Commentary Magazine

The Housing Order & Its Limits

On November 20, 1962—as the entire nation listened to hear the outcome of two events, either of which might have touched off a world war—President Kennedy read a prepared statement announcing that he had signed an Executive Order banning discrimination in federally aided housing. Thus more than two years after attacking his Republican predecessor for failing to end housing discrimination “with the stroke of a pen,” Mr. Kennedy finally made good on his own promise to do so. Yet when the provisions of the Order appeared in the press and the flurries of praise and protest had settled down, two questions still remained to be answered. First, what were the forces that had caused Mr. Kennedy to wait so long before taking an action which he had conceded to be “sound, public constitutional policy” from the outset? And second, what would the Order actually accomplish?

The reasons for the delay in the signing are tied up with a difficult ethical and political issue which arose in 1935 when the federal government first put its power and credit behind the mortgage and home building industries. Until then home building had been an entirely private undertaking of a real estate fraternity which looked upon discrimination as a necessary element of sound business and which therefore spawned racial covenants throughout the country and threatened to expel any realtor who sold a house to an unwelcome buyer. Such practices could be countenanced so long as the real estate transaction remained private, but when after 1935 the government began to insure mortgages, to finance savings and loan associations, and to dole out federal credit to builders, the question came up as to whether these government-assisted enterprises should be required to abide by the same ethics of color-blindness and nondiscrimination which properly apply to government itself.

Government housing officials, however, perhaps because they were recruited from the real estate fraternity itself,1 refused to pay any heed to this question. Not only did they allow builders and lenders to discriminate, but, from 1935 to 1950, they insisted upon discriminatory practices as a condition of government aid. The Federal Housing Administration’s official manuals cautioned against “infiltration of inharmonious racial and national groups,” “a lower class of inhabitants,” or the “presence of incompatible racial elements” in the new neighborhoods. “The social class of the parents of children at the schools” was declared to have a vital bearing on whether a neighborhood was “stable.” A neighborhood was to be considered less desirable if inhabited by “a lower level of society.” (FHA added, however, that this could be remedied by having the children “attend another school with pupils of their same social class.”) Stables and pigpens were put by FHA into the same category as a section occupied by the “wrong” race. Zoning was advocated as a device for exclusion and the use was urged of a racial covenant (prepared by FHA itself) with a space for the prohibited races and religions left blank, to be filled in by the builder as occasion required.2

The Home Loan Bank System—the federal agency which regulates savings and loan associations—urged similar practices, while a confidential report by the National Housing Agency (predecessor of the present Housing and Home Finance Agency) contained a foreword describing as a “first approach” the exclusion of “the clannish gregarious foreign-born groups, of religious groups, of social groups, and, most important of all, of the great contained and semi-contained groups of Negroes and Jews.”



For fifteen years, then—a period in which some 15,000,000 homes were built—federal housing agencies pursued a concerted, relentless, and officially sanctioned drive to keep people living only near their own kind and to get them to oppose intrusions by anybody who was different. Federally approved racial covenants soon covered the greater part of suburbia; neighborhoods were divided into those of the elite and the unwanted; and intolerance gained such rapid headway that men in high national office now saw nothing wrong in signing restrictive covenants, one of the most popular of which barred not only Negroes, but Jews, Armenians, Persians, and Syrians.

It was not until 1946—by which time the Negro who had been moving northward had become the main target of exclusionary devices, though discrimination continued against other groups as well—that the leading national civic, racial, and religious organizations became fully aware of the implications of the situation. As a result of this new awareness, thirty-seven such organizations eventually joined together in the National Committee Against Discrimination in Housing, and pressure began to mount for local and state laws banning discrimination in publicly aided undertakings. In 1950, the first important state law barring discrimination in subsidized operations was won in New York, adding to the progress that had been made when the Supreme Court banned enforcement of the racial covenant in 1948 and President Truman subsequently forbade its use in FHA undertakings. FHA was reluctant, but it had no choice other than to comply.

