borrowers, putting

them at higher risk of default and foreclosure.

With the creation of the Federal Home Loan Mortgage Corporation in

1970, known as Freddie Mac, residential lending increased sharply because

lenders had more available funds after selling their loans on the secondary

mortgage market.

208

With this came more mortgage brokers, who do not

directly bear the risk of default.

209

Rather, these brokers reaped benefits

from lending overpriced loans. Subprime lending was supposed to make

credit available to more borrowers, especially the underserved.

210

However,

its abuses have led to the opposite outcome. This industry grew immensely

during the 1990s and early twenty-first century.

211

Who is a prime borrower and subprime borrower? The Fair, Isaacs, and

Company’s (FICO) credit scoring system “track[s] records of . . . consumer

credit, disproportionately raising the scores of those who adhere to credit

practices traditionally recognized as prudent, and depressing the scores of

those who have lived nontraditional economic lives.”

212

A bad credit score

prevents an individual from moving into the prime loan market,

perpetuating their bad score.

213

As redlining conflated property values with

208

Howell, supra note 82, at 117. The practice of combining loans into securities and

subsequently selling them on a secondary market is called “securitization.” Id.

209

Id. at 118. “Securitization also made possible the increase market share of non-deposit

institutions, namely mortgage brokers, who typically originate loans on behalf of

wholesale lenders which in turn sell the mortgages into the secondary market.” Id.

210

Charles L. Nier, III & Maureen R. St. Cyr, A Racial Financial Crisis: Rethinking the

Theory of Reverse Redlining to Combat Predatory Lending Under the Fair Housing Act,

83 T

EMP. L. REV. 941, 944 (2011).

211

Id. at 944. Automation of the lending process and limited mortgage lending

regulations “helped to increase the popularity and perceived attractiveness of subprime

loans.”

212

Howell, supra note 82, at 126.

213

Id. at 127. High interest rates of non-traditional loans reduce the borrower’s ability to

pay, thus lowering their credit score, and some borrowers simply choose to under-invest

in their creditworthiness in order to avoid excessive fees. These actions lead lenders to

lower borrowers’ credit rating further, perpetuating the cycle. Id.

30 SEATTLE JOURNAL FOR SOCIAL JUSTICE

EATTLE JOURNAL FOR SOCIAL JUSTICE

race, FICO correlates low credit scores with the percentage of minorities in

a neighborhood.

214

A typical subprime loan product is an adjustable rate mortgage (ARM)

with a teaser low interest rate, which then jumps to a higher rate. These

have to be periodically refinanced to avoid the higher rates. Each time they

are refinanced, more fees are earned by the mortgage industry. However,

when appraisal values drop, refinancing is no longer possible. Because

these loans were securitized and sold on a secondary market, lenders passed

on this risk to others.

Discretionary pricing, a common practice related to reverse redlining,

also plagued subprime borrowers.

215

A lender evaluates an applicant’s risk

factors, determines a risk-based interest rate, and then authorizes additional

charges for the applicant.

216

These unjustifiably increased fees cause

financial hardship and increased risk of foreclosure,

217

but lead to greater

profits for lenders and brokers.

218

Predatory practices did not end with loan origination. When a borrower

defaulted on a loan, predatory mortgage brokers arranged for second

loans,

219

or repossessed property upon foreclosure.

220

They also “rescued”

homeowners facing foreclosure by purchasing their homes, renting them to

214

Id. at 125.

215

Robert G. Schwemm & Jeffrey L. Taren, Discretionary Pricing, Mortgage

Discrimination, and the Fair Housing Act, 45 H

ARV. C.R.-C.L. L. REV. 375, 395 (2010).

216

Id. at 395–96.

217

Id. at 397.

218

Id.

219

Lloyd T. Wilson, Jr., Effecting Responsibility in the Mortgage Broker-Borrower

Relationship: A Role for Agency Principles in Predatory Lending Regulation, 73 U.

CIN.

L. REV. 1471, 1482 (2005). This usually only occurs if there is still equity in the property.

Id.

220

Id. at 1482. This requires a lender to bid on the property at a foreclosure sale. The

lender will then turn around and offer the property in conjunction with high-risk

financing. Id.

Real Estate Agents as Agents of Social Change 31

VOLUME 12 • ISSUE 1 • 2013

the victims, and later evicting them.

221

Another practice involved former

mortgage brokers offering their services as a “loan expert,” charging large

upfront fees, and offering little to no assistance.

222

Subprime lending produces a vicious cycle: as more borrowers default

because of oppressive terms, more subprime lending is needed for already

devastated communities.

223

It is estimated that 61 percent of “subprime”

borrowers would have qualified for prime credit.

224

If they had received

prime loans, their loan payments would have been affordable. Subprime

loans were aggressively marketed to African-American and Hispanic

borrowers.

225

A person of color who was qualified for a prime loan was

three times more likely to be wrongfully steered towards a subprime loan.

226

A high-earning black was almost twice as likely as a low-income white to

have a subprime loan.

227

Target marketing was possible because of segregation, which allowed for

a lack of information infiltration in vulnerable populations.

228

Marketers

could easily identify neighborhoods that had racial minorities.

229

Thus,

221

Linda E. Fisher, Target Marketing of Subprime Loans: Racialized Consumer Fraud &

Reverse Redlining, 18 J.L.

& POL’Y 121, 145 (2009).

222

Id. at 145–46.

223

See Howell, supra note 82, at 106–07.

224

HEATHER MCCULLOCH AND PREETI VISSA, EXPANDING SUSTAINABLE

HOMEOWNERSHIP FOR COMMUNITIES OF COLOR IN THE WAKE OF THE FORECLOSURE

CRISIS, 8 (2011), available at http://greenlining.org/issues/economic-equity/2011/

expanding-sustainable-homeownership-for-communities-of-color-in-the-wake-of-the-

foreclosure-crisis/.

225

Howell, supra note 82, at 129.

226

McCulloch & Vissa, supra note 224, at 15 (citing LAYING THE FOUNDATION FOR

NATIONAL PROSPERITY: IMPERATIVE OF CLOSING THE RACIAL WEALTH GAP (2009)).

227

Id.

228

Howell, supra note 82, at 122–23. Unfortunately, segregation has also led to huge

gaps in educational opportunities for blacks and other minorities. Segregated

neighborhoods also lend themselves to inequitable police and criminal justice practices.

For a description of the scandalous practices that lead to the crisis of the inordinate

number of incarcerated minorities, see M

ICHELLE ALEXANDER, THE NEW JIM CROW:

MASS INCARCERATION IN THE AGE OF COLORBLINDNESS (2012).

229

Fisher, supra note 221, at 128.

32 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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lenders, mortgage brokers, and real estate agents systematically exploited

vulnerable neighborhoods that were scarred by redlining.

230

This industry

used fraud to achieve their earnings goals.

231

As in the practices of the

1960s and 1970s, lenders wrongly stated income, assets, and property

values.

232

As in the days of contract selling in the 1940s through 1960s, the

result of these fraudulent practices was crushing loan terms, often resulting

in home foreclosures.

233

According to Beth Jacobson, a subprime loan officer at Wells Fargo, the

bank had “an emerging-markets unit that specifically targeted black

churches, because it figured church leaders had a lot of influence and could

convince congregants to take out subprime loans.”

234

The bank’s

euphemistic term for subprime lending was “alternative lending.”

