When the average person thinks about government intervention in housing, rarely do they think about the inherent racism embedded in its history. While reading through the chapter, the moment that I saw that the appraisal questionnaire included ethnicity, two thoughts came to mind: 1) that wouldn’t be illegal to collect today; even health insurance algorithms can’t make use of gender when generating rates. 2) why are they collecting ethnicity information if it has little to do with housin… uh oh. Sure enough, my suspicion s were confirmed as I uncovered that the ABCD rating system of the Federal Housing Administration had a clear track record of granting C and D ratings to minority neighborhoods. All it took was one black family for a whole street block to be designated as black. What I found curious was how housing prices shifted when a minority moved into the white section of a neighborhood; I knew that prices would eventually drop as the white residents would view the area as unfavorable or in decline and wish to move out, however I would have never suspected the initial rise in price, stemming from the increased price blacks had to pay in order to get a house in a white neighborhood. I suspected there to be only a drop in prices, never a rise.
It’s easy to blame the FHA for the racist rating system which deeply affected one’s access to loans and thus had a massive impact on neighborhoods. However, I think the discrimination was a product of the environment at the time, and that the banks, even without a discriminatory rating system with which to make loan judgements, would have been making discriminatory decisions. So while the government certainly facilitated discrimination with “Residential Security Maps,” I do believe that loan discrimination would have persisted even without the help of the federal government.

However, despite the blatant racism within the system, many great advances came with government intervention in housing. The most surprising of which to me was the creation of long-term fully-amortizing loans, as I had no idea that it was common practice to issue loans that were not fully-amortizing and that needed to be followed up with renewed loans (which were not guaranteed). The whole system was broken and I don’t have the slightest clue how it existed and persisted in the first place. Additionally, government backed loans made the private sector more willing to issue loans, which put construction companies to work, and lowered unemployment, along with interest rates and housing prices (to the point where it was cheaper to buy than to rent). It was an ingenious system in my opinion.

While the net-benefit of government housing from the 1930s until the 1960s can be debated, the impact it had certainly cannot.