CHICAGO — Vacant and derelict properties clustered on the south and west sides of Chicago and in the southern suburbs have been a stubborn problem for decades. Every two years, the Cook County Treasurer tries to return these properties to productive use in his biennial Delinquent Tax Recovery Sale, often with little luck.
A new analysis from a team in Treasurer Maria Pappas’ office has set out to find out why. Their answer: Federal “redlining” maps that sanctioned discriminatory lending policies in the late 1940s were strongly correlated with vacant and derelict property sites today.
The report, “Maps of Inequality: From Redlining to Urban Decay and the Black Exodus”, argues that these underlined maps “triggered urban decay and fueled a continued exodus of black people from Chicago and other major American cities”, including Detroit and Philadelphia. The policy has led to “vast swaths of vacant land, abandoned homes, and closed businesses in minority neighborhoods” that existing tax laws and county programs do little to significantly address.
A March 2021 study from the University of Chicago’s Harris School of Public Policy found that since 2007, only 7% of all properties involved in the county treasure sale have successfully returned to the private market. Meanwhile, the number of lots, homes and businesses on salvage listings has increased sevenfold, from around 4,000 in 2007 to more than 28,000 in 2019.
The study published on Tuesday on the local impact of redlining – the systematic refusal of housing loans in minority neighborhoods on the grounds that they were a bad risk – took almost a year to set up, with the help of of nearly a dozen people from the treasurer’s office. .
LaDale Winling, an associate professor of history at Virginia Tech who focuses on American urban and political history, including redlining, said the study “is a responsible and evocative way to illustrate that these processes and inequalities do not are not accidental, they don’t happen by chance , but in fact, they come about as a result of a long history of political steps and actions that, frankly, an office like the Cook County Treasurer should be reflecting on and think, “How can we account for this?”
Properties come on the scavenger block when they have three or more years of unpaid taxes over the previous two decades. Private buyers can then make offers to acquire tax liens on these properties. If the original owner fails to pay the taxes they owe – plus county interest charges that accrue each month and possibly more if a private bidder purchases a lien on those taxes – the bidder may possibly become an owner.
Pappas criticized the effectiveness of the treasure sale for some time. But as a result of this study, she is proposing to eliminate the sale altogether and put in place a new system which she says would put these properties back on the tax rolls and make them more productive in a faster and more fairer.
The study overlaid more than 27,000 distressed properties at risk of being sold due to overdue taxes on top of the 1940 “safety” card made by the federal Home Owners’ Loan Corp., or HOLC. Just over half of the troubled properties fell within the color-coded boundaries of the 1940 map.
HOLC, which no longer exists, compiled maps that ranked mortgage prospects in cities across the country. The red zones were deemed “unsafe”, due to declining homeownership rates, poor housing conditions and an “undesirable population”. The yellow areas were in “decline” in part because they faced “infiltration from a lower level population”. Blue and green were “still desirable” and “better”, respectively. HOLC reports specifically referenced the presence of black, Jewish and non-English speaking people in the neighborhood as contributors to its undesirability.
Just because an area has been demarcated does not mean an individual has been rejected or refused for a mortgage, Winling pointed out, but the maps “gave the tools and changed the rules of the game” for private institutions like lenders, real estate appraisers and real estate agencies. real estate agents to systematically discriminate.
Of the current scavenger-sale properties that overlapped HOLC maps, Pappas’s study found that nearly all were in areas deemed undesirable by HOLC: 57% were in areas mapped in red and 40% in yellow.
The Treasurer’s Office tested the same hypothesis with about 8,500 City of Chicago-owned distressed properties and found that 98% were in areas outlined in red or yellow. The same was true for 96% of the 5,600 properties owned by the Cook County Land Bank. Some areas, including suburban Cook County, were rural at the time and not included in the HOLC map. But of the salvage properties included in the 2022 sale, 93% were in majority black and/or Latino areas.
“Perhaps the fundamental discriminatory idea behind redlining and the work of HOLC is that officials believed where African Americans lived there was an inherent risk of declining property values, Winling said. “Black-owned land was simply worth less and should be treated as such.”
When black families moved to areas that weren’t mapped by HOLC like the southern suburbs, “they faced the same kind of ideology, structures of inequality and denial of supports and services, etc. “Winling said.
These HOLC cards were precursors to other unfair lending and housing practices, says Hal Dardick, director of research at the Treasurer’s Office.
“You can look at other work and see how redlining led to sales under contract, how it was made worse by segregation and racial exclusion pacts in areas deemed better. Then when these things were banned – mainly in 1968 with the Fair Housing Act – other things took their place: subprime mortgages, regressive taxation and the undervaluation of real estate appraisals so many people in these communities cannot get enough loans to buy a house. … All of these things stem from when the federal government sanctioned redlining.
To test their hypothesis, the Treasurer’s Office team conducted a similar analysis of Detroit, where distressed properties are largely owned by the city’s land bank authority. They found that 85% of them were in areas bordered by red and yellow. Given Detroit’s steep population loss, however, it’s “more likely that a home anywhere in Detroit will be vacant, abandoned, or seriously tax delinquent,” according to the report.
In Philadelphia, where the city’s housing development corporation has distressed properties, about 82% fell into the red-delineated areas and 15.5% fell into the yellow-delineated areas, according to the analysis.
Pappas says the history of discriminatory lending has not only led to an exodus and likely exacerbates crime, but also hurts other taxpayers. When a property owner fails to pay, it increases the burden on everyone else in the county. Pappas says she wants to work with the city, the county land bank, the governor’s office and the state legislature to fix it.
“It’s a problem of ‘us’, and we have to work on it, because if we don’t, (the tax rates of) people who already pay taxes will go up because we haven’t solved the problem. abandonment problem,” Papas says.
The study makes 13 recommendations for reforms at the state and county levels. State lawmakers are expected to approve making the treasure sale optional in Cook County, rather than mandatory. Pappas recommends reducing the redemption period for scavenger-eligible properties from 2.5 years to one year. This would require an amendment to the state constitution.
She also proposes halving the interest rate charged on overdue property taxes, from 18% per year to 9%, and letting landlords make partial lien payments against their property, rather than a lump sum. . The reforms would not come without a cost: If that interest rate were reduced for the first 13 months of delinquency, the county would lose about $30 million in tax revenue, Dardick said.
She also proposes that Cook switch to a model that nearly every other county in Illinois uses: a trustee program.
This is where counties get tax liens on unsold properties during their annual tax sales. If the owner ends up paying their overdue bills, penalties and fees, the money is distributed to the various county tax agencies. If the owner does not pay, the trust acquires the title, releases it from all liens and attempts to find a new owner through an auction, sale or giveaway. Proceeds from these sales would also go to various tax agencies.
It would be complicated for Cook, the report concedes, “because tens of thousands of properties can go without bidding at tax sales held each year.”