The Color of Law A Forgotten History of How Our Government Segregated America by Richard Rothstein (z-lib.org).epub

neighborhood, would cause the value of the white-owned properties to
decline. This, in turn, would increase the FHA’s own losses, because white
property owners in the neighborhood would be more likely to default on
their mortgages. In the three decades during which it administered this
policy, however, the agency never provided or obtained evidence to support
its claim that integration undermined property values.
The best it could apparently do was a 1939 report by Homer Hoyt, the
FHA’s principal housing economist, that set out principles of “sound public
and private housing and home financing policy.” Hoyt explained that racial
segregation must be an obvious necessity because it was a worldwide
phenomenon. His only support for this assertion was an observation that in
China enclaves of American missionaries and European colonial officials
lived separately from Chinese neighborhoods. On this basis, he concluded
that “where members of different races live together . . . racial mixtures tend
to have a depressing effect on land values.”
I
STATISTICAL EVIDENCE contradicted the FHA’s assumption that the presence
of African Americans caused the property values of whites to fall. Often
racial integration caused property values to increase. With government
policy excluding working- and middle-class African Americans from most
suburbs, their desire to escape dense urban conditions spurred their demand
for single-family or duplex homes on the outskirts of urban ghettos
nationwide. Because these middle-class families had few other housing
alternatives, they were willing to pay prices far above fair market values. In
short, the FHA policy of denying African Americans access to most
neighborhoods itself created conditions that prevented property values from
falling when African Americans did appear.
In an unusual 1942 decision, the federal appeals court for the District of
Columbia refused to uphold a restrictive covenant because the clause
undermined its own purpose, which was to protect property values.
Enforcement, the court said, would depress property values by excluding