D. FINANCIAL ASPECTS OF NEGRO HOUSING
I. NEGRO PROPERTY CONSIDERED A POOR RISK
An important factor in the housing problem is the low security rating given by real estate loan concerns to property tenanted by Negroes. Because of this Negroes are charged more than white people for loans, find it more difficult to secure them, and thus are greatly handicapped in efforts to buy or improve property. The general opinion that condemns such property makes the risk poor, even for Negroes. A Chicago Trust Company representative said:
A Negro called to buy a mortgage. Our first thought was to submit to him one of the colored loans, which we did. We showed him a photograph; he liked the appearance of the building, and then he inquired, "Is this anywhere near the colored district?" He declined the loan on that account, showing that this uneasiness is not confined to the white investor.
When districts become exclusively Negro this reluctance to invest or to lend invariably appears. If there are sufficient Negroes with money to create a market the loss is somewhat relieved. Yet, deprived of the usual facilities for purchasing a home, they cannot relieve their housing shortage and are forced to seek houses in unfriendly neighborhoods.
The factors are similar to those in depreciation, often based on prejudices and erroneous beliefs concerning Negroes. Whatever depreciates real estate necessarily depresses its security value—whether the cause be fact or opinion. A South Side bank had difficulty in selling Negro loans to white people because "they say they don't keep up the property; they let it deteriorate; they don't improve it." The representative of another bank said:
I don't believe you could find enough colored people who could make a substantial first payment. There are a few that I have talked with recently who are on the police force, who wanted to know how we could help them out in buying places. One had in mind the purchase of a three-flat building; the price was around eight or nine thousand dollars. There was a first mortgage on it of about five. He had only $300 cash to buy it with.
A former president of the Chicago Real Estate Board said:
The percentage of Negro people in Chicago who will buy homes is comparatively small. The best evidence we have is that 85 per cent of the white people are tenants; 15 per cent of them are home owners. It follows, I think, that a smaller percentage of the colored race will buy homes, not more than from 3 to 5 per cent of the colored people at the present time.
A representative of a very large South Side realty business said: "There are ever so many mortgage men not familiar with the colored belt. That's one of their greatest reasons for refusing the loans—they are not familiar with the values."
Real estate men, white and Negro, were invited to present their views, and leading mortgage-loan houses and banks of the city were asked what they knew about Negroes as borrowers, investors, tenants, and clients, and their thrift and care of property. Their testimony, with the Commission's investigations, yielded a fairly accurate picture.
II. NEGROES AS HOME OWNERS
The first house in Chicago was a rude cabin built by a Negro in 1790. There were several Negro home owners when the city was incorporated in 1837. The first Negroes to settle near Thirtieth Street—long before the city had extended its limits that far—owned their homes. Although prior to 1916 most Negroes did not own homes, there were many, especially business and professional men, who had gradually acquired dwellings. The migration brought thousands of Negroes with ready cash who found it easy to buy dwellings on the South Side. The uncomfortable and inadequate dwellings of the "Black Belt" could be avoided only by the purchase of property elsewhere. Attention thus was directed, probably for the first time, to the question of home buying by Negroes. Indeed home owning is an essential feature of any solution of their housing difficulties.
Until the migration Chicago's Negroes had engaged chiefly in personal-service occupations that governed somewhat the location of their homes; when these were not in the "Black Belt" they were in shabby property in undesirable streets near their employment. Men who worked on dining- and sleeping-cars lived near the railroad stations—on State and Dearborn streets, Plymouth Place, and the surrounding neighborhood; they were generally renters and moved southward with the general trend.
Home buying stimulated by high wages and the migration.—The war brought wages to the Negroes that seemed fabulous to many; and the wages brought the migration. The first migrants were mostly drifters. Then came a great many who had acquired considerable substance in the South, and having sold out they came to Chicago with ready money, in some instances large amounts. This class of Negroes bought dwellings. Several of them bought apartment buildings, said a real estate dealer, and in one instance the buyer paid $10,000 in cash; and there were very many who were able and ready to pay from $1,000 to $3,000 on the purchase of a residence in a respectable neighborhood. Another dealer said that he was not able to supply the buying demand: "We have put renters on the side list; buyers are taking up the time. We used to think $500 a good-sized payment for them, but now they often have $3,000, $4,000, or $6,000. A Negro customer lately wanted a twelve-flat building and would pay cash."
"The average newcomer is a home-owner," said another realty dealer; "he has sold his home in the South to come here. Some say the high wages are not attracting them so much as better schools."
Another dealer said that the average amount per family brought from the South was from $300 to $500, and he knew of one family that brought $6,000.
