Economic expansion in the United States after World War II has often been credited with giving birth to a mass middle class. The G.I. Bill helped millions of veterans returning from war to secure higher education, jobs and healthcare, and a government-backed, low-interest, low-payment home financing system set vast numbers of Americans on a path to the financial security that came with owning a home.
From 1940 to 1960, the proportion of households that owned the home they lived in grew from 43 percent to 62 percent. But while White Americans had a government-assisted path to that dream of home ownership, but black Americans had a different experience. Federal policy and banking practices pushed black Americans into a secondary, unregulated market known as “contract selling” that often left them stripped of any wealth they had accumulated—or hoped to accumulate—through home ownership.
Between 75 percent and 95 percent of the homes sold to black families during the 1950s and 60s were sold on contract. On average, the price markup on homes sold on contract was 84 percent.
We found that African Americans purchasing on contract paid, on average, an additional $587 (in April 2019 dollars) more each month than they would have had they paid the fair price for their home and had a conventional or Federal Housing Authority (FHA) backed mortgage. The average black buyer also paid several points more in interest on their contract loan than the average white buyer paid on a conventional or an FHA backed mortgage.
Over the two decades studied, the amount of wealth land sales contracts expropriated from Chicago’s black community was between 3.2 and 4.0 billion dollars