Most financial reforms have focused on reining in Wall Street. But a new study by the American Sociological Review highlights what could be a more important regulatory target: civil rights. Like previous research, the report found that blacks were more likely than whites to have subprime mortgages or homes in foreclosure, even among borrowers with similar incomes. But it goes further, noting that while poor whites are spread around, decades of racism in the real-estate market has clustered poor blacks. That has allowed predatory lenders to reach more people and “multiplied the effects of the crisis.”
Cleaning up the market, says Princeton sociologist Douglas Massey, who coauthored the study, must therefore include reforming the real-estate industry, too. It’s illegal for landlords and sellers to discriminate on racial grounds. But civil-rights acts of the ’60s and ’70s lacked enforcement measures (like anonymous audits for discrimination). Without them, segregation will continue as is, says Massey, and the risk of another housing bubble will remain.