The Atlantic: A house you can buy, but never own

The Atlantic, April 10, 2018: A house you can buy, but never own

In the 1950s and 1960s, African Americans were prohibited from borrowing through traditional means, so they entered into contract-for-deed arrangements, which left them with little equity to pass on to their children. This had long-lasting effects—African Americans still have, on average, much lower credit scores than whites, in part because they didn’t have the means of building wealth through homeownership that whites had. In the 1980s, 1990s, and 2000s, banks started lending more to African American buyers, but these buyers were frequently targeted by subprime loans with high interest payments and terms that were difficult to fulfill.

Contract-for-deed arrangements in today’s housing market came under scrutiny in 2016 when The New York Times reported how low-income buyers in Ohio were entering into these agreements and then losing the homes. Soon afterwards, the CFPB said it had assigned two enforcement lawyers to look into whether contract-for-deed transactions violate federal truth-in-lending laws. But now, advocates in Atlanta are raising another issue with contract-for-deed arrangements—alleging that they are racially discriminatory and that they violate the Fair Housing Act, along with various other state and federal laws. Many African Americans in cities like Atlanta were foreclosed on during the subprime crisis, which resulting in bad credit—meaning they can’t buy homes the traditional way, and so are being offered contract-for-deed payments.

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