It was the experience of another firm that three or four years ago Negro purchasers paid down about $500, but that now (1920) they frequently make first payments of $1,000 or more.
This sudden wave of home buying impressed Carl Sandburg, who wrote (1919) in the Chicago Daily News:
Twenty years ago fewer than fifty families of the colored race were home owners in Chicago. Today they number thousands, their purchases ranging from $200 to $20,000, from tar paper shacks in the still district to brownstone and greystone establishments with wealthy or well-to-do white neighbors. In most cases, where a colored man has investments of more than ordinary size, it is in large part in real estate. Realty investment and management seems to be an important field of operation among those colored people who acquire substance.
Several other factors contributed to this house-buying movement. One was that Hyde Park had many available houses in the early years of the war, while the Negro was excluded from the market west of Wentworth Avenue, with its smaller and less expensive houses, by the vigorous antagonism of the Irish and other people living there. The southern Negroes were glad to find that—at first, anyway—access was not denied them to districts having good schools, churches, recreation and amusements, and convenient transportation facilities. This feeling was reflected in their purchase of churches; two of these, one on Washington Boulevard and one on Prairie Avenue, are in districts of extensive home buying by Negroes.
The high war wages contributed to home buying. Though in many instances they induced extravagant expenditures, a surplus remained for many, and with the frugal the savings were large.
High rents were another primary contribution. Many of the ambitious newcomers figured that they could buy a house for about the same monthly amounts required for rent. In many instances they thriftily contrived to make the property pay for itself. Two- and three-flat buildings would furnish a family with a home while providing a considerable revenue from the rented flats. When old-fashioned houses too large for one family were bought, lodgers and boarders were often taken. Frequently wife and children added to the family income so that they might own a home.
A real estate dealer in Hyde Park said: "The Negro has purchased 90 per cent of the property where he lives, and 75 per cent of these are 'high-class colored men.'" This estimate is too high, but it shows the impression made by the large number of Negro home buyers.
An inquiry in two blocks on Prairie and Forest avenues disclosed that 40 per cent of the Negroes living on Prairie Avenue were property owners, in the intervening block on Thirty-seventh Street over 90 per cent were owners, while on Forest Avenue the Negro property owners were few.
In 1920 the School of Civics canvassed a small area occupied by Negroes in the district west of State Street, a district where, because of their low economic status, they would not be expected to buy. Of 331 families, thirty, or 10 per cent, were owners, and all but one had been owners for from four to twenty years, so that they had not been influenced by the migration.
Of the impression made by the home-buying migrants a very intelligent Negro real estate dealer said, referring to the Chicago Negroes:
I will dare say that 90 per cent or even a greater number did not own their property. They rented. It seems there has been a different spirit instilled into the northern colored man. We bow to the southern man because he is a home owner. The northern man was satisfied to rent. I was born in Chicago and felt the same as others do.
The present trend was indicated in these statements of two well-informed white real estate dealers on the South Side: "The colored people are demanding homes and the tendency is to buy"; and that Negroes were continuing to buy homes in the district between Thirty-ninth and Forty-seventh streets, Cottage Grove Avenue and State Street, more sales being made to Negroes in that particular location than in any other. And this has been during a period of acute and general housing famine in every large city.
Methods of purchase.—When Negroes first began to buy dwellings during the migration years, the average price was $4,000 to $5,000, and the initial payment, usually $500, ranged from $300 to $1,000. The time for payment was ordinarily three years, though some contracts were for five years. Later on Negroes began to buy houses or apartment buildings running as high as $8,000 or $10,000, and the payments were increased proportionately.
That the Negro assumed a heavy load, sometimes more than he could reasonably be expected to carry, was the opinion of several careful observers. While the surplus from his wages might be expected to cover the monthly payments, money for taxes, repairs, and insurance would have to come from the wages of wife or children, or from lodgers.
In April, 1920, when work at high wages was abundant, a well-informed Negro real estate dealer said that any Negro family head could then assume payments of from $40 to $55 a month on purchased property. But many Negroes made contracts calling for monthly payments of $65 to $75.
The opinions of experienced persons in close touch with the situation were divided as to whether, in making such purchases, Negroes had assumed too heavy obligations. One said his long experience showed that Negroes carry out what they undertake to do; that very few default on their payments, and when Negroes buy on the instalment plan "they pay out better than the whites do, as a rule."
Another said, though Negroes buy only old properties—and generally pay more than white people—they are careful in assuming their obligations and make their payments promptly. They pay down to the mortgage, in from three to five years, and sometimes within two years.
Another, who has been dealing with Negroes since 1907, gave his opinion that they undertake their obligations seriously, and as instalment buyers of property they are entirely satisfactory.
