Real Estate Blockbusting

Blockbusting is term in real estate that refers to the outdated and outlawed practice of developers and real estate agents who worked to reduce property values by lying to white homeowners about minorities moving into their neighborhoods. Many such homeowners in racially segregated neighborhoods did sell their homes for well less than market value. Property values continued to decline as developers would buy the homes at a great discount and then leave them abandoned in further effort to give the neighborhoods the look of a slum.

Nefarious real estate agents would hire non-white people to pretend they were looking to buy a home in a white neighborhood in order to scare the homeowners into selling their homes at discounted prices. The practice of selling a home to a black family at a cheap price in a white neighborhood would often set off the chain of 'white flight', in which white people would flee their homes and sell them for significant losses to developers and real estate agents so as to avoid their fear of declining property values and increased crime.

Blockbusting was a common practice in Chicago, Illinois as well as many other American cities after the real estate laws were changed after World War II and the previously racially segregated neighborhoods were disassembled. Until this time, many cities had blatantly racial statutes that prevented blacks from moving to neighborhoods where whites lived. Even after certain racially restrictive laws were overturned, the practice of segregation continued. While there were many court cases that upheld the racial segregation policies as outside the scope of the U.S. Constitution amendment Fourteen, finally, the Supreme Court removed the restrictions and homes could now be sold to anyone who wanted to buy them.

On the outside of this change in regulation it seems as though this was for the benefit of black Americans, but unfortunately, real estate agents hoping to profit from racism, aggravated the situation by pretending black people were wanting to move into white neighborhoods, thereby scaring white homeowners into selling their homes to the agents at significant losses. The real estate agents would then sell those homes to black families at overly inflated prices, earning the scandalous estate agent a hefty profit. In addition, lending practices of the time were not generous to black Americans and they therefore were forced into expensive and racist installment contracts that often led to foreclosure.

In the early 1960s, the profiting from racially charged real estate practices was exposed and many governmental regulations were set up to prevent the practice of blockbusting. Real estate agents found guilty of this practice were stripped of their licenses and sued for fraud. By 1968, the United States government established the Fair Housing Act, but it was not until the 1980s that America finally rescinded blockbusting statutes across the country on a local level.