Yet the elimination of the written racial covenant from FHA manuals after 1950 by no means entailed the elimination of racial and religious discrimination from the field of housing. Not only did the federal housing agencies fail to ban discriminatory practices by making their absence a condition of federal aid, but they ruled that so long as no state law existed forbidding such practices, a builder was free to do as he pleased. Where housing was concerned, states’ rights became the new federal rule even while the same federal government was moving against states’ rights in school segregation.

With the advent of urban renewal after 1949, moreover, racial discrimination with federal blessing took on an additional form in the wholesale evictions of Negroes from footholds they had established in the cities. Negroes constituted more than 70 per cent of those displaced from their homes to make room for more expensive housing developments (all financed in part by federal aid); and a high proportion of the remaining 30 per cent were Puerto Ricans, Orientals, and other minorities. Here too, the federal housing agencies ruled that both displacement and refusal to rent space in the new federally aided projects to minorities were matters of local option.

While the federal government continued to sanction housing discrimination, however, many city and state governments began proving responsive to the pressure that was being put on them to pass laws against discrimination in federally aided housing. By November 1, 1962, seventeen states, the Virgin Islands, and fifty-five cities had enacted anti-discrimination laws of some sort or passed resolutions against discrimination in the housing field. Eleven states went even further by outlawing bias in private housing not receiving government aid, as well as in publicly subsidized housing and urban renewal. These laws affect more than 65 million people. Contrary to the predictions of certain real estate interests, such laws have neither caused any general decline in property values nor curtailed investment in housing. They have brought no mass influx of Negroes into previously restricted areas, but they have assured protection to those Negroes who wish to move and can afford to do so.

Despite these demonstrations in the states and localities, President Eisenhower could not be moved to alter federal policy. “I happen to be one of those people,” said Mr. Eisenhower repeatedly, “who has very little faith in the ability of statutory law to change the human heart, or to eliminate prejudice.” He nevertheless appointed a Commission on Civil Rights to study the whole question of discrimination, and in its 1959 report, his Commission asked that the government bar discriminatory housing practices in federally aided undertakings. Mr. Eisenhower was still unmoved, and thereby became the target of Mr. Kennedy’s barbs during the 1960 campaign.



Had Mr. Kennedy signed the Order when he was sworn in, it would hardly have caused a ripple, for the signing was expected and had already been discounted politically. But during the course of his two-year delay, complications set in. First he felt that he had to get his housing bill through the Congress, and the Housing Subcommittees were headed by Southerners who might balk in retaliation for the signing. Thereafter, he continued to put off the signing for fear that the election of some friendly Southern Senators and Congressmen might be jeopardized. When pressed for a comment by newspapermen, he said that he was awaiting a popular “consensus.” When the stock market sagged, he thought the signing might jeopardize building starts. Meanwhile, his delay fortified the opposition of realty groups and Southerners, while opposition also began to manifest itself in the segregated white neighborhoods built with federal aid in the North. The Executive Order which had hardly been a bone of contention in 1960 turned into a major political issue by 1962.

The Order Mr. Kennedy finally signed was a compromise which sought to satisfy liberal sentiment on the one hand, and the realty groups, worried home-owners, and the South on the other. It followed almost to the letter the narrow recommendations of the two Southern members of the President’s Commission on Civil Rights rather than those of the majority. The result is that the issue remains only partly resolved.

The compromise Order embraces only mortgages hereafter insured by the Federal Housing Administration or the Veterans Administration, properties owned by the government or receiving direct government loans, future federally subsidized urban renewal projects, and future public housing. It has no application to mortgages still outstanding. Nor will it have much impact on public housing, which is predominantly inhabited by Negroes anyway. Property owned by the government had been barred by court decisions from discrimination long before the Order, while a California court had already held discrimination illegal even on FHA-insured loans. As to future urban renewal projects, little was added to the protections of minority groups, since the actual discrimination against them in this area takes place in the evictions, not the rehousing. Even here the Order provides little help, for it fails to bar discrimination in the private housing market in which most families displaced by federally aided urban renewal projects are to be relocated.

In consequence of all this, less than 25 per cent of all new housing construction will be embraced by the Order. Since about half of these were already covered by more stringent state and local laws banning discrimination, the Order will at best affect only 13 per cent of new housing undertakings.