235

The

seminars were called “wealth building” seminars, and Wells Fargo donated

$350 to a borrower’s church when a borrower took a loan from Wells

Fargo.

236

Ms. Jacobson further states that other tactics used at Wells Fargo

included telling underwriting departments that their clients did not provide

income verification when W-2’s were available, cutting and pasting credit

reports from one customer to another, putting “bounties” on minority

borrowers, and giving bonuses to loan officers who referred prime

borrowers to subprime products.

237

Sadly, for a customer who had a

$165,000 mortgage, paying the subprime interest rate meant $100,000 more

230

Howell, supra note 82, at 102.

231

Id. at 103.

232

Fisher, supra note 221, at 142.

233

Id. at 142–43.

234

Powell, supra note 206.

235

Fisher, supra note 221, at 140 (citing Affidavit of Elizabeth Jacobson, Mayor of

Baltimore v. Wells Fargo Bank, N.A., No. 08-cv-00062, 29 (D. Md. June 1, 2009)).

236

Creola Johnson, The Magic of Group Identity: How Predatory Lenders Use Minorities

to Target Communities of Color, 17 G

EO. J. ON POVERTY L. & POL’Y, 165, 173 (2010)

(citing affidavit by Tony Pachal, 10).

237

Powell, supra note 206.

Real Estate Agents as Agents of Social Change 33

VOLUME 12 • ISSUE 1 • 2013

in interest payments!

238

Lending practices elsewhere included lenders and

brokers filling out loan applications for borrowers with wildly inflated

income numbers.

239

In 2011 and 2012, Wells Fargo and two other lenders settled

discrimination suits with the Department of Justice after being accused of

steering African-American and Hispanic borrowers to subprime loans.

240

Although the lenders denied any wrongdoing, Bank of America agreed to

pay $335 million related to its Countrywide Financial unit, and SunTrust

Mortgage paid out $21 million.

241

In July 2012, Wells Fargo, the nation’s

largest mortgage lender, also denying wrongdoing, agreed to pay at least

$175 million

242

to more than 30,000 African-American and Hispanic

borrowers.

243

Wells Fargo also agreed to pay $50 million for homebuyer

assistance programs in hard-hit communities around the nation.

244

Investigators found that outside brokers originating Wells Fargo loans

charged minority borrowers higher fees.

245

According to Thomas Perez,

head of the Justice Department’s Civil Rights Division, an African-

American seeking a $300,000 loan paid an average of nearly $3,000 more

in fees than a similarly qualified white applicant, which he described as

amounting to a “racial surtax.”

246

238

Id.

239

Fisher, supra note 221, at 143.

240

Wells Fargo Settlement: A Predatory Lender Pays Up, BALTIMORE SUN, July 15,

2012, http://articles.baltimoresun.com/2012-07-15/news/bs-ed-wells-fargo-20120715_1_

subprime-mortgages-minority-borrowers-mortgage-brokers [hereinafter Wells Fargo].

241

Id.

242

Id.

243

Meg Handley, In ‘Financial Tragedy’ Wells Fargo to Pay $175M Over Predatory

Lending Allegations, U.S.

NEWS, July 13, 2012, http://www.usnews.com/news/blogs/

home-front/2012/07/13/in-financial-tragedy-wells-fargo-to-pay-175m-over-predatory-

lending-allegations.

244

Id.

245

Wells Fargo, supra note 240.

246

Id. This is in stark contrast to “white privilege,” the deference that many white persons

receive not only in lending but in many other arenas such as job and educational

34 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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The consequences of reverse redlining and predatory lending have been

disastrous. Before 2000, home prices tracked median household incomes

and price inflation.

247

From 2000 to 2005, homeownership rates increased,

including minority ownership.

248

In 2005, however, housing prices began to

stagnate or decline, and all gains made since 2000 were lost.

249

Moreover,

reverse redlining has also led to re-redlining. Since the subprime financial

crisis, among the four largest US banks, prime refinancing rose by 32

percent in white communities, and fell by 33 percent in minority

communities.

250

Although minority borrowers were targeted for subprime loans, they

cannot be blamed for the foreclosure crisis.

251

The majority of these loans

were made to white borrowers, and minority borrowers were not originally

more likely to default than white borrowers.

252

However, the higher charges

and fees assessed against minority borrowers have wiped out their wealth.

Among subprime borrowers, black homeowners paid higher interest rates

than white homeowners!

253

They paid more interest than white prime

borrowers!

254

As in contract selling, communities of color have been

opportunities. For a discussion of white privilege, see STEPHANIE WILDMAN, PRIVILEGE

REVEALED: HOW INVISIBLE PREFERENCE UNDERMINES AMERICA (1996).

247

Schwemm & Taren, supra note 215, at 377.

248

Id.

249

Id. at 377–78.

250

MCCULLOCH & VISSA, supra note 224, at 9 (citing CALIFORNIA REINVESTMENT

COALITION ET. AL., PAYING MORE FOR THE AMERICAN DREAM IV: THE DECLINE OF

PRIME MORTGAGE LENDING IN COMMUNITIES OF COLOR (May 2010)).

251

Nier, III & St. Cyr, supra note 210, at 951.

252

Id. at 950–51.

253

MCCULLOCH & VISSA, supra note 224, at 17 (citing Carolina Reid & Elizabeth

Laderman The Untold Costs of Subprime Lending: Examining the Links Among Higher-

Priced Lending, Foreclosures and Race in California (Fed. Reserve Bank of San

Francisco, Working Paper (2009)).

254

MCCULLOCH & VISSA, supra note 224, at 17.

Real Estate Agents as Agents of Social Change 35

VOLUME 12 • ISSUE 1 • 2013

stripped of assets and wealth, deepening the wealth gap between white and

black families.

255

Before the crisis, a minority family held only 16 cents for each dollar of

wealth that a white family held.

256

Moreover, of minority wealth, 61 percent

was held in home equity,

257

as opposed to only 38.5 percent for whites.

258

California in 2006, the median net worth for whites was $304,982, as

opposed to $51,000 for minorities.

259

Across the nation in 2008, 74.9

percent of whites owned their own homes, compared with only 47.5 percent

of African-Americans and 48.9 percent of Hispanics.

260

Around 4.5 percent

of whites have faced foreclosures; whereas 8 percent of blacks and Latinos

have also faced foreclosures.

261

Blacks and Latinos are also twice as likely

to be in risk of imminent foreclosure.

262

Sadly, Latino families report an average loss of $89,155 due to

foreclosure.

263

Indirect wealth loss for foreclosures between 2009 and 2012

totaled $193 billion for African-Americans and $180 billion for Latino

communities.

264

In 2011, 21.6 percent of African-Americans and 21.4

percent of Latino homeowners were at risk of foreclosure.

265

In addition to

financial losses, foreclosure also brings depression, marital disruption, and

decline in work and academic performance.

266

255

Nier, III & St. Cyr, supra note 210, at 947.

256

MCCULLOCH & VISSA, supra note 224, at 6 (citing CORPORATION FOR ENTERPRISE

DEVELOPMENT, ASSETS AND OPPORTUNITY SPECIAL REPORT: NET WORTH, WEALTH

INEQUALITY AND HOMEOWNERSHIP DURING THE BUBBLE YEARS (2008)).

257

MCCULLOCH & VISSA, supra note 224, at 6.

258

Melvin Oliver & Thomas M. Shapiro, Subprime as a Black Catastrophe, AMERICAN

PROSPECT, Sept. 22, 2008, http://prospect.org/article/sub-prime-black-catastrophe.

