Fair Housing Laws

William J. Collins, Vanderbilt University

Before the Civil Rights Movement, housing market discrimination was common and blatant, especially against African Americans but also against Jews and other minority groups.¹ This essay focuses on the treatment of African Americans, but readers should keep in the mind the pervasiveness of housing discrimination around 1950. By “discrimination,” I mean (as usual in economics) the differential treatment of market participants on the basis of their race or ethnicity — for example, the refusal to rent an apartment to a black family that is willing and able to pay a rental price that would be acceptable if the family were white. Proponents of fair housing laws, at the local, state, and federal levels, hoped that the laws would effectively limit housing market discrimination.

Around mid-century, many barriers inhibited African Americans’ residential mobility, including racially restrictive covenants among white property owners, biased lending practices of banks and government institutions, strong social norms against selling or renting property to blacks outside established black neighborhoods, and harassment of blacks seeking residence in otherwise white neighborhoods (Myrdal 1944, Abrams 1955, Meyer 2000). Since then, the potentially adverse effects of housing discrimination on blacks’ accumulation of wealth through housing equity and on blacks’ access to high quality schools, jobs, and public goods have been widely discussed (Kain 1968, Oliver and Shapiro 1995, Yinger 2001). A related literature has sought to understand the apparent connection between residential segregation, in part a legacy of housing market discrimination (Kain and Quigley 1975), and a variety of adverse socioeconomic outcomes (Massey and Denton 1993, Cutler and Glaeser 1997, Collins and Margo 2000).

Given these concerns, it is not surprising that dismantling housing market discrimination has been among the top priorities of civil rights groups and urban policymakers for decades. Starting in 1959, states began implementing fair housing laws to curb discriminatory practices by sellers, renters, real estate agents, builders, and lenders. In 1968, almost immediately after the murder of Martin Luther King Jr., the United States Congress passed the Fair Housing Act. The Fair Housing Amendments Act of 1988 substantially broadened federal enforcement powers (Yinger 1999).

Fair housing laws are commonly placed among the Civil Rights Movement’s central legislative achievements. Unfortunately, we still do not have convincing measures of the laws’ impact on blacks’ housing market outcomes. It is clear that the laws did not completely eliminate discriminatory practices, let alone the residential patterns that such practices had promoted. The more relevant open questions concern how much headway the laws made on discriminatory practices and segregation, and especially, whether minority families improved their housing situation because of the laws’ implementation. On the basis of the existing evidence, it would be difficult to argue that the laws made a large direct contribution to improvements in African Americans’ housing market outcomes (or those of other groups protected by the laws). One could argue, however, that fair housing was one element of a larger campaign that successfully changed discriminatory norms and policies.

Fair Housing’s Origins and Operation

The federal Fair Housing Act of 1968 remains a highly visible accomplishment of the Civil Rights Movement. It is important to note, however, that the basic ideas that underpinned the federal legislation emerged long before 1968. State and local governments incrementally adopted nondiscriminatory standards for public housing starting in the late 1930s. The application of anti-discrimination policy to the private housing market, however, was among the Civil Rights Movement’s least popular initiatives among whites, and as a result, fair housing legislation lagged years behind fair-employment and public accommodations laws (Lockard 1968). On one level, this reflected whites’ concern about property values and their desire to avoid interracial social contact. On another level, it reflected the rhetorical strength of the argument that the government ought not infringe on perceived private property rights, particularly with respect to homes.

Nevertheless, as black migration to central-city neighborhoods continued through the 1950s, and as the Civil Rights Movement gained momentum, fair housing initiatives rose toward the top of the Movement’s legislative agenda. In this regard, especially when considering state legislation outside the South, it is important to note that the efforts of African-American groups were complemented by those of Jewish groups and labor unions (Lockard 1968, Collins 2004b). In 1957, New York City adopted the nation’s first fair housing ordinance which served as a model for several of the subsequent state laws and was itself based on existing fair-employment statutes. While granting exceptions for the rental of rooms in or attached to owner-occupied homes (the “Mrs. Murphy rule”), the ordinance (as amended in 1962) stated that:

“no owner, . . . real estate broker, . . . or other person having the right to sell, rent, lease, . . . or otherwise dispose of a housing accommodation . . . shall refuse to sell, rent, lease . . . or otherwise deny or withhold from any person or group of persons such housing accommodations, or represent that such housing accommodations are not available for inspection, when in fact they are so available, because of the race, color, religion, national origin or ancestry of such persons” (Housing and Home Finance Agency 1964, p. 287). It also barred discrimination in the terms of sale or rental, advertisements expressing discriminatory preferences, and discrimination by banks and lending institutions. Finally, it outlined a procedure for handling complaints and enforcing the policy.

