Crain’s Chicago Business

March 12, 2021

By Whet Moser

The legacy of racism in Chicago’s real estate market has been told extensively in recent years. But what was its toll? In 2019, a consortium of researchers from Duke University, the University of Illinois at Chicago, and Loyola University Chicago put a number to it: $3 billion to $4 billion was extracted from Black communities in the city in the 1950s and 1960s through the practice of contract selling, a rent-to-own model that Black families were forced into by public policy and private markets. Between 75 percent and 95 percent of all homes sold to Black buyers during those decades were on contract.

Unable to get mortgages, prevented from moving into white neighborhoods by violent resistance, contract buyers typically paid 84 percent markups on the houses they could buy, at several points more in interest. On average, Black families paid $587 more per month as a result—what the report calls a “color tax.”

That meant less money in retirement accounts, less money for education, and less money to maintain those houses. Those who couldn’t keep up with the additional expense could be evicted easily with no equity from their investment.

Crain's Equity

We spoke with Bruce Orenstein, the the study’s project director, about the effects of redlining and contract buying on families, neighborhoods and cities. Orenstein, artist in residence at the Samuel DuBois Cook Center on Social Equity at Duke University, is producing a documentary series, “Shame of Chicago: The Segregation of an American City.”

CRAIN’S: How does redlining force Black families into contract selling?

ORENSTEIN: In the 1950s and ’60s, you’ve got this post-WWII economic boom, and owning a home became the centerpiece of the American Dream. But the real estate industry, whose policy was federal policy, had determined that certain neighborhoods were not worthy of investment. In those neighborhoods, Black families were unable to take advantage of federally backed loans that allowed white people to enter the middle class. They’re working at the post office. They’re working in the education system, working in government. They’re doctors, lawyers. An educated, Black middle class is burgeoning during these years. But they can’t get loans from banks because of the determination of these redlining policies.