Is "Regulation from Below" Possible? Historian Rebecca Marchiel on Community Housing Activism

How do the people exercise power? For West Side Chicago residents in the 1960s who were part of Organization for a Better Austin (OBA), the exercise of power needed to be opportunistic and confrontational. To pressure banks to reinvest in their community, they took action: they scattered hundreds of pennies in the lobby of a bank lender, so as to disrupt business,¹ and they surrounded a blockbusting real estate agent in the basement of a house until the agent promised to take his business out of the neighborhood.

These were among the hundreds of actions, negotiations, and persistent efforts the OBA undertook, along with subsequent federated organizations under the National People’s Action on Housing (NPAH, later dropping “on Housing”) coalition, that led to the eventual passage of the Home Mortgage Disclosure Act (HMDA) in 1975 and the Community Reinvestment Act (CRA) in 1977. These two acts are considered the dual federal legislation responsible for reversing decades of bank redlining practices in the United States. They remain imperfectly enforced.² Moreover, they are in need of updating to meet the realities of the contemporary mortgage market: for example, 60 to 70 percent of loans are issued by mortgage brokers not subject to the CRA. Nevertheless, the HDMA and the CRA remain central policy instruments for regulating fair access to credit for low- and moderate-income neighborhoods.

That the two acts directly originated from community organizing is distinctive in the history of 20th-century housing and urban development. This is because, for decades, regulation and practices were largely steered by the economic incentives of the ecosystem of private and government actors, legislatures, and institutions. Neighborhood investment flowed in the direction of property value ideologies: profit, it was believed, was created through new construction and maintained by a hierarchy of race, ethnicity, and class homogeneity.

Instrumental to diverting resources away from older, more diverse city neighborhoods and toward newly constructed single-family subdevelopments in the suburbs were powerful trade associations, such as the National Association of Real Estate Brokers (NAREB). For instance, the NAREB included a clause in its 1924 code of ethics that forbade members of races or nationalities “whose presence will clearly be detrimental to property values in that neighborhood”; this prohibition, of course, was then reflected in mortgage credit evaluation practices.

But it was not only such private actors. In fact, federal agencies such as the Housing and Home Finance Agency (HHFA)—the precursor to the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA)—were also motivated by self-preservation and expansion.³ In the 1950s and 1960s, for example, the HHFA disregarded nondiscrimination and relocation requirements for slum clearance. Meanwhile, the FHA—which was designed as a profit-making enterprise to stem the economic downturn during the Depression—focused on subsidizing credit in suburban subdevelopments. The agency justified that bias by claiming such a focus minimized the default risk in its own portfolios.

Against this landscape of public-private profit taking, at the cusp of bank deregulation in the late 1970s and early 1980s, Rebecca Marchiel’s deeply researched After Redlining (2020) recounts how Chicago community organizers such as Gale Cincotta, Shel Trapp, and the NPA built power to ultimately usher in and repeatedly reinforce legislation for bank-led reinvestment.

“Regulation from below,” as Orin L. McCluskey terms it,⁴ was achieved through fighting racial steering and blockbusting in Chicago’s Austin neighborhood, expanding into a national movement with the common interest of neighborhood reinvestment, acting as vigilant grassroots financial oversight in the recognition that there exists a wide gulf between legislation and implementation, and maintaining pressure on key legislative actors through direct action. The NPA went on to challenge the structural harms of FHA inner-city financing practices and work with municipal, state, and national legislators toward affirmative action for older urban neighborhoods. But, as Marchiel concedes, it was not enough.

What are the consequences of this particular path of grassroots organizing around the place-based logic of “financial common sense”? More important, what lessons about the process of community organization are we to take from the NPA, especially in the current era of housing insecurity and the deepening financialization of housing? Marchiel’s narrative paints the picture of a remarkably powerful national reinvestment campaign against an almost unstoppable force of ever more inventive flows of capital. Perhaps the lesson should have been that capitalism refuses to work for people.