259

MCCULLOCH & VISSA, supra note 224, at 19.

260

Id.

261

Id. at 15.

262

Id.

263

Id. at 8.

264

Id. at 5.

265

Id. at 7.

266

Id. at 16.

36 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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According to a 2008 US Census report, homeownership rates for Asians

dropped the most, down 1.24 percent making the current rate 59.4

percent.

267

African-Americans had a 0.88 percent drop to 45.6 percent,

268

Hispanic ownership dipped 0.80 percent to 49.1 percent, and white

ownership decreased 0.40 percent to 73.4 percent.

269

The loss in Asian

home ownership may be attributable to the fact that two-thirds of Asians in

America are foreign born, leading to language and cultural barriers, which

present a significant obstacle for distressed homeowners.

270

Unfortunately, the US government has not officially acknowledged this

devastation in communities of color. The 633 page report released by the

Financial Crisis Inquiry Commission in January 2011 did not mention the

destruction of wealth that subprime lending has wreaked on the African-

American community

271

and other minorities.

A. The Role of Real Estate Agents in Reverse Redlining

Real estate agents played several roles in aiding the proliferation of

reverse redlining. They steered customers towards segregated

neighborhoods, which made targeted marketing possible. They also

aggressively sold homes in a housing bubble by touting cheery forecasts

and promoting subprime loans.

Although the Fair Housing Act prohibited racial steering and

blockbusting, NAREB continued to advocate for discriminatory

practices.

272

NAREB’s position was that realtors do not violate the law by

267

Asian Homeownership Rates Hit Hardest in the Current Real Estate Downturn, ASIAN

REAL ESTATE ASS’N OF AM., Sept. 25, 2009, http://www.areaa.org/index.php/advocacy.

268

Id.

269

Id.

270

Id.

271

Nier, III & St. Cyr, supra note 210, at 942. The FCIC interviewed over “…700

witnesses and reviewed millions of pages of documents . . . .” Its silence on minorities is

astounding. Id. at 941–42.

272

Stocker-Edwards, supra note 61, at 71–72.

Real Estate Agents as Agents of Social Change 37

VOLUME 12 • ISSUE 1 • 2013

not showing homes in particular neighborhoods due to the buyer’s race,

because the law only makes actionable a refusal to sell a dwelling that the

purchaser wants to buy.

273

Therefore, the purchaser must be aware of such a

dwelling.

274

In 1988, the federal government authorized the Housing and Urban

Development office (HUD) to sue real estate agents for discrimination.

275

This action has lessened overt practices of discrimination.

276

There have

also been increased training opportunities for agents in FHA compliance.

277

Nevertheless, some agents continue to discriminate because their

business is dependent on personal contacts and ties to certain

communities.

278

If an agent’s personal connections leave a community, he

or she loses his or her territory and business.

279

Even if an individual agent or brokerage does not have any express racial

animus, unconscious bias often may come into play. Unconscious bias may

be ingrained in one’s youth by parental and societal attitudes, and media

images.

1. Steering

In October 1996, the Holleys visited Triad Realty’s office in

California where they met with agent Grove Crank . . . . While the

Holleys [wanted a home ranging from $100,000 to $150,000],

Crank only showed them houses that were out of their price range .

. . the Holleys located a house on their own within their price range

273

Id.

274

Id.71–72.

275

RICHARD GREG MOYE JR., THE IMPACT OF SHIFTING NEIGHBORHOOD RACIAL

COMPOSITION ON HOME VALUE APPRECIATION 17–18 (Jan. 2012) (unpublished Ph.D.

dissertation, Temple University), available at http://gradworks.umi.com/3493922.pdf

(last visited July 3, 2013).

276

Id. at 17.

277

Id. at 18.

278

Stocker-Edwards, supra note 61, at 77–78.

279

Id.

38 SEATTLE JOURNAL FOR SOCIAL JUSTICE

EATTLE JOURNAL FOR SOCIAL JUSTICE

Suspiciously, this house was among the homes listed by Triad but

it was never shown to [them]. The Holleys still [wanted to buy the

house] and although they and the seller were willing to go forth

with the sale, Crank refused to sell the house to those ‘n’ and even

called the Holleys the ‘salt and pepper team.’ Eventually, the home

was sold for $20,000 less than the amount the Holleys had

offered.

280

It is estimated that minorities face discrimination half of the time when

purchasing or renting homes.

281

In 1976, an observer in Philadelphia stated

that the most common tactic used to preserve a dual housing market was

directing whites and blacks to different home listings.

282

This practice of

racial steering refers to pointing white buyers to white neighborhoods and

minority buyers to minority neighborhoods.

283

These practices can be

divided into two categories: (1) counseling buyers to buy homes in

neighborhoods matching their race; and (2) refusing to show homes that

would otherwise meet the criteria of buyers.

284

The following actions, in conjunction with other proof, tend to occur in

instances of racial discrimination: misrepresenting the neighborhood,

availability of the home, or its terms and conditions; pointing out bad

characteristics or racial composition of the neighborhood; offering to sell a

home in a different part of town; placing “sold” signs at available

properties; breaking appointments or not making a home reasonably

available for inspection; breaching a sales contract; or selling the home to a

280

Andrene N. Plummer, A Few New Solutions to a Very Old Problem: How the Fair

Housing Act Can Be Improved to Deter Discriminatory Conduct by Real Estate Brokers,

47 H

OW. L. J. 163, 163 (citing Holley v. Crank, 258 F. 3d 1127, 1129–30 (9th Cir. 2001).

281

Id. at 184 (citing Abraham Bell & Gideon Parchomovsky, The Integration Game, 100

OLUM. L. REV. 1965, 1966 (2000)).

282

Stocker-Edwards, supra note 61, at 87 (citing P. MULLER, METROPOLITAN

PHILADELPHIA: A STUDY OF CONFLICTS AND SOCIAL CLEAVAGES 40 (1976)).

283

Racial Steering: The Real Estate Broker and Title VIII, 85 YALE L. J. 808, 809 (May

1976) [hereinafter Racial Steering].

284

Id. at 809–10.

Real Estate Agents as Agents of Social Change 39

VOLUME 12 • ISSUE 1 • 2013

white buyer after refusing to sell it to a minority buyer.

285

If a home in a

primarily white neighborhood was sold to a black family, that family has to

pay more than if they were white.

286

Agents may steer buyers because sellers instruct them not to sell to

certain races, or because the agent assumes home owners and buyers desire

segregated communities and by steering the agent satisfies their

preferences,

287

or because it is profitable to employ both a steering and

blockbusting strategy.

288

Brokers also make assumptions about the incomes

of prospective buyers leading to unequal treatment.

289

Brokers also protect

sellers’ racist interests by making excuses for why a seller refuses to sell to

a minority.

290

In a 1969 study, whites preferred neighborhoods that “are at least 80%

white, while blacks prefer neighborhoods that are . . . 50% black and 50%

white.”

291

A 2003 study affirmed these conflicting preferences.

292

A 2008

study examining racial change from 1980 to 1990 showed that when a

285

Bill Wishard, Racial Discrimination in Sale of Real Estate, 14 AM. JUR. PROOF OF

FACTS 2D 511, § 17 (1977, updated 2012).

286

MOYE, JR., supra note 275, at 203 (citing K. Ihlanfeldt and T. Mayock, Price

Discrimination in the Housing Market, J.

OF URBAN ECON. 66, 125–140 (2009)).

