Antero Pietila author of “Not in My Neighborhood”: Blockbusting techniques made developers rich in Baltimore

Story Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. This is the second part of our interview series with Antero Pietila, who worked for The Baltimore Sun for 35 years and then wrote and finished his book Not in My Neighborhood about how racism helped shape great American cities. I guess the subtitle actually is How Bigotry Shaped a Great American City. Thanks for joining us. So let’s pick up the story with blockbusting. So we’re in a Baltimore where there has been, for many years, from 1910 on, and then it gets repealed in 1917, but more or less strict conventions or covenants to have white neightborhoods, black neighborhoods, and Jewish neighborhoods. So when does blockbusting start? What is blockbusting? When does it start? And what effect does it have?

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ANTERO PIETILA, AUTHOR: Well, there are two different interpretations of blockbusting. The standard white interpretation is that unscrupulous speculators came to a perfectly happy white neighborhood, scared people off, bought houses for a pittance, and flipped them to blacks. The black understanding is, yes, they were profiteers, but these were people who were enabling blacks to move into better housing. And so, particularly after the 1948 Supreme Court ruling that made restrictive covenants unenforceable, the blockbusters, however odious their tactics, they really did not break any law.

JAY: So let’s describe exactly what blockbusting is. Like, give an example [of] this type of blockbusting.

PIETILA: Blockbusting usually started this way. How the first house changed, racially, happened basically in two ways. Either a speculator spotted a house and went to the person and said, listen, negros are on their way, I will give you a good price, but it’s today, and tomorrow I cannot tell you what the price might be, because once negroes come here, prices are going to go down.

JAY: So let me just remind everybody what we learnt in segment one, which is, after 1948, there were covenants that if you moved into a neighborhood, people would still sign an agreement saying that I’m not going to allow a black family into the neighborhood. It wasn’t legally enforceable, but it was voluntarily agreed to by everyone. And there was a lot of, I guess, social peer pressure on people not to sell to a black family. But after ’48 it’s hard to legally stop someone from doing this, so it starts to change. So go on. So somebody targets a house.

PIETILA: So this is one scenario. The other scenario is that many of the marginal neighborhoods, they had lots of houses in poor condition that were auctioned off at public sale. So if you bought a house, speculator buys a house at the public auction and sells it to a black family, there’s absolutely nothing anybody can do about it. It now is a final sale. So this is how speculators got the first foothold. And then all kinds of things happened after the first sale was made. There would be leaflets mailed and distributed to people’s homes. There would be midnight calls: did you hear about the rape (whether there had been any rape or not)? And people really–in the conditions of the late 1940s, early 1950s, they were paranoid. They started counting the numbers of blacks on their streets, because in the Baltimore of that era, blacks did not commonly walk in white neighborhoods. And so in many ways the impression was enforced that negroes are going to take over our neighborhood.

JAY: And these are real estate developers driving most of this.

PIETILA: Absolutely. Absolutely. This is how they made their money.

JAY: So they drive down the prices and they pick up all these houses on the cheap.

PIETILA: Right.

JAY: And then what do they do?

PIETILA: Then they would double or in many cases triple the price. And since very few if any of these sales in that early time period were financed through conventional loans, they would enter into a rent-to-buy contract with a very high interest rate. And as a matter of fact it’s kind of interesting how these rent-to-buy contracts became such a prevalent force, particularly in Baltimore real estate. During World War II, Baltimore had price control. You could not hike your rents. So if you turned homeowners into theoretical–renters into theoretical homeowners through–

JAY: You get around the price controls.

PIETILA: –you could do whatever you wanted.

JAY: So the scheme is you force down the prices and white families leave. You buy the houses on the cheap. You triple the price. And then you get black families to come in, supposedly to buy, but you’re really renting to them, and then you’re charging an interest, I guess, on the asset part of the house, which you’re saying is essentially usurious, and you bankrupt these families. And then what? You flip the house again.

PIETILA: Then you flip the house again. And Baltimore’s housing was in deplorable shape in areas that became targets for the first blockbusting. So not only did the first black families overpay, because that was the only way they could get a house, but then they were faced with tightening regulations. You needed inside bathrooms. And so in order to cope with these codes, you needed to go to another set of speculators, who would then lend you more money and put a flimsy bathroom in. So, I mean, when you look at Baltimore (and you have seen Baltimore in The Wire, which is a description of inner-city Baltimore), this is the condition that evolved over many years. These were the kinds of regular row houses, some of them as narrow as 14 feet. And they all have stories. Each house in Baltimore has a story.

JAY: Now, we’ve been told by some of the people who have been working on this issue that there’s another step to this where they start deliberately boarding up some houses and deliberately–and then it becomes increasingly difficult for people to borrow money to fix their houses. And it helps start to create the conditions for the drug business to move in, to actually take the deterioration of the neighborhood another step.

PIETILA: Sure.

JAY: So talk a bit about that.

PIETILA: Well, it’s very difficult to say how deeply the drug business has penetrated inner-city Baltimore. The drug business has several needs. It needs to invest money, launder money. So real estate is clearly one way to do it. It also needs stash houses. So if any boarded-up house is–potentially is a stash house, where drugs are stored and people go in to shoot or have sex, whatever.

JAY: So that’s–and then once that starts in a neighborhood, people want to move out.

PIETILA: Absolutely.

JAY: So you get even more neighborhoods with boarded-up housing, and even they become cheaper and cheaper, and we get to this current situation of thousands and thousands of boarded-up houses, which we know are also being bought up by developers and such, which I guess is another piece of that story. Talk a little bit more about this whole process in terms of some of the findings in your book.

PIETILA: Well, what I demonstrate is something that is not unprecedented, but I outline it in more detail than anybody else, and that is the federal government’s complicity in all of this. And what we have is, in the middle of the Great Depression, in the mid-1930s, the federal government created a bailout agency called Home Owners’ Loan Corporation. And the first mission of the corporation was to redline 239 American cities.

JAY: So explain redline for anyone who doesn’t know.

PIETILA: Well, basically this is how it happened. The federal government would assemble a group of ten or so real estate experts and a couple of banking officials. They would be given a regular street map of a city and four crayons, and they would be asked to paint the city. And there were those four crayons. The best color in terms of real estate risk in the opinion of the federal government, they were green-colored neighborhoods, which had covenants against Jews and blacks. And then the next preferred color was blue. And what the federal government was telling the lending industry, even in the deepest days of the Great Depression, was these are secure loans, and you should not hesitate to make them. Then there were two other colors; there was yellow and there was red. And the federal government said, it is possible to make good loans in these neighborhoods, but those loans have to be made on a different basis. This is the moment in American history when a two-tier home financing system is sanctioned, federally sanctioned: conventional loans for one set of buyers, often ethnically defined; and then these speculative loans from speculators, subprime loans. We still have this problem for another set of buyers, usually blacks, and in today’s situation, Hispanics.

JAY: And the nature of the subprime in those days was much higher interest rates.

PIETILA: It was far higher interest rate. And as I said, there was an instrument, in Baltimore particularly: at one point, about 80 percent of black sales were done on the basis of land-instalment contracts, which were these rent-to-buy.

JAY: This is after ’48.

PIETILA: Right. And so there was no guarantee that people buying those houses would ever own those houses.

JAY: In fact, it very much mirrors the current subprime lending scandal, in the sense that anyone that looked at those loans knew that eventually the people were going to default. And it’s somewhat similar here: eventually they knew that this rent-to-buy was going to actually bankrupt people. They reach a point where they couldn’t do it anymore, and you’d pick up these houses again.

PIETILA: Sure. Now, there is a very interesting psychological phenomenon that happened in Baltimore. Baltimore began changing racially perhaps ten years before many other American cities. The big change came in 1944 when blacks crossed a street that had been the dividing line racially for the past 30 years. And–.

JAY: The name of–this is [crosstalk]

PIETILA: No, this was Fulton Avenue. One side was black, and the other side was white. And in 1944, just before Christmas, the first black family crossed over. And then everybody got scared. And this was the starting point. But it is kind of interesting that there are a couple of early racial-change neighborhoods, one particularly, Edmondson Village, which even today is relatively stable–it may have deteriorated, but it is relatively stable. And the reason is that unlike whites, average whites, who change houses every so often, the early black buyers have been very reluctant to go through that experience again, it was so traumatic.

JAY: Well, in the next segment of the interview, let’s talk about some other areas of Baltimore, places like Woodlawn and others, where you actually find very stable working-class black areas. You know, you get the sense from a show like The Wire that blacks only live, you know, in boarded-up, drug-infested areas. And, in fact, there’s whole areas of Baltimore which–given they’re quite still apartheid areas, with black working class here and white there, they’re still quite stable areas. So please join us for the next segment of our interview with Antero Pietila.

End of Transcript

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