Today, as a Realtor of conscience, I present an annotated summary of research undertaken at the University of Minnesota into the long-term effects of covenants. I have provided a link to the full academic paper presented at the 5th Biennial Real Estate Conference in Atlanta in December of 2019.
But first, let's define an important term:
COVENANT
Racially-restrictive covenants were clauses within property deeds that prohibited the sale, resale, or rental of a property to a range of non-white people but primarily targeting African-Americans. Covenants prevented people of color from living in particular areas within a city.
“Unlike many other American cities, Minneapolis did not have racially-segregated zoning policy because it began its expansion after the Supreme Court invalidated them. Racial covenants were truly one of the first housing discrimination instruments used in this region and affected the initial geographic distribution of race. Thus, we can draw a straight line from covenants to modern segregation and racial differences in the region.” (Sood et al. p.4)
“In Minneapolis, Minnesota, the first racially-restrictive deeds appeared in 1910. Soon thereafter, real estate companies began including the language within property deeds sold throughout the city.” (Sood et al. p.5)
“In response, real estate developers, public officials, and private citizens used the sale of private property to create a legally enforceable system of housing discrimination. The housing deeds during the point of sale included language which explicitly prohibited many racial and ethnic groups from ever purchasing or residing in a home. While primarily focused on preventing African-Americans from moving into neighborhoods, these clauses also excluded many other groups stating that the "premises shall not at any time be conveyed, mortgaged or leased to any person or persons of Chinese, Japanese, Moorish, Turkish, Negro, Mongolian or African blood or descent" (This is a direct quote from a historical covenant).” (Sood et al. p.5)
“The Supreme Court reaffirmed the legality and enforceability of covenants when it ruled in Corrigan v Buckley (1926) that the resell of property to black families were void because of covenanted language. Following the ruling, if an individual seller wanted to sell to a minority group, past owners and even neighbors could void the transaction.” (Sood et al. p.5)
“The use of covenants became widespread across much of the United States, especially by real estate developers in growing cities.” (Sood et al. p.7)
“Developers would often advertise the use of covenants as part of their amenities in order to attract buyers and higher prices. Minneapolis and Hennepin County’s urbanization occurred concomitantly with this national trend. Many real estate developers built new homes with covenants to address the city’s swelling population which grew from 301,408 in 1910 to 521,718 by 1950. As more people moved into the city and racially-restrictive deeds spread, African-Americans were pushed into confined neighborhoods. Even as the number of black residents continued to grow, large parts of the city became completely white. The prevalence of covenants both locally and nationally cannot be understated.” (Sood et al. p.7)
“Several studies have considered how a city’s fundamentals contribute to spatial outcomes across races. Spatial discrimination, where black workers cannot freely move to certain neighborhoods, increases the cost to access of labor markets and contributes to higher black unemployment.” (Sood et al. p.8)
“Many recent studies have examined the long-term effects of racial discrimination by focusing on credit access and the role of HOLC maps which disproportionately effected racial minority residents through “redlining” and giving worse credit ratings to neighborhoods of people of color.” (Sood et al. p.8-9)
“In an extensive study across the United States, Aaronson et al. (2018) use HOLC maps of 149 cities and a propensity score weighting approach to compare boundaries of similar plots of land. They show that credit access determined by HOLC maps had a significant impact on black home ownership, house values, rents, and vacancy rates.” (Sood et al. p.9)
“Congressional legislation passed the Fair Housing Act in 1968 explicitly banned housing discrimination on race. By this time, however, zoning and development of Minneapolis and Hennepin County slowed and even begun to decline. However, the racial makeup of neighborhoods determined in preceding decades persisted, where the region was highly segregated with white families primarily residing in suburban areas and black families within select neighborhoods parts of Minneapolis. This segregation has continued for more than fifty years, suggesting the highly long lasting effect that covenants had on the racial distribution of the region.” (Sood et al. p. 7)
Researchers, Aradhya Sood (University of Minnesota Department of Economics), William Speagle (University of Minnesota Department of Economics), and Kevin Ehrman-Solberg (Department of Environment, Geography, and Society) published findings in November of 2019 using “a unique and newly constructed data set of all historic property deeds from 1910-1955 with information on racially-restrictive covenants for all lots in Hennepin County, Minnesota.” (Sood et al. p.2)
They compared “this data with census and present-day tax assessor data to assess the long-term impact of these covenants.” (Sood et al. p.2)
They found “that houses that were covenanted have on average 15% higher house values in 2018 compared to houses that were not covenanted. We also find a 1% increase in covenanted houses in a census blocks reduces black residents in 2018 by 14% and reduces black home ownership by 19% in 2018.” (Sood et al. p.30)