287

Racial Steering, supra note 283, at 824.

The local broker often enjoys a position of influence over a buyer new to the

community, and his suggestion as to where the buyer should live can shape the

buyer’s preferences. Hence, the broker’s assumption that buyers prefer to live

with members of their own race may become a self-fulfilling prophecy.

Id.

288

Id. at 810–12.

289

Plummer, supra note 280, at 184.

290

Id. at 188–89. For example, a real estate broker may tell a buyer that the seller is

rethinking his decision to sell rather than telling the buyer that the seller refuses to sell to

a minority family. Id. at 188–89.

291

MOYE, JR., supra note 275, at 23.

292

Id. at 23.

40 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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neighborhood became 15 percent black, a tipping point, many whites left.

293

The actions of real estate agents often destabilize neighborhoods by

“devaluing home values in racially transitioning neighborhoods.”

294

Advertising also can be a form of racial steering.

295

Studies indicate that

discriminatory advertising is not based on objective factors, but on racial

stereotypes.

296

In a 1995 report, real estate brokerages were less likely to

advertise homes in “integrating neighborhoods” than in “all white

neighborhoods.”

297

Presumably, less advertizing would lead to fewer

potential buyers, offers, and lower prices.

It is not surprising that given a climate of racial discrimination, a study of

the Detroit housing market showed that in the five years before 1992, only

43 percent of blacks consulted a broker, while 60 percent of whites did.

298

This difference would likely lead to perpetuating the status quo in the racial

composition of neighborhoods.

Studies done in 2003, 2006, 2009, and 2012 confirm that real estate

agents still engage in steering.

299

The 2006 study “Do Real Estate Agents

Treat Minorities Differently Than Whites?” reveals discrimination in 48

percent of cases in targeted Westchester County, New York, real estate

293

Id. at 156 (citing D. Card, A. Mas and J. Rothstein, Tipping and the Dynamics of

Degregation, 123 Q.

J. OF ECON. 177 (2008)).

294

Id. at 34.

295

Ross D. Petty, Anne-Marie G. Harris, Toni Broaddus & William M. Boyd III,

Regulating Target Marketing and Other Race-Based Advertising Practices, 8 M

ICH. J.

RACE & L. 335, 339 (2003).

296

Id. at 340; Civil Rights Forum on Communication Policy, When Being No. 1 is Not

Enough: the Impact of Advertising Practices on Minority-Owned & Minority-Formatted

Broadcast Stations, 13 n.4 (1999), available at http://www.fcc.gov/Bureaus/Mass_Media

/Informal/ad-study/.

297

MOYE, JR., supra note 275, at 20.

298

Reynolds Farley, Racial Differences in the Search for Housing: Do Whites and Blacks

Use the Same Techniques to Find Housing?, 7 H

OUS. POL’Y DEBATE 379 (1996).

299

MOYE, JR., supra note 275, at 27; see also WESTCHESTER RESIDENTIAL

OPPORTUNITIES, INC., WRO 2012 FAIR HOUSING TESTING REPORT: FAIR HOUSING IN

WESTCHESTER COUNTY? 3, 6 (2012), available at http://www.wroinc.org/documents/

FairHousingTestingReportasof4.4.2013.pdf [hereinafter WRO Report 2012].

Real Estate Agents as Agents of Social Change 41

VOLUME 12 • ISSUE 1 • 2013

offices.

300

Minorities were purposefully misinformed that no units were

available, were shown fewer units, and were shown units in the wrong price

range.

301

Also, agents did not return phone calls to minorities.

302

African-

Americans had to make many more phone calls to set up an appointment.

303

A follow up 2012 Fair Housing Testing Report shows that in 40 percent

of cases in Westchester County, blacks and Hispanics were given unequal

treatment, including steering; not being shown units; being shown less

desirable units; or having a credit check when not required of others.

304

One

agent showed only one listing in a heavily Hispanic-populated

neighborhood to a Hispanic tester, praising such neighborhood; then the

same agent showed the white counterpart three white communities, while

also disparaging the Hispanic neighborhood.

305

A 2012 study in Allentown, Pennsylvania, revealed discrimination in 78

percent of cases.

306

Hispanic and black buyers were steered toward two

neighborhoods in Allentown, while white buyers were steered towards the

suburbs.

307

Also, agents gave better service, including prompt return calls to

white buyers.

308

Agents also disparaged the city school district and urged

white buyers to seek private schools.

309

300

WESTCHESTER RESIDENTIAL OPPORTUNITIES 2006, DO REAL ESTATE AGENTS

TREAT MINORITIES DIFFERENTLY THAN WHITES? 4 (2006), available at

www.wroinc.org/pdf/FairHousingTestingReport.pdf [hereinafter WRO Report 2006].

301

Id. at 10.

302

Id.

303

Id. at 10.

304

Id. at 6.

305

Id. at 16.

306

Colin McAvoy, Allentown Real Estate Agents Treat White, Minority Homebuyers

Differently, Report Says, The Express Times, June 26, 2012, http://www.lehighvalleylive.

com/allentown/index.ssf/2012/06/allentown_realtors_engage_in_d.html.

307

Id.

308

Id.

309

Id.

42 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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2. Promotion During Housing Bubble and Bust

[A] young . . . couple . . . had pre-qualified for a fixed-rate loan no

larger than $310,000. Their agent kept pressing them to look at

$400,000-plus properties because he could get the same payment,

or even lower payment . . . by encouraging them to get a ‘2/28’

subprime, 30-year loan that started with a low rate . . . . By selling

the more expensive home, the agent earns a larger commission . . .

310

In addition to steering before and after the housing crisis, during the

crisis, realtors also presented rosy pictures of the housing market. At the

height of the housing bubble in 2005-07, the NAR held that there was no

bubble; even when prices started to decline, the NAR held prices would

begin to rise again.

311

Instead, prices declined further.

312

In late 2006, the

NAR began a “multi-million dollar media campaign . . . to . . . convince

[buyers] that it was a ‘great time to buy.’”

313

Another campaign pointed to

the Realtor Code of Ethics for justification for trusting a realtor.

314

The

NAR’s Realtor Magazine “provided realtors with scripts for dealing with

clients worried about the advisability of buying in a down market.”

315

Real

estate brokers also referred customers to subprime mortgage brokers.

316

Many mortgage companies were “captive lenders” of the real estate

agents.

317

310

The Subprime Blame Game: Where were the Realtors?, KNOWLEDGE@WHARTON

(Oct. 17, 2007) http://knowledge.wharton.upenn.edu/article.cfm?articleid=1824

[hereinafter Blame Game].

311

Brent T. White, Walking away Scot-Free: Trust, Expert Advice, and Realtor

Responsibility, 40 R

EAL EST. L. J. 312, 325-26 (2011).

312

Id. at 325-30.

313

Id. at 338.

314

Id. at 344.

315

Id. at 352.

316

Fisher, supra note 221, at 136.

317

Blame Game, supra note 310.

Real Estate Agents as Agents of Social Change 43

VOLUME 12 • ISSUE 1 • 2013

While brokers earned billions of dollars in commissions during the

housing bubble, many buyers became stuck in underwater homes and faced

foreclosure.

318

Professor Brent White rightly advocates that brokers either

be held accountable as professionals who provide investment advice, or be

recognized merely as salespeople.

