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Blockbusting was prohibited by the Civil Rights (Fair Housing) Act of 1968, which declared it an illegal practice “for profit,” to induce or attempt to induce housing sales “by representations” regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, etc.” (Section 804[e]). Blockbusting practices occurred sporadically throughout the twentieth century (sometimes under other names, like “panic peddling”), but reached their peak in the 1950s and 1960s when they served to accelerate massive racial change in residential areas in a large number of American cities.
Blockbusters functioned in settings where rigid patterns of residential segregation prevailed, resulting from private discrimination and institutionalized though real estate, banking, and governmental practices. They preyed upon the racial prejudices and fears of white residents by selling or renting to African Americans – or even by spreading rumors of black settlement – to panic property owners unwilling to accept residential integration. Such actions severely depressed housing values, enabling the operators to purchase houses well below prior market values. ”White flight often ensued, further depressing prices. In turn, blockbusters sold the properties to African American home-seekers, previously denied such residential options within the rigid confines of housing segregation, at mark-ups considerably in excess of normal business margins. The profit from such transactions was sometimes referred to as ”the color tax or ”black tax, the price African Americans had to pay to gain new housing opportunity. Since prospective African American home buyers often lacked access to conventional financing, blockbusters also often profited from loan arrangements, which protected their investment, but left purchasers exposed to considerable risk.
Following adoption of the Fair Housing Act, flagrant instances of blockbusting have declined. The anti-blockbusting provisions of the law were upheld by a series of federal court decisions, and stronger enforcement mechanisms were added in subsequent federal legislation.
- Helper, R. (1969) Racial Policies and Practices ofReal Estate University of Minnesota Press, Minneapolis, MN.