By Natasha Edwards Pallan, CFO
In 1979, my uncle, Texas State Rep. Al Edwards, introduced legislation to have Juneteenth declared a holiday in the Lone Star State. It was a massive undertaking, in his freshman year in the house no less, and required sustained persistence to gain support in the face of hostility and indifference from white lawmakers in the Texas Legislature.
The bill was passed on June 7, 1979, and became law on Jan. 1, 1980, making it the first state to officially recognize Juneteenth as a holiday. Since then, the celebration has become officially recognized across the country and, by last count, has become a holiday in 47 out of the 50 states, including New York.
Juneteenth marks the actual Emancipation Day on June 19, 1865, for slaves in Texas, when the news of the Emancipation Proclamation —signed by President Lincoln two and a half years earlier —finally made it all the way across the South. Finally freed, Black people were no longer property and could now have the hope to own property themselves.
But for generations after the end of slavery, a number of obstacles prevented most Black people from owning homes — starting with the empty promise of 40 acres and a mule. For more than a hundred years, deed covenants prohibited homes in most neighborhoods from being sold to Black people and other people of color. In the 1930s, the federal government backed racist housing policy through redlining, which further prevented Blacks from obtaining a mortgage in their own communities or obtaining a mortgage to move to more affluent communities.
Fair housing laws, passed after civil rights marches and mass protest following the assassination of Dr. Martin Luther King, Jr., finally made these restrictions illegal in 1968.
But the damage had been done. These policies created cities and towns across the country that were deeply segregated into neighborhoods that saw decade-upon-decade of wealth building, credit, and ownership opportunities for mostly White households, and undesirable neighborhoods with predatory loans and little wealth-building for Blacks and people of color.
Unfortunately, the private investment community has picked up where racist federal housing policies and banking practices left off.
After the last crisis, investment firms purchased large swaths of properties, having realized the opportunity for yield and particularly the legalized form of yield laundering inherent in financing the working classes. I call it yield laundering because it was made out to look like sound investing 101 (buy low sell high, right?) when really it was legalized theft.
Dividend and other investment yield laundering by corporations has taken many forms over the past 10 years, such as squeezing the minimum wage below subsistence levels while generating billions in profit, outsourcing to minimize labor costs, eliminating health care costs by limiting weekly wage hours — and of course structuring mortgages with enticingly low introductory fixed rate interest-only payment periods with variable rate balloons at the tail end — a risky mortgage that was specifically targeted to Black and Hispanic homebuyers.
All of this activity was very legal — and very wrong.
A popular form of yield laundering in New York and other major urban markets is milking the working classes of their long-held homes and their disposable income, and making an absolute killing on foreclosure sales: jacked-up prices for the homes they flipped and jacked-up rents for the homes they kept, all supposedly in the name of efficient markets.
Investment funds can hold on to these properties and list prices at whatever levels they want; in a rising real estate market (influenced by extremely large holdings by real estate investment funds and investment trusts) that means they can record massive mark-to-market profits with properties just sitting on the books.
Black homeowners in NYC bore the brunt of the losses from these practices. The control of residential real estate by the banking and venture investment community — as both landlord and financier — laid the foundation for massive gentrification and neighborhood instability. Trapped by unaffordable mortgages, the humiliation of foreclosure, high rents everywhere in the city and out of feasible options (hat tip to aged and inadequate public transportation), all of this led New York City losing 20,000 Black homeowners in Queens alone over a 10-year period.
The Center, which was formed to respond to the mortgage foreclosure crisis of 2008, recommends that our partners in City and State government, as well as our bank and foundation funders, double down on their publicly stated commitments to Black lives. The Center, in partnership with JPMorgan Chase Foundation, has launched our Black Homeownership Project, to help address the disparities and injustices in our City’s housing market.
We are engaging with a number of stakeholders to develop pilot initiatives to stop the loss of Black homeowners and actually start to see these numbers increase. We ask for partnership not only from banks and private equity, but also from community leaders and the real estate brokerage community. The pathway for long-term family and community health must include an affordable cost of shelter and the preservation of the American Dream of homeownership, which allows for the transfer of family assets and acts as a safety net for the family unit.
To our banking partners — thank you for your continued engagement on these issues. Consider how the investment arms of your business impact our communities, for example, through speculative real estate investment, even while your CRA departments try to stop the bleeding.
While we focus on providing health and safety amidst the coronavirus crisis, we should recognize the familiar moment that we are in, where just like 2008 we have a depressed economy, massive unemployment and falling real estate prices. With interest rates at near zero for the foreseeable future, there is bound to be another insatiable search for yield. I hope that we can look back over the past 12 years and think about what we actually “yielded” and whether it was worth it.
Uncle Al just passed in April, and is not here to witness the recent widespread recognition and celebration of Juneteenth. The silver lining is that this year, Juneteenth is coming after nationwide demonstrations for justice, demanding that black people be seen as fully human. Corporations are also starting to take systemic racism in corporate culture seriously, starting with formally recognizing Juneteenth as a paid holiday.
This year, it can be Emancipation Day for all of us and a chance to begin to set right the wrongs of the distant and recent past. We must reverse the loss of Black homeowners and support affordable homeownership for Black people as an essential step toward full citizenship and freedom.
Natasha Edwards Pallan has been Chief Financial Officer of the Center for NYC Neighborhoods since 2014.