The Housing Crisis: How Did We Get Here? Where Do We Go?

In early October 2008, The Kirwan Institute hosted a national summit on subprime lending, foreclosure, and race. We didn't know it when we were planning the event, but a series of unfolding economic events spurred by our nation's housing crisis would have our government contemplating a $700 billion financial sector bailout on the eve of our convening.

Upon reading these volumes, you cannot escape the powerful impact historical policies and discriminatory actions have had in creating today’s crisis. The era of redlining in communities of color is well documented and addressed in all three books, but in greatest detail by Immergluck and Katz. The pathways to building the American middle class was aided by the development of the policies to support homeownership created by FHA and other post New Deal programs. Unfortunately, these programs primarily only served white suburban America, leaving most communities of color behind and leading to the huge race-based disparities in wealth in our nation today, where recent data finds the disparity in white vs. black assets to be nearly 900 percent. In many ways we are still trying to solve the problems created by the redlining era — instead of assuring sustainable credit in communities of color, the more drive there is to increase homeownership by creating a dual “predatory” lending market for underserved communities resulted in reverse redlining. That said, reverse redlining was only possible because of the continued effect of redlining dating back to the 50s and 60s with credit-starved communities of color presenting vulnerable targets for the lending industry.

Race is critical to understanding and solving the housing crisis; our society cannot tolerate or sustain a separate and unequal system of delivering credit to marginalized communities of color. Minority populations became the target of subprime loans, with many borrowers not being informed of other loan options even if they qualified. As we are learning from the recent Wells Fargo litigation in Baltimore, lenders openly targeted black families for subprime loan products. Because of the extreme concentrations of subprime loans in communities of color, these neighborhoods were disproportionately affected when foreclosures spiked, resulting in a deadly spiral of abandonment, blight, disinvestment and neglect for these communities. Until we can provide sustainable credit in our underserved and marginalized communities we will never truly address our nation’s housing challenges.

john a. powell
john a. powell is an internationally recognized expert in the areas of civil rights and civil liberties and a wide range of issues including race, structural racism, ethnicity, housing, poverty, and democracy. He is the executive director of the Haas Institute for a Fair and Inclusive Society. He is a professor of law and of African American studies and ethnic studies at the University of California–Berkeley, and holds the Robert D. Haas Chancellor’s Chair in Equity and Inclusion.
Jason Reece is director of research at The Kirwan Institute for the Study of Race & Ethnicity at the Moritz College of Law and lecturer in city & regional planning at the Knowlton School of Architecture at The Ohio State University.


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  2. Now, going into 2010, it’s hard to imagine that it’s only been just over a year since the economic impact of our nation’s housing crisis became clear to many Americans, producing a series of drastic economic aftershocks that shook the domestic and global economies. Spy PhoneTroubled Asset Relief Program, Fannie Mae and Freddie Mac, CRA, Bear Stearns, subprime loans, and mortgage securities dominated the news, the final months of the presidential campaign and went from obscure topics to dinner table conversation.

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