The state fair housing statutes initially had varying degrees of coverage. Almost all states included a Mrs. Murphy rule. More importantly, some states also exempted activities surrounding the sale or rental of owner-occupied single-family homes. Others allowed the owner-occupiers of homes to discriminate while simultaneously prohibiting discriminatory acts by real-estate brokers, advertisers, lenders, and builders. By 1968, several states had converged to a standard that covered virtually all sales and rentals (except those by Mrs. Murphy). In general, these state laws contained stronger enforcement mechanisms than the federal legislation passed in that year.

Following procedures established to enforce the earlier fair-employment laws, the administrative agencies charged with enforcing the fair housing laws did so, for the most part, by responding to individual complaints rather than by seeking out discriminatory practices. When presented with a viable complaint (i.e., within the law’s coverage), the agency would conduct an investigation. If evidence of discrimination was found, the agency’s representatives would attempt to persuade the discriminatory party to comply with the law. If the discriminatory party refused to cooperate, a public hearing could be held, a cease and desist order and/or fine could be issued, court proceedings could be undertaken, and (if appropriate) a real estate agent’s license could be suspended. Of course, all of this would take time, and households attempting to move might not have been willing or able to wait for redress. Beyond their enforcement role, fair housing agencies often undertook broad educational campaigns and offered advice to community leaders and housing industry participants regarding residential integration.

The effectiveness of this approach in dealing with housing market discrimination or, more to the point, in improving blacks’ housing market outcomes, is unclear a priori. The anti-discrimination measures were weak in the sense that the agencies’ first step was always to seek “conciliation” rather than punishment. Thus, even if caught, there was no immediate penalty and perhaps little incentive to adjust discriminatory policies until confronted by the agency. Even so, the passage of the laws and the threat of sanctions against resistant builders, lenders, or real estate agents might have facilitated conciliation procedures once initiated, might have modified discriminatory behavior immediately (rendering complaints unnecessary), and might have provided a convenient excuse for those who wished to do business with blacks but felt constrained by community norms. Moreover, the speed with which some neighborhoods “tipped” from white to black might have amplified the effects from enforcement efforts. Finally, it is possible that the state agency’s educational campaigns contributed to changing discriminatory norms. Whether the fair housing laws actually contributed to the observed improvement in blacks’ housing market outcomes is discussed below.

In 1966 and 1967, Congress failed to enact federal fair housing legislation, and its doing so in 1968 surprised many observers (Congressional Quarterly Almanac 1968). Southern opposition to the law was strong, and therefore, attaining cloture on a filibuster in the Senate (then requiring a 2/3 majority of votes) was a key step in moving the legislation forward. The Senate finally passed the bill on March 11, 1968; the House passed the bill on April 10 despite opposition mobilized by the National Association of Real Estate Boards. All of this occurred against a background of extraordinary urban civil disturbances from the mid to late 1960s, including an outburst after Martin Luther King’s assassination on April 4.

The federal Fair Housing Act of 1968 initially exempted privately owned, single-family housing. The policy’s coverage was extended over the next two years, but the Department of Housing and Urban Development’s (HUD) enforcement powers remained severely circumscribed (Yinger 1999). The legislation allowed only informal, clandestine efforts at persuasion. If persuasion failed, the complainant was then free to sue for an injunction in federal court, but this was obviously cumbersome, costly, and time consuming. The federal law also specified that a state with its own fair housing law had initial jurisdiction over any complaints originating there. Thus, the original federal law was no stronger than, and in many instances weaker than, existing state legislation.

Fair Housing’s Impact and Extension

Since 1960, blacks’ average housing market outcomes have improved relative to whites’, at least according to broad and commonly referenced measures such as home ownership rates and property values. Moreover, in the 1960s middle- and upper-class black families moved to suburban neighborhoods in larger numbers than ever before, and the average level of residential segregation within cities began to decline around 1970 (Cutler, Glaeser, and Vigdor 1999). These developments are consistent with the presence of a significant fair housing policy effect, but they are far from a direct evaluation of the hypothesis that fair housing laws helped improve blacks’ housing market outcomes.

How could the fair housing laws have contributed to improvement in blacks’ housing outcomes? The laws were intended to lower barriers to blacks’ entry into predominantly white neighborhoods and new housing developments, and to curb discriminatory treatment of blacks seeking mortgages, thereby lowering the effective cost of housing and expanding minorities’ set of housing opportunities. If this mechanism worked as intended, one would expect blacks to increase their housing consumption relative to whites, all other things being equal. One might also expect to see more racial integration in neighborhoods, though in theory, this need not follow. Of course, given that the laws’ enforcement mechanisms were far from draconian and that discriminatory biases in housing markets were deeply rooted, it is possible that the laws had no detectable effect whatsoever.

Comparing similar states that happened to have different fair housing policies before federal legislation was passed, Collins (2004a) finds little statistical evidence to support the hypothesis that state-level fair housing laws made an economically significant contribution to African-Americans’ housing market outcomes in the 1960s. Others (e.g., Yinger 1998) have suggested that a substantial degree of housing market discrimination still exists, though almost certainly less than before the passage of fair housing laws. The difficult measurement problem is figuring out how much of the perceived decline in discrimination or improvement in blacks’ housing is attributable to the anti-discrimination laws and how much is attributable to more general changes in discriminatory sentiment and in the economic resources of African Americans.

Since 1968, the federal government has made several extensions to its original fair housing policy. Among the most important are Fair Housing Assistance Program (1984), the Fair Housing Initiatives Program (1986), and amendments to the Fair Housing Act (1988). Separate but relevant legislation that may have had implications for minority home ownership includes the Home Mortgage Disclosure Act (1975, amended in 1989) and the Community Reinvestment Act (1977). Readers are referred to Galster (1999) and Yinger (1999) for further discussion of fair housing policy in contemporary housing markets.

References

Abrams, Charles. Forbidden Neighbors: A Study of Prejudice in Housing. New York: Harper & Brothers, 1955.

Collins, William J. “The Housing Market Impact of State-Level Anti-Discrimination Laws, 1960-1970.” Journal of Urban Economics 55, no. 3 (2004a): 534-564.

Collins, William J. “The Political Economy of Fair Housing Laws, 1950-1968.” Cambridge, MA: NBER Working Paper 10610 (2004b), available at http://www.nber.org/papers/w10610.

Collins, Willam J. and Robert A. Margo. “When Did Ghettos Go Bad? Residential Segregation and Socioeconomic Outcomes.” Economics Letters 69 (2000): 239-243.

Congressional Quarterly Almanac. “Congress Enacts Open Housing Legislation.” CQ Almanac 1968. Washington, DC: Congressional Quarterly News Features (1968): 152-168.

Cutler, David M. and Edward L. Glaeser. “Are Ghettos Good or Bad?” Quarterly Journal of Economics 112 (1997): 827-872.

Cutler, David M, Edward L. Glaeser, and Jacob L. Vigdor. “The Rise and Decline of the American Ghetto.” Journal of Political Economy 107 (1999): 455-506.

Galster, George C. “The Evolving Challenges of Fair Housing since 1968: Open Housing, Integration, and the Reduction of Ghettoization.” Cityscape 4 (1999): 123-138.

Housing and Home Finance Agency. Fair Housing Laws: Summaries and Text of State and Municipal Laws. Washington, DC: Government Printing Office, 1964.

Kain, John F. “Housing Segregation, Negro Employment, and Metropolitan Decentralization.” Quarterly Journal of Economics 82 (1968): 175-197.

Kain, John F. and John M. Quigley, Housing Markets and Racial Discrimination: A Microeconomic Analysis. New York: Columbia University Press, 1975.

Lockard, Duane. Toward Equal Opportunity: A Study of State and Local Antidiscrimination Laws. New York: Macmillan Company, 1968.

Massey, Douglas S. and Nancy A. Denton. American Apartheid: Segregation and the Making of the Underclass. Cambridge, MA: Harvard University Press, 1993.

Meyer, Stephen G. As Long As They Don’t Move Next Door: Segregation and Racial Conflict in American Neighborhoods. New York: Rowman & Littlefield, 2000.

Myrdal, Gunnar. An American Dilemma: The Negro Problem and Modern Democracy. New York: Harper & Row, 1962 (originally 1944).

Oliver, Melvin L. and Thomas M. Shapiro. Black Wealth/White Wealth: A New Perspective on Racial Inequality. New York: Routledge, 1995.

Yinger, John. “Housing Discrimination and Residential Segregation as Causes of Poverty.” In Understanding Poverty, edited by S.H. Danziger and R.H. Haveman, 359-391. Cambridge, MA: Harvard University Press, 2001.

Yinger, John. “Sustaining the Fair Housing Act.” Cityscape 4 (1999): 93-105.

Yinger, John. “Evidence on Discrimination in Consumer Markets.” Journal of Economic Perspectives 12 (1998): 23-40.

Citation: Collins, William. “Fair Housing Laws”. EH.Net Encyclopedia, edited by Robert Whaples. February 10, 2008. URL http://eh.net/encyclopedia/fair-housing-laws/