The fallout over President Trump’s response to the violence in Charlottesville, Virginia last week has been swift and damning. Americans across all political and social spectrums have denounced him (although not everybody). The business world has joined the fray, if slowly, as shown by several high-profile CEOs leaving two of the President’s economic advisory boards. The boards have since been disbanded entirely. However, the real estate industry has been slow to speak out against the President. There are several reasons, but let’s be clear about the bigger problem: it has never taken responsibility for its own profound legacy of racism. It’s time for industry leaders to do so.
The violence experienced at Charlottesville, which resulted in the death of a young woman by a white domestic terrorist and, indirectly, the deaths of two Virginia State Troopers in a helicopter crash, has come to a shock to many Americans. White supremacists, Neo-Nazis, Neo-Confederates, and other white extremists marched openly (many in military-style gear with military-grade weaponry) in 2017 America, under the guise of preserving a monument to Confederate general Robert E. Lee. The real reason was to reassert white supremacy into mainstream politics.
They got a major assist from the President. Instead of immediately denouncing these groups, their actions, their ideology, and their perceived association with the administration, President Trump hesitated. He initially issued a passive statement against the violence, then after two days of outrage, issued a stronger statement that he could barely muster enthusiasm for.
In a subsequently disastrous press conference on infrastructure, the President’s true feelings emerged. They were despicable. Not only did he equate the actions of counter-protesters with Neo-Nazis, he also tried to say not all of the marchers (who were heard chanting "Jews will not replace us" and "blood and soil") were bad people. As a coup de grace, he displayed yet again a shocking ignorance of American history and a deeply held sympathy to white supremacy by supporting Confederate monuments. The lack of moral clarify and leadership by the President this week is an embarrassment to our country and our place in the world.
Much of this behavior in President Trump has been on display long before now, but this particular episode has marked a significant change in other people’s behavior towards him who previously looked the other way or downplayed it. The fact that many Republican lawmakers are openly questioning the stability of the President, military leaders are tweeting against racism, and Steven Bannon has been shown the door, shows that something larger is afoot potentially.
But it is the departure of prominent CEOs and the subsequent disbanding of President Trump’s economic advisory boards that are particularly interesting (though it doesn't mean they won't try to curry favor with the administration going forward). The role of the modern CEO of publicly traded companies is complicated. Taking a stand on contentious social issues (or not taking a stand) has gotten many in trouble recently. This speaks to the increasingly powerful public role corporations are playing in our society. Given the political and economic advantages that these institutions have amassed over the last three decades, this is no surprise. CEOs have an incredible amount of power. If it is healthy for our country is another question entirely.
So it is telling that real estate has been quiet. As The Real Deal has reported, some leaders in real estate have commented generally about racism and anti-Semitism, but few have distanced themselves from the Trump administration. Some of this could be chalked up to the perception that President Trump is one of their own. Some of it could be chalked up to concerns about facing public backlash from the President. Most likely, it’s the simple reality that the industry expects to benefit substantially from the Trump Administration through tax reform, regulatory relief, and the promised infrastructure plan that will be a bonanza for the private sector, so they will let his behavior slide.
It remains to be seen if this administration is actually capable of following through on those promises. Remember, the President’s most explosive remarks last week took place at an infrastructure press conference. The infrastructure council was itself disbanded along with the others. (Though it appears that President Trump never took these seriously to begin with.) The point is, this calculation by real estate leaders might not last much longer.
But since we are in an age of higher social profiles for corporations and industries, it is about time that real estate owns up to its legacy of racism. Even if the industry steps back from a flailing Trump presidency, it will not likely wish to do so. But if we are to sincerely address the fundamental divisions and inequalities that are causing the latest wave of unrest in the country, we must start with real estate.
Owning land has always been the historical root of the power structure in the US. As a result, exploitation and racism has long been a default setting in real estate. In 19th century America, starting with the south, this was most evident in white plantation culture that exploited slave labor, which only slightly shifted after the Civil War to sharecropping. In the north, the tenements of urban America were cash cows for nativist white landlords who charged European immigrants exorbitant rents for dehumanizing living conditions. Further west, the systemic eradication of Native Americans from their land for white homesteaders resulted in thousands of deaths.
The modern real estate industry was built on this legacy by default, but it began to build its own legacy in the 20th century. During the Great Depression, lobbying from the homebuilding industry prompted the radical decision to make homeownership the core of federal housing policy, setting up massive federal intervention in financing home construction. (Check out my more detailed article about this.)
The growing power of the real estate lobby asserted itself to create two cornerstones of mid-century American development: suburbanization and urban renewal. By actively supporting red-lining policies and racially exclusive housing covenants, the real estate industry gifted white Americans into homeownership, setting them up for generations of wealth creation, while actively preventing black Americans from doing the same. To add insult to injury, the same interests helped destroy hundreds of thousands of housing units in urban centers across the country in the name of urban renewal. These projects displaced millions of poorer, darker Americans from thriving communities for the benefit of a few downtown real estate interests.
And before the Fair Housing Act was passed in 1968 (over the concentrated resistance of the real estate industry) it was perfectly legal to discriminate against race in private housing, further preventing minorities from accessing quality housing. The industry long supported racial discrimination and still had a legacy of steering even after the law passed. The President himself first made national news for denying entry to black residents in Trump Village and had to settle with HUD in 1973.
Additionally, the real estate industry has always been opposed to public housing, particularly as it was increasingly perceived as housing for minorities. The threat of government competition in housing construction rallied the industry to help eventually kill the program under President Nixon. Housing, from then on, would fall entirely under the guise of the private market.
The two policies that emerged at the federal level after this period, the Low-Income Housing Tax Credit, and the voucher program known as Section 8, were backed by the real estate industry because they were rightfully seen as yet more federal subsidies to the industry. A complicated and deeply flawed regime of “affordable housing” policies and metrics have emerged in the subsequent decades that benefit from bi-partisan support in Congress and have continued to pass billions of public funds to private real estate interests.
This legacy is still unfolding. HUD has backed off of a legal dispute over fair housing laws with Westchester, even after well-documented attempts to prevent more affordable housing in wealthy, white-majority towns. The LIHTC, which is potentially under some threat due to the Trump tax reform, has been shown to focus construction in high-poverty, minority-majority communities. This not only prevents poor renters from living in wealthier communities with better school and job opportunities, it has also been linked to increased gentrification in these communities.
There are many other examples of racism on smaller scales that I could go into as well. During the Great Recession, the real estate industry preyed on many black homeowners with pernicious reverse mortgages. Many areas allow landlords to block Section 8 voucher residents. Eviction practices show how state power is used against minorities to benefit private interests. Labor practices in housing construction in many regions are rife with abuses targeting illegal immigrants. Even how the modern revival of urban centers has taken on an exploitative racial component in many neighborhoods.
The build environment is artificial construct. Where we live and work as Americans is largely dictated by race and income - which is no accident. The huge gap between average wealth of black families vs. white families has as much to do with where we were allowed to live than anything else.
The real estate industry has played a central role in this process and bares a significant responsibility to address it. It has never properly acknowledged how political land ownership and development is. It has always focused on its profit motivation as though it is divorced from social consequences. That can no longer be tolerated.
Staying silent on the President’s disastrous comments on Charlottesville is just the latest example of the industry avoiding its responsibility. Rarely do you see someone in real estate acknowledge the role housing policy has played in the divisions in American society. Rarely do you see someone question how the industry can redress its historical legacy. Rarely do you see the industry acknowledge its role in the affordable housing crisis and admit how it actually benefits from it.
Facing history is painful, for individuals, for industries, and for countries. But it is necessary in order to progress as a society and to build a better, more prosperous world. Taking down Confederate monuments is necessary, contrary to what the President might think, but it is relatively easy. Addressing the deeper injustices they represent and changing them is harder.
Real estate is no different. It is hard to change the physical landscape of our country. It is hard to change the deeply ingrained behaviors that our built environment has perpetuated. But the country created by these is broken and failing our ideals and values. Real estate must take responsibility for the role it has played in this and find new ways to benefit society fairly.