While places like San Francisco talk about grandiose, unachievable “reparations” schemes for politically favored racial groups, my home state of Washington moves quietly ahead on little cat feet. Within a week or two, after the state House and Senate have reconciled slightly different versions of House Bill 1474, the governor will sign into law a measure that will, if you believe the cheerleading account in the Seattle Times “address the legacies of housing discrimination” by creating “new down-payment and closing cost assistance for Washingtonians who were once affected by racially restrictive covenants or who are the descendants of those affected”.
Section 1(a) of the bill summarizes the theory underlying the legislation:
Generations of systemic, racist, and discriminatory policies and practices have created barriers to credit and homeownership for black, indigenous, and people of color and other historically marginalized communities in Washington state. The legislature finds that these policies and practices include redlining, racially restrictive covenants, mortgage subsidies and incentives, and displacement and gentrification.
Succeeding paragraphs attribute to those practices the current lower rate of black home ownership when compared to whites and a host of other evils:
These negative impacts extend beyond homeownership and affect wealth generation, housing security, and other outcomes for black, indigenous, and people of color and other historically marginalized communities in Washington. The legislature finds that these impacts include higher rates of homelessness, rent burdening, substandard or otherwise unhealthy or unsafe housing, and predatory and discriminatory lending practices that lead to further displacement and gentrification.
The bill goes on to declare that “race-neutral approaches are insufficient” and that only “race-conscious programs” can “remedy the past discrimination in which the state was complicit”.
The “race-conscious” remedy is left by the bill in an inchoate state. One part is definite: Starting January 1st of next year, county auditors must collect an additional $100 fee for each document that they record (with exceptions for birth and death certificates, marriage and divorce records, and the like) and remit $99 to the state treasurer for deposit in a “covenant homeownership account”. That is a whopping increase. The current charge is five dollars for the first page, and one dollar for each additional page plus a five dollar surcharge for state libraries and a thirteen dollar surcharge for “affordable housing”. The title deed to my family’s home, thee pages, cost $25 to record. Recording it in 2024 would cost five times as much. The new fee is projected to raise $99 million a year.
As for the program that this levy will support, it will be constructed by the Washington State Housing Finance Commission. The bill furnishes some guidelines. The program is supposed to provide loans for eligible home buyers’ down payments and closing costs, repayable when the property is sold. To be eligible, a home buyer must –
- not have owned a home within the past three years,
- have household inocme of no more than 100 percent of the median income in the area where the home is purchased (around $107,000 in Seattle, where the benefits are designed to be concentrated),
- be a Washington State resident,
- be, or be descended from, someone who was a Washington State resident on or before April 11, 1968, the date of enactment of the federal Fair Housing Act and who “was or would have been excluded from homeownership in Washington state by a racially restrictive real estate covenant on or before April 11, 1968”.
Much can be said about this program, none of it positive. To start with an obvious point, even if government disbursements on the basis of race were wholly unproblematic, these particular disbursements are unlikely to help, and may injure, the intended beneficiaries. Lenders are reluctant to extend credit to buyers who borrow their down payments. Inability to make a down payment from the borrower’s own resources is a warning sign that he is buying more house than he can afford and has a high risk of default. The last housing crisis was if not caused, certainly aggravated, by the widespread reduction of down payments to three percent of principal. Loans that won’t have to be repaid until a future sale will predictably have the same effect.
If lenders don’t lower their credit standards to accommodate the new program, many eligible buyers won’t be able to obtain mortgages, and those who can won’t need a government subvention; it will be purely a windfall handed out on the basis of race. If lending standards are lowered, well, does anybody want to revisit 2008?
The legality of the program is also highly dubious. While courts have, through half-closed eyes, held that the Fourteenth Amendment doesn’t bar race-conscious programs that are narrowly designed to correct past discrimination by state and local governments, this one will have trouble passing muster.
Seventy-five years ago, in Shelley v. Kraemer, 334 U.S. 1 (1948), the Supreme Court held that judicial enforcement of racially restrictive real estate covenants is state action that violates the Fourteenth Amendment. Since then, racial covenants have not prevented anyone from buying a home. Racial prejudice has, but prejudice isn’t produced by words in title deeds. The fact that unenforceable covenants lingered in the documents had no legal effect and was not “state action” by any rational standard.. The notion that people who would willingly have sold properties to members of “black, indigenous, and people of color and other historically marginalized communities” were deterred by reading their deeds is sheer fantasy. The purported state action on which the House Bill 1474 rests its claim to legality lies so far in the past that it has no real connection with present day social ills.
Nor, even if the separation in time were narrower, would there be much of a plausible argument that inability in the past to buy a home in a white neighborhood plays any role in the lower rate of black home ownership today. The reason that blacks are less likely than whites to own their homes is that, on average, blacks are poorer. As an earlier Times puff piece for the program notes, “Median income for white households in King County is nearly twice that of Black households.” Can much, or any, of that discrepancy be traced to racial covenants? The same Times story unwittingly shows how little role they play. It recounts the family story of a 37-year-old black woman who can’t afford to buy a home.
When her parents hoped to buy a house in the 1990s, they couldn’t rely on financial assistance from their parents. “There was no generational wealth to be distributed,” Lucas said. “So when my mom and dad were on their quest to homeownership, they basically were doing it alone.”
The family moved into a home on a corner in Rainier Beach that “looked abandoned” with grass so tall it covered up the windows, she said. “And they made it to the nicest house on the block.”
Yet even as homeowners, Lucas said her parents struggled to build enough wealth to pass on. Add to that high home prices, and the area where she grew up now feels out of reach.
“If I wanted to purchase a house on that block, I wouldn’t be able to afford to do it,” Lucas said.
In other words, the parents bought a house that they could afford, put in the labor needed to turn it into a pleasant place to live and, one infers, saw it increase substantially in value. So far as one can tell, neither racism in general nor racial covenants in particular had any effect on their housing situation, nor are those the factors that prevent their daughter from owning rather than renting..
Finally, let me note a challenge that the designers of the program will face. As the bill itself observes (section 3(8)), restrictive racial covenants frequently targeted Asians, Jews and various Middle Eastern ethnicities that are commonly regarded as “white”. It will be a real surprise if the program extends any benefits to those “historically marginalized communities”. I wonder what work-around the Washington State Housing Finance Commission will find to keep the subsidies away from them.
As reparations go, this is a penny ante offense, but that doesn’t make it any better.