Still another South Side man who sells real estate to Negroes declared that he had been getting better payments recently than he did three or four years ago; in 1914, 1915, and 1916 he suffered considerable loss because of defaults in payments on purchases or in rents.
A former president of the Chicago Real Estate Board remarked that Negroes buy but do not build their houses, and are not yet sufficiently numerous to create a market for real estate; that white people will not buy back property once occupied by Negroes; that, as the numbers of Negroes increase, this situation might be changed, but that the Negro who tries to sell old property, on which he has put no improvements, will rarely find a buyer, because there is so much old property available.
Certain banks and loan firms thought there would be a general foreclosure of mortgages on recently purchased property as they fell due, that the Negroes are carrying such heavy payments on their contracts that they cannot reduce their mortgages and consequently renewals will be denied; that the Negro has not yet acquired sufficient stability to carry on payments over a long term of years, and if wage reductions become general they will fall most heavily on unskilled workers and render difficult the meeting of payments by such Negroes, who constitute the great majority.
Most of the firms that had dealings with Negroes, whether as buyers, borrowers, or renters, expressed satisfaction with their transactions with them. Typical of their comments was that of John A. Schmidt, who found Negroes to be prompter than Jews in making payments, and of Milton Yondorf, who said that Negroes, like the Italians, finish paying for one house before undertaking to buy another, and are eager to make the final payment.
While the preponderance of opinion was that the Negroes do meet their payments, it may be that experience is still too limited in Chicago and conditions have thus far been too abnormal to afford the basis for final judgment and future policy.
The first wave of buying by Negroes was stimulated by both Negro and white real estate agents because many dwellings had been unremunerative for several years. With the tightening up of the real estate market that ensued, Negroes became home hunters, and they are continuing to search.
There has been a wide variation in the prices paid by Negroes for dwellings. For some houses Negroes have undoubtedly paid more than could have been obtained from a white purchaser. One dealer's opinion was that the Negroes have paid full value. Another said that the Negro never pays higher for property unless the price is measured by what has been paid for it by white persons of the "fourth class"—referring to property that has descended from the original owner through three classes of whites before coming into Negro hands. Many purchases during the last two or three years have been made direct from the owners. An attempt made by white real estate men to come to an agreement regarding sales in new districts—whereby they would turn over to Negro agents all inquiries as to blocks where Negroes already lived, and Negro agents would not place Negroes in exclusively white districts—was unsuccessful.
III. REAL ESTATE LOANS TO NEGROES
The most formidable stumbling-block in the way of home owning by Negroes is the unsalability of their mortgages. Except in a limited field these loans have no market. The Negro demand for home property has become so large in recent years that the search for it has extended beyond the fringes of the main existing districts on the South, West, and North sides into the outlying territory adjoining Negro settlements in Blue Island, Woodlawn, Morgan Park, and Robbins. How the Negro is to be financed in his effort to improve his citizenship and home life through home ownership thus becomes a matter of great concern.
The Commission sought to learn from banks, trust companies, brokerage firms, and similar institutions their experience with Negro clients and property and their purpose and plans as to future dealings. To thirty such institutions questionnaires were sent, and twenty-three gave careful replies.
Only a few real estate firms that have a large number of Negro clients have funds available for such loans. These meet but a small part of the demand. The three banks that have large Negro deposits, the Lincoln State, the Franklin State, and Jesse Binga's, make such loans when deemed desirable, but they seem not a large factor in relieving the loan situation. Many of the banks that are depositories for Negroes' funds do not make loans to them, giving as their reason that they do not lend on the class of property purchased by Negroes. Some of them have no real estate department. Only three of the downtown investment bankers make no restrictions regarding Negro borrowers that are not common to all; they have dealt with Negro clients for many years and have found them entirely satisfactory. Possibly one reason for this is that they educate their buyers of mortgages concerning the value of these loans; and thus have succeeded, they say, in overcoming many objections based upon race prejudice.
Most large real estate firms and loan companies decline to make loans on property owned or occupied by Negroes. With some of them this is a blanket provision that covers generally property in changing or depreciated districts. Difficulty of disposing of such mortgages is one of the commonest reasons given for refusing to handle them.
Even among the agencies that handle such loans opinion is not unanimous on fundamental points involved. The Commission asked several brokers representing large interests this question: "Does your experience indicate that loans up to 50 per cent of the valuation on property in the residence districts from Twenty-sixth to Sixtieth streets and from State Street to the lake have a safe-and-sound investment value?" Among those favorable to Negroes the answer of Yondorf & Company, a downtown firm, is perhaps typical: It is necessary to consider each house separately, as conditions vary widely; consideration must be given to future uses of the property, the present condition of the improvements, and especially the stability of the person asking for the loan. As a general rule, loans on old residence property are not as good as those on houses in new districts; on an old house about $1,000 would be loaned on a market value of $5,000, whereas in new districts the contractor can borrow up to two-thirds of the cost of the house; no conscious discrimination is made in the nature of higher rates because a borrower happens to be a Negro; careful consideration is given to the margin of safety, and safeguards are arranged in the way provided for payments.
Lionel Bell, another downtown loan broker, regarded this general type of mortgages on old residence property as fully secured, and does not hesitate to recommend mortgages in the district mentioned.
John A. Schmidt, who handles a large number of loans on Negro property in that district, considers them of high value, though the risks are both physical and moral; it is essential to know both the client and the property; the amount of the loan asked on Negro property usually is not high as compared with its value. No distinction is made as to the color of the borrower, the condition and value of the property being the only basis for the loan; loans to Negroes are less in amount than to whites, though clients thus far accepted are commonly found satisfactory; the period of payment is about the same, varying between three and five years, according to the amount paid monthly, the kind of property involved, and so on. The usual range of amounts requested was one-third to one-half of the value of the property.
R. M. O'Brien & Company, an active South Side real estate firm which also deals largely in Negro mortgages, found that the average amount loaned to Negroes was smaller, and that it is a smaller percentage of the value of the property than in the case of loans to whites, and that the average period for loans to Negroes was three years.
Mead & Coe, another real estate firm, found that the Negroes usually are allowed $1,000 to the white man's $1,500; that only 35 per cent of the value of the property is loaned to the Negro, whereas 50 per cent is granted to whites. Maximum time of loan was five years for the white and three years for the Negro.
The Chicago Trust Company answered that the same requirements were made of white and Negro; the range was from $2,000 to $6,000, limited to 50 per cent of conservative valuation, and five years.
In general it was found that property values in the districts where Negroes usually buy are affected by more factors than is the property in districts where whites usually buy. Where Negroes are buying the majority of white people are renting.
It was sought to find out whether Negroes ask for renewals more often than do white borrowers; whether there was any marked difference between Negroes and other racial groups in the promptness of making payments, in asking for additional time, in the difficulty of collections, and in compelling foreclosure. Comparison of Negroes and whites was found to be difficult because of differences between various nationalities as to repaying loans. The Poles pay promptly when dealing through loan companies or banks conducted by Poles. The Italians are eager to get their property cleared. Jews are likely to ask for renewals and to expect the property to pay the mortgage out of earnings. The Negroes pay if they can, but sometimes have difficulty because they have arranged heavy payments on their contracts; during the period of high wages there has been little trouble, but the feeling was that as yet there had been no real test. Speaking generally, a representative of Yondorf & Company said it was estimated that only about 25 per cent of working people are thrifty and save anything; 75 per cent save nothing; and that proportion holds true of the Negroes.
Firms that deal with Negroes ask for no larger reduction when a Negro renews his loan, they say, than when a white person renews if the character of the property is the same. The facts as to the reliability, character, and standing of the borrower are established when the loan is first made. Negroes buy old properties where deterioration is rapid, and when the renewal is asked the value of the property has fallen in proportion. White persons do not buy the same class of property. So it is necessary to ask the Negro to reduce his mortgage considerably, except when his property is in a location of newer houses, such as Morgan Park or Woodlawn.
Difficulty is experienced by mortgage bankers and brokers in selling Negro mortgages to white clients. Yondorf & Company declared that while their old clients would buy regardless of the color of the borrower, others had to be convinced of the value of the property and of the earning power and stability of the Negro borrower. The Negro mortgages are usually for smaller amounts and hence within the reach of small investors. When white investors find that Negroes' loans are promptly paid they continue to buy such securities.
Lionel Bell reported some difficulty in selling Negro mortgages to white clients, though he generally succeeded, by showing their value and by inspection, that the Negroes were keeping their houses in good condition as to both sanitation and repair.
E. A. Cummings & Company have difficulty in selling such mortgages because many of their clients are out-of-town buyers who are suspicious of Negro property.
E. and S. Lowenstein find no market for such loans; non-resident buyers and even local buyers fight shy of Negro property in particular, and property in general that is undesirable because of overcrowding and consequent hard usage.
In general, the refusals to buy Negro loans are due to feeling against the Negro, a disbelief in the Negro's ability to pay them, and distrust of the old properties which Negroes commonly buy. The opinion was general that anything which would tend to stabilize values on the South Side, especially in the lower part of the district occupied by Negroes, would be desirable; that improvements such