319

V. GREENLINING AND OTHER SOLUTIONS

While both redlining and reverse-redlining strip wealth from needy

communities and have had devastating effects on minority wealth

accumulation, greenlining directs investment into communities to

“encourag[e] individual behaviors that will maximize net social benefits

directly within the constraints of available resources.”

320

Greenlining’s main

goal is to “neutralize disinvestment with investment.”

321

Greenlining arose with community development efforts in the 1960s and

1970s to combat redlining.

322

It may entail many strategies for promoting

community investment and affordable housing. It often involves

partnerships among community groups, governmental agencies, and

businesses. The 1974 Housing and Community Development Act enabled

channeling of government funds into community development

corporations.

323

318

White, supra note 311, at 344.

319

Id. at 368.

320

Daniel T. Friedson, Greenlining Toward A Community of Local Entrepreneurship,

Home Ownership, and Quality of Life, 9 WTR

J. AFFORDABLE HOUS. & CMTY. DEV. L.

183, 191, 193 (2000). The South Shore Bank of Chicago (SSB) was created in 1973. Id.

321

Id. at 193. “In a prosperous community, there is more building and growing than

tearing down; in a slum, tearing down exceeds building and growing. When the building

and growing are equal to the tearing down, a community has reached economic

equilibrium.” Id.

322

Id. at 191-94.

323

Housing and Community Development Act, 12 U.S.C. §1706e (1974); see William

Frej and Harry Specht, The Housing and Community Development Act of 1974:

Implications for Policy and Planning, 50-2 S

OC. SERVICE R., 275–92 (1976).

44 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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One major aspect of community development is providing financing

for homes, businesses, parks, and cultural institutions. This may be

achieved through community development banks, credit unions, and loan

funds.

324

An example of greenlining is the use of Rehab CDs.

325

Unlike

traditional CDs, Rehab CDs are taken in from around the country,

“greenlined” into impoverished communities, and used to renovate

buildings, increase education investments, and start businesses.

326

exchange, the investors receive annual reports detailing how their money is

used and are offered lower interest rates.

327

Another example is the “retrievable housing plan.”

328

This was developed

by the Shore Bank of Chicago (SSB), which has since become part of the

Urban Partnership Bank.

329

This plan consists of four steps: (1) forming a

real estate development corporation;

330

(2) forming a nonprofit organization

to provide job training; (3) granting loans for renovations;

331

and (4)

founding a multi-family housing industry.

332

SSB’s rationales for this plan

were that “no group of people better combines social and business agendas

than local residents who have both a social and financial stake in the

324

Rochelle E. Lento, Community Development Banking Strategy for Revitalizing Our

Communities, 27 U.

MICH. J. L. REF. 773, 776–77 (1994).

325

Friedson, supra note 320, at 193.

326

Id. at 193–94. Small-business investments are the most difficult because most

economically depressed neighborhoods are bedroom communities whose residents prefer

to shop outside the community due to the belief that black communities receive inferior

goods for the same or higher prices. Id.

327

Id. at 194.

328

Id.

329

Id.

330

Id. at 194–95. This corporation engaged in development inside and outside the

community in order to “cushion further the loss potential that is necessary for SSB’s

high-risk lending practices.” It was able to “promote social efficiency by exercising

specific value-enhancing behavior on a parcel of property, thereby increasing the

likelihood of an aggregate increase in neighboring property values.” Id.

331

Id. at 195. “This practice of requiring upward conversion or positive maintenance

promotes social efficiency.” Id.

332

Id.

Real Estate Agents as Agents of Social Change 45

VOLUME 12 • ISSUE 1 • 2013

neighborhood” and that “each improved building also enhances the general

economic environment and the quality of all the loans in the area.”

333

Two organizations of note dealing in greenlining are The Greenlining

Institute and Korean Churches for Community Development (KCCD). The

Greenlining Institute, based in Berkeley, California, is a multiracial

coalition that both organizes grass roots leaders and conducts national

policy initiatives.

334

It was formed in 1993, following in the footsteps of the

Greenlining Coalition, which was organized in the mid-1970’s.

335

Among

other initiatives, the Greenlining Institute has advocated for bringing the

practice of greenlining to America’s moderate and lower income

neighborhoods and thus assisting with job creation, energy savings, and

lower greenhouse gas emissions.

336

These neighborhoods have suffered the

most from our current recession and, because of discriminatory zoning, are

exposed the most to car and industrial emissions.

337

This initiative would

involve a block-by-block weatherization project of upgrading appliances,

plumbing, and insulation.

338

KCCD, based in Los Angeles, is the largest Asian nonprofit organization

in the US working with churches and community development.

339

In 2008,

KCCD began hosting its annual Homeownership Preservation and

Foreclosure Prevention Fair and foreclosure prevention workshops twice a

333

Id.

334

To read more about the institute, see Our Mission & History, THE GREENLINING

INSTITUTE, http://greenlining.org/about-greenlining/our-mission-history/ (last visited

Jan. 11, 2013).

335

Id.

336

TARA MARCHANT & ZARA BURKIRIN, GREENING OUR NEIGHBORHOODS & PUTTING

AMERICANS TO WORK: A CASE FOR CARBON REDUCTION & JOB CREATION, 6 (2009),

available at http://greenlining.org/wp-content/uploads/2013/02/GreeningNeighborhoods

012810.pdf.

337

Id. at 8.

338

Id. at 9.

339

About Us, KOREAN CHURCHES FOR CMTY. DEV., http://kccd.org/about-us (last visited

July 24, 2013).

46 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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month.

340

They also sponsor homebuyer education classes.

341

Because many

of KCCD’s constituents rely on cash payments only, they are highly

vulnerable to fraud and predatory lending.

342

KCCD joined with the Federal

Deposit Insurance Corporation (FDIC) to develop FDIC’s Korean Money

Smart curriculum, part of KCCD’s other financial literacy programs.

343

addition to the above initiatives, greenlining can also promote global

flourishing communities.

A. Flourishing Communities

At least once a week, my five-year-old goddaughter Lesley and I

explore our neighborhood together . . . . We pass a Hawaiian

restaurant, the Rainier Valley Chamber of Commerce (in a

building that also provides housing to formerly homeless men), a

holistic health center, the Burqaa halal grocery, an all-you-can-eat

Ethiopian buffet, Seattle’s oldest African American men’s social

club, and a new music hall . . . . On Wednesday afternoons . . . we

visit the farmers’ market . . . . Nearly everything I need for day-to-

day living is within walking distance of my house . . . . The Seward

Park Audubon Center offers free . . . nature walks.

344

What is a flourishing community? A thriving neighborhood, like an

ecosystem, flourishes because of variety and synergy. Thriving

communities are attuned to their natural surroundings. They celebrate

healthful activities such as walking, hiking, biking, and gardening. There

340

History, KOREAN CHURCHES FOR CMTY. DEV., http://kccd.org/content/chronology

(last visited June 24, 2013).

341

Homebuyer Education & Downpayment Assistance, KOREAN CHURCHES FOR CMTY

DEV., http://kccd.org/content/homebuyer-education-downpayment-assistance (last visited

June 24, 2013).

342

Financial Literacy, KOREAN CHURCHES FOR CMTY DEV., http://kccd.org/content/

financial-literacy.html (last visited June 24, 2013).

343

Id.

344

Wendy Call, LIFE IN 98118; SEATTLE’S RAINIER VALLEY-ONE OF THE NATION’S

MOST DIVERSE ZIP CODES (2012), available at http://www.onenationindivisible.org/our-

story/life-in-98118-seattles-rainier-valley-one-of-the-nations-most-diverse-zip-codes/.

Real Estate Agents as Agents of Social Change 47

VOLUME 12 • ISSUE 1 • 2013

are sidewalks, trails, and bike paths. Local and organic food production is

encouraged. Flourishing communities have locally-owned and operated

businesses that provide jobs. Residents can also work at home or commute

with public transportation. Residents can walk to restaurants, grocery stores,

boutiques, theaters, houses of worship, schools, parks, and other services. A

car is not necessary.

Flourishing communities draw in a diverse population, not only in terms

of ethnicity and race, but also in income. They provide different housing

options for renters and homeowners. They have multigenerational residents.

Seniors are welcome and cherished. Young people can get around without

being chauffeured.

A thriving community attracts professional artists, but also encourages

creativity among all residents. Music, crafts, fashion, cuisine and exciting

new trends are birthed in a flourishing community. All are engaged because

the neighborhood is both a sanctuary and hub of creativity.

In sum, flourishing communities are not sterile bedroom communities

with uniform houses dependent on cars and high energy consumption.

Residents are not concealed behind garage door openers. Boredom is not an

option.

Two examples of flourishing communities in the United States are

Rainier Valley in Seattle, Washington, and Frogtown in St. Paul,

Minnesota. Montgomery County in Maryland is an example of an

increasingly diverse community as well.

Rainier Valley is a community located southeast of Seattle, Washington,

that is considered one of the most multicultural communities on the West

Coast.

345

It is associated with Columbia City, which became part of Seattle

in 1907.

346

The community welcomed masses of immigrants from Italy,

345

See Welcome to Rainier and Columbia City!, COLUMBIA CITY: RAINIER VALLEY,

http://www.rainiervalley.org (last visited Jan. 21, 2013).

346

A Short History, COLUMBIA CITY: RAINIER VALLEY, http://www.rainiervalley.org

48 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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Japan, the Philippines, Latin countries, Vietnam, East Africa, and Ireland.

347

African-Americans soon followed the immigration into Rainier Valley as

well.

348

This influx of cultures caused the area to be named the

“Neighborhood of Nations.”

349

When its businesses began to struggle in the

1980s, a neighborhood association developed and grew into the Columbia

City Revitalization Committee (CCRC).

350

Also, “Town Hall breakfasts led

by inspired leaders, catalyzed teams of residents and businesses to do clean-

ups and start new projects designed to help the business district and

residents.”

351

Other community organizations worked in conjunction with

the CCRC to reintroduce farmers markets, music events, park maintenance,

and gardens.

352

The introduction of these diverse activities and cultures

encouraged movement into the community from around the country. “In the

2000’s, Columbia City became hot property. New businesses and residents

came in and there was a tremendous amount of housing infill, new condos

and increased prices.”

353

Some local businesses were distressed by the

increase in prices, but new “live-above” businesses and apartments were

developed, allowing the distressed businesses to stay.

354

South East Effective Development (SEED) was founded in 1975 with the

goal of community development through art.

355

SEED works to connect the

many cultures in Rainier Valley through opportunities such as the Rainier

Valley Cultural Center, which offers an aesthetic venue for cultural events

/Cchistor.htm (last visited July 4, 2013) [hereinafter Columbia City History].

347

Id.; See generally RAINIER VALLEY HISTORICAL SOCIETY,

http://rainiervalleyhistory.org (last visited July 4, 2013).

348

Columbia City History, supra note 346.

349

Id.

350

Id.

351

Id.

352

Id.

353

Id.

354

Id.

355

SEED Housing and Economic Development, SE. EFFECTIVE DEV. (SEED),

http://www.seedseattle.org/index.html (last visited July 4, 2013).

Real Estate Agents as Agents of Social Change 49

VOLUME 12 • ISSUE 1 • 2013

and celebrations.

356

SEED also works in housing and economic

development. The combined finances of the federal government, private

partnerships, grants, and banks fund its housing and commercial

development projects.

357

SEED provides affordable and safe rental

properties for the families of Rainier Valley.

358

Frogtown, a neighborhood in northwest St. Paul, Minnesota, is one of

Minnesota’s “most intact working class neighborhoods.”

359

It has become a

haven for Vietnamese and Hmong immigrants as well as other immigrant

populations.

360

There are numerous churches with ethnic ties and restaurants

serving food from around the world.

361

The Greater Frogtown Community

Development Corporation (GFCDC) helps residents obtain home

ownership, provides home improvement funding, and assists in economic

development.

362

“For 17 years, GFCDC has built new or substantially

renovated 107 homes that have been sold to low and moderate income

families.”

363

Unfortunately, many homes were foreclosed because of the

recent credit crisis; GFCDC is currently working hard to provide rental

properties.

364

Frogtown residents promote gardens for healthful living and eating.

365

The Frogtown Gardens website states, “[w]e may be poor financially, but

we are rich in history, diversity, children, energy, cuisine, languages and so

356

Id.

357

Id.

358

Id.

359

About Frogtown, GREATER FROGTOWN CMTY DEV. CORP., http://greaterfrogtowncdc.

org/about.html (last visited Jan. 21, 2013) [hereinafter G

REATER FROGTOWN].

360

Id.

361

Id.

362

Id.

363

Id.

364

Frogtown Affordable Rental Housing Program, GREATER FROGTOWN

http://www.greaterfrogtowncdc.org/rental.html (last visited July 4, 2013).

365

Frogtown Garden Power, FROGTOWN GARDENS, http://www.frogtowngardens.org/

Frogtown_Gardens/Welcome.html (last visited July 4, 2013).

50 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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much more.”

366

These gardeners encourage the planting of fruit trees in

every yard.

367

They have created a community garden named Amir’s

Garden, which remembers a toddler who perished in a house fire on the

site.

368

In addition, Frogtown residents have joined together to promote

sustainable urban farming. Frogtown Park and Farm, a 12.7 acre space, has

been approved for purchase by the city government.

369

Additional monies

were raised from foundations.

370

Organizers estimate that the Park and Farm

will annually return $900,000 in “health care savings, increased property

value, food production and storm water management, among other benefits .

. . .”

371

This green space will be a demonstration farm and sanctuary, a place

to build health “through physical activity, through eating well and sensibly,

[and] through allowing ourselves space for quiet meditation.”

372

The

organizers are bucking conventional thinking that this land should be sold to

developers for its highest “market” value.

373

366

Id.

367

About Us/Events, FROGTOWN GARDENS, http://www.frogtowngardens.org/Frogtown_

Gardens/About_Events.html (last visited July 4, 2013).

368

Cynthia Frost, From the Ashes, Amir’s Garden Grows a Vision of the Future in St.

Paul’s Frogtown Neighborhood, T

WIN CITIES DAILY PLANET, Aug. 2, 2012,

http://www.tcdailyplanet.net/news/2012/08/02/ashes-amirs-garden-grows-vision-future-

st-pauls-frogtown-neighborhood.

369

Sana Naz, Frogtown Farm Plans Move Forward in St. Paul, TWIN CITIES DAILY

PLANET, May 12, 2013, http://www.tcdailyplanet.net/news/2013/03/12/striving-be-green-

frogtown; Frederick Melo, St. Paul: Frogtown Farm Park Premiers in Coleman Budget,”

WINCITIES.COM, Aug. 20, 2012, http://www.twincities.com/stpaul/ci_21358386/st-paul-

frogtown-farm-park-debuts-coleman-budget .

370

Naz, supra note 369.

371

Next Up for Park Deal: Raise Money, GROWING FROGTOWN (on file with author).

372

FROGTOWN FARM, http://frogtownfarm.org/Frogtown_Farm/Welcome.html (last

visited July 5, 2013).

373

Frogtown Deserves Greenspace, FROGTOWN FARM, http://frogtownfarm.org/

Frogtown_Farm/Why.html (last visited July 5, 2013).

Real Estate Agents as Agents of Social Change 51

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Frogtown is also home to creative enterprises like the Daily Diner. The

Daily Diner trains former homeless individuals in food services.

374

It also

serves “diner favorites while incorporating local ingredients and ethnic

flavors . . . [from Frogtown] . . . including ‘light rail chili’ . . . ‘Dale Street

wings’ . . . catfish sandwiches, Asian salads, and chicken with waffles.”

375

The Diner is decorated with murals and other art from local artists and is

part of Frogtown Square, which provides 50 units of senior housing above

commercial space.

376

Turning to Maryland’s Montgomery County, the 2010 census shows that

this county has become a majority-minority county.

377

From 1990 to 2000,

the minority population grew from 19 percent to more than 38 percent.

378

Around that time, more than one-fifth of the county’s 850,000 residents

were born in another country.

379

By 2010, 50.7 percent of households in Montgomery County identified

themselves as “Black or African-American, Hispanic or Latino, Asian or

Pacific Islander or an ethnicity other than non-Hispanic White.”

380

The Montgomery County Government sponsors the Gilchrist Center for

Cultural Diversity (GCCD) whose mission is to “help make Montgomery

County a thriving multicultural community where every resident feels

welcomed, participates civically, and contributes positively to the

374

Jess Fleming & Frederick Melo, Daily Diner Frogtown, Union Gospel Mission Team

up to Train Workers, T

WINCITIES.COM, Apr. 17, 2013, http://www.twincities.com/

localnews/ci_23028890/daily-diner-frogtown-union-gospel-mission-team-up.

375

Id.

376

Id.

377

As Montgomery County Grows, It Grows More Diverse, Says 2010 Census,

ARYLAND-NATIONAL CAPITAL PARK POLICE, Feb. 9, 2011,

http://mncppc.typepad.com/news/2011/02/as-montgomery-county-grows-it-grows-more-

diverse-says-2010-census.html#more [hereinafter Montgomery Grows].

378

Michael Amon, Gilchrist Center Aims to Bring People Together, WASHINGTON POST,

Sept. 13, 2001, http://www.montgomerycountymd.gov/gilchrist/Resources/Files/gcaims

.pdf.

379

Id.

380

Montgomery Grows, supra note 377.

52 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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economy.”

381

GCCD connects residents with “public and private services,

volunteering, civic engagement, cross cultural activities, and economic

empowerment.”

382

It offers free legal advice, English classes, job-search

workshops, computer training, citizenship preparation classes, cultural

groups, and other services.

383

From these examples of flourishing communities, it is clear that

greenlining should not only incent investment in previously redlined

neighborhoods, but should also be utilized to promote the flourishing of

additional global communities. These communities have sustainable

property values.

1. The Role of Real Estate Agents in Greenlining and Promoting Global

Flourishing Communities

Until recently, brokers have not been involved in greenlining in large

numbers. For example, it is not apparent what role agents have played in

organizations such as the Greenlining Institute and in communities such as

Rainier Valley and Frogtown. This lack of visible involvement can and

should change.

There have been some promising greenlining activities by brokers. As

mentioned earlier, the National Association of Real Estate Brokers, the

organization for black brokers, has been on the forefront of promoting fair

housing since its founding in 1947.

384

Along with legislative changes in the

1960s, the organization has been involved in the Community Reinvestment

Act of 1977, FIRREA in 1989, and other laws promoting diversity in

381

Montgomery County Charles W. Gilchrist Center for Cultural Diversity,

ONTGOMERY COUNTY, MD, http://www.montgomerycountymd.gov/gilchrist/info/

mission.html (last visited July 5, 2013).

382

Id.

383

Id.

384

NAREB History, NAREB, http://www.narebshiba.com/?page_id=2 (last visited July 5,

2013).

Real Estate Agents as Agents of Social Change 53

VOLUME 12 • ISSUE 1 • 2013

housing.

385

Today, they promote equitable policies in light of the

foreclosure crisis, including foreclosure mitigation, Homeowners’ Bill of

Rights legislation, preserving minority homeownership communities and

access to credit, increasing affordable housing, job creation for minorities,

and green energy-saving initiatives.

386

Many of its proposals require urgent

implementation to address the devastation of minority communities due to

the subprime crisis.

In 2011, the Multicultural Real Estate Coalition, made up of the National

Association of Real Estate Brokers, Asian Real Estate Association of

America (AREAA), and the National Association of Hispanic Real Estate

Professionals (NAHREP) issued “The Five-Point Plan: Refocusing the

Future of Minority Homeownership.”

387

This plan calls for balanced

regulation, more diversity in employees in financial services institutions,

strong consumer protection, and mandatory financial education for first-

time homebuyers.

388

As for the NAR, it is encouraging that it now promotes diversity

training,

389

workforce housing,

390

and partnerships with Habitat for

Humanity.

391

Since 1998, it has sponsored a one day certificate program

385

Id.

386

ANAREB’s African American and Ethnic Minority Housing. Policy Issues, NAREB,

http://www.narebshiba.com/?page_id=157 (last visited July 5, 2013).

387

The Five-Point Plan, Refocusing the Future of Minority Homeownership, THE NAT’L

ASS’N OF HISPANIC REAL ESTATE PROFESSIONALS, http://nahrep.org/downloads/2011-

five-point-plan.pdf (last visited July 5, 2013).

388

Id.

389

Diversity Program, NAT’L ASS’N OF REALTORS, http://www.realtor.org/programs/

diversity-program (last visited July 5, 2013) [hereinafter Diversity Program].

390

Housing Opportunity Program, NAT’L ASS’N OF REALTORs, http://www.realtor.org/

programs/housing-opportunity-program (last visited July 5, 2013).

391

Erica Christoffer, “Building Hope”, NAT’L ASS’N OF REALTORS, Nov. 9, 2012,

http://speakingofrealestate.blogs.realtor.org/2012/11/09/building-hope/; The Na’tional

Association’ of Realtors Renews its Support of Habitat for Humanity, H

ABITAT OF

HUMANITY, Aug. 10, 2006, http://www.habitat.org/newsroom/2006archive/08_10_2006

_NAR_renews_partnership.aspx.

54 SEATTLE JOURNAL FOR SOCIAL JUSTICE

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called “At Home with Diversity®,” which addresses “diversity, fair housing

and business planning development.”

392

NAR publishes an annual

publication on fair housing during Fair Housing Month, which is in April.

This publication “includes a poster, advice on reporting acts of

discrimination, information on multicultural real estate organization

meetings, NAR diversity, [and] smart growth and housing opportunity

grants.”

393

NAR also promotes foreign investors in US property.

394

These are excellent efforts. However, as in the 1920’s when NAREB was

at the forefront of promoting civic responsibility by selling single-family

homes, NAR may consider whether it wants to be at the forefront and not

the tail end of promoting global flourishing communities for everyone. This

is so, especially in light of the United States’ changing demographics.

It is predicted that by 2043, the population of the United States will no

longer be majority white.

395

Both the Hispanic and Asian populations are

growing faster than other groups and will constitute a large part of the

housing market for the decades to come.

396

During 2000 to 2009, while

whites had 1.1 births for each death, Hispanics had 8.9 births for each

death.

397

From 2000 to 2010, the Asian-American population, now at 18.2

million persons, expanded at “double-digit rates in 49 of the 50 states.”

398

392

At Home with Diversity, NAT’L ASS’N OF REALTORS, http://www.realtor.org/

designations-and-certifications/at-home-with-diversity (last visited July 5, 2013).

393

Diversity Program, supra note 389.

394

NAT’L ASS’N OF REALTORS, REACH FOR SUCCESS: 2013 ISSUES AND CHALLENGES,

25 (2012), available at http://www.realtor.org/reports/reach-for-success-2013-issues-and-

challenges.

395

Michael Cooper, Census Officials, Citing Increasing Diversity, Say U.S. Will Be a

‘Plurality Nation’, N.Y.

TIMES, Dec. 12, 2012, A20, available at

http://www.nytimes.com/2012/12/13/us/us-will-have-no-ethnic-majority-censusfinds

.html?_r=0.

396

Hispanics and Homeownership, NAHREP, http://nahrep.org/facts-and-figures (last

visited July 5, 2013).

397

Id.

398

NIELSEN, STATE OF THE ASIAN-AMERICAN CONSUMER Q3 2012 1 (2012) , available

at http://www.nielsen.com/content/dam/corporate/us/en/microsites/publicaffairs/State

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The Greenlining Institute has called for a broad coalition of stakeholders,

including brokers and other real estate professionals, to develop a

“sustainable homeownership agenda.”

399

In light of the statistics just

mentioned, now is the perfect time for the NAR and its sibling associations

to accelerate their greenlining efforts by promoting flourishing global

communities. In addition to calling themselves “realtors,” they may all

become “realists.”

Specifically, brokers and their organizations should consider these

individual and collective steps to action:

1) Develop training materials that describe the history of the realty

industry in redlining and reverse redlining;

2) Adopt a letter of healing and hope acknowledging this past

propensity with vows to move forward with greenlining (a sample

is attached as Appendix 1);

3) Develop “Best Practices for Real Estate Agents;”

4) Conduct intensive training on methods to avoid steering and

other present day discriminatory practices with appropriate

disciplinary measures for noncompliance;

5) Develop consumer education on these practices as well;

6) Develop compensation incentives for greenlining, including

working with community groups that promote urban gardening,

farming and greenspaces that build healthful living, and

sustainable property values. Currently, broker compensation

incentives are geared towards steering buyers to segregated

neighborhoods. Unless a break from the past is acknowledged, the

realty industry will continue to perpetuate racist and

nonsustainable practices of the past;

7) Develop a task force among NAR, National Association of Real

Estate Brokers, Asian Real Estate Association of America

oftheAsianAmericanConsumerReport.pdf ).

399

MCCULLOCH & VISSA, supra note 224.

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(AREAA), and National Association of Hispanic Real Estate

Professionals (NAHREP) to address these issues in innovative

ways;

8) Contribute to organizations that promote greenlining and

community development;

9) Develop mentoring programs/internships for high school and

college students, and older people of color in real estate brokering;

and

10) Lobby legislatures for tax incentives and continuing education

requirements for the above.

Social activists may also join the ranks of brokers to contribute to the efforts

listed above.

VI. CONCLUSION

This article has traced the history of practices of real estate agents from

redlining to reverse redlining to greenlining. Realtors arose in the United

States during the industrial revolution. In order to avoid unscrupulous

practices, they developed professional associations and codes of ethics.

They adopted the agency model of fiduciary duties, as opposed to being

independent contractors.

Unfortunately, for many years, local boards and the national association

of real estate agents were ethically and legally committed to redlining, that

is, banks refused to lend to areas deemed undesirable because of racial

discrimination. From 1924 to 1950, the NAREB Code of Ethics forbade

realtors from integrating neighborhoods, and state licensing authorities

could revoke licenses for violating the Code of Ethics. Even after the US

Supreme Court held racial covenants legally unenforceable in 1948,

discriminatory practices continued. Agents induced appraisers to overvalue

“white” properties and devalue others. They steered customers away from

neighborhoods to avoid integration, or practiced blockbusting and contract

selling. This involved spreading rumors of integration and causing white

Real Estate Agents as Agents of Social Change 57

VOLUME 12 • ISSUE 1 • 2013

owners to sell at low prices, and black owners to buy at high prices. Some

agents profited on fears of integration and perpetuated racial stereotypes.

Although federal and state legislation later banned redlining and

blockbusting, agents were subsequently involved in reverse redlining

practices in the 2000s, which exacerbated the inequities of redlining. Agents

steered consumers to listings based on race. This exacerbated segregation

and enabled targeted marketing for predatory lending. In reverse redlining,

vulnerable borrowers, many of them minorities, were given subprime loans

even though they qualified for prime loans. Many of these high risk

subprime loans led to default, foreclosures, and other unsavory practices.

Real estate agents were on the front lines by promoting home sales with

rosy forecasts during the housing bubble and bust.

As our economy recovers from the worst financial crisis since the Great

Depression, real estate agents, as other professionals, have an opportunity to

return to the professionalism and fiduciary duties that are part of their

original calling. Greenlining practices can channel investment into

sustainable global communities. These communities thrive not because of

artificially constructed property values, but because they genuinely flourish.

They draw from the strengths of nature and multiple cultures. In turn, they

bear the fruit of sustainable work and other cultural activities. They are not

cultural deserts, but oases of thriving cultural expression. Their property

values are sustainable.

Officials predict that the Chinese economy will surpass the US economy

by 2019,

400

and by 2043 the United States will no longer have a white

majority.

401

Real estate professionals have always been on the front lines of

social policy and change. They now have an opportunity to take the lead in

400

China Economy to Overtake US by 2019: State Research, SOUTH CHINA MORNING

POST, Jan. 9, 2013, available at http://www.scmp.com/business/economy/article/1123807

/china-economy-overtake-us-2019-state-research.

401

Cooper, supra note 395.

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promoting global flourishing communities and to thrive with them.

Additionally, those who want to effect social change also should consider

becoming real estate agents. Hopefully, the role of real estate agents in

greenlining will one day overshadow their past involvement in redlining

and reverse redlining. The American dream should not just be a home, but a

home in a global flourishing community with sustainable property values.

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VOLUME 12 • ISSUE 1 • 2013

APPENDIX 1

Letter of Healing and Hope

We, the real estate brokers in the United States, issue this letter of healing

and hope.

Either intentionally, or through ignorance, throughout our history, we

have promoted or enabled segregated communities through racial covenants,

blockbusting, steering, and reverse redlining and promotion of subprime

mortgages. These segregated communities have enabled predatory lending

and racial profiling, and fostered vast disparities in access to education,

credit, transportation, work, nutrition, and intergenerational wealth transfer.

We have also promoted unsustainable housing, e.g., housing that is

dependent on high consumption of gas and other natural resources.

Although we called ourselves agents with fiduciary duties, we have often

pursued our own profit, and not the best interests of our clients.

We vow that we will acknowledge this past. We vow that we do not have

to repeat the past, but will do all we can to heal relationships and

neighborhoods.

As we move towards a United States that will no longer have a majority

race, we are hopeful, that together we can realize a new American dream

that is sustainable, inclusive, and healing.