The most serious omission, however, is the exclusion of savings and loan associations from the Order’s provisions. These associations are members of the government-created Home Loan Bank System composed of eleven regional Federal Home Loan Banks which make available to their member savings and loan associations an unlimited reservoir of credit at low interest rates. The Home Loan Bank Board regulates these associations, looks into the affairs of the member associations, sets up rules they must observe, approves the “character of [their] management,” and can bar membership to any association if its policies are inconsistent with the law or the Board’s own regulations. It also has the power to establish “such other requirements as it deems necessary or desirable.”

Another federal agency, the Federal Savings and Loan Insurance Corporation, not only oversees the associations and the character of their management, but puts the federal guarantee behind all savings accounts up to $10,000. This insurance has been responsible for the spectacular growth of the associations from a mere $138 million in assets in 1934 to about $80 billion in assets today and it has made them the most important mortgage lenders on homes. As the United States Commission on Civil Rights has said, while the associations are privately operated, “they owe their very existence and a large part of their success to the Federal Government. They are creations of the Federal Government, chartered for express public purposes.”



On June 8, 1961, the President’s Commission on Civil Rights, after finding that discrimination was “widespread among the associations,” asked Chairman Joseph P. McMurray about the Home Loan Bank Board’s policy and he told them “it opposes discrimination, by financial institutions over which it has supervisory authority, against borrowers solely because of race, color, or creed.” Subsequently, however, the Board’s staff blunted this policy by stating that the savings and loan associations must consider only economic factors in making loans and there was now some uncertainty as to whether race could be considered an “economic factor.” The staff, moreover, doubted that the Board had the legal authority to bar discrimination by its associations.

Had the President’s Order embraced these savings and loan associations, the doubt would have been dispelled. As it now stands, however, by being excluded from the Order, the principal mortgage lenders in the country feel themselves free to discriminate. In fact, some home builders who had been using FHA loans are already switching their mortgage applications from FHA to these associations so as to avoid the Order’s prohibitions.

The Executive Order will, in short, touch only a small fraction of the housing market. If any real gains are to be made, its coverage must be widened or more individual state laws laboriously sought. The President’s Order is no more than a small first federal step toward breaking the bottleneck in housing discrimination.

Nevertheless, its importance cannot be discounted. First steps in civil rights legislation have often led to second steps when the will to move ahead has been present. The Order affects some parks and public facilities connected with urban renewal and will also have some value in demonstrating that builders who adopt a no-discrimination policy need not have their investments jeopardized. Moreover, since the Order authorizes “educational programs” and the use of the government’s “good offices,” some progress may conceivably be made by voluntary cooperation.

But the most important gain represented by the Order is that an old principle which the federal government had been violating—the principle that government may not practice discrimination or abet in the practice of discrimination—has now been partially reclaimed. The long delay in signing the Order and the sordid history of federal discrimination in housing point a warning for all future programs requiring expansions of public power. When government and private enterprise combine into a joint undertaking with common interests and common drives, there is always the danger that the high ethics of constitutional principle will be leveled down to the lower standards of the market place. While the private entrepreneur is no better and no worse than other mortals, business is not concerned, as a democratic government must be, with such things as the equal treatment of minorities. A democratic government must therefore beware of adopting standards alien to its own nature when it enters into partnership with private business.

The President’s delay in signing the Order only exemplified the deep roots racial discrimination had won in America. Much still remains to be done if these roots are ever to be destroyed.




1 As the late Herbert U. Nelson, the Executive Vice President of the National Association of Real Estate Boards told a Senate Committee in 1950: “We put several hundred of our people, whom we found and persuaded to go into government service, into positions where they could give their services.”

2 The sections of the official FHA manual in which these provisions appeared were Sections 937, 310, 315, 307, 229, 330 and 255 of the 1935 manual; 228, 252, 266, 210d, 284 and 229 of the 1936 manual; 233, 935, 937 and 951 of the 1938 manual; and 207 and 217 of the 1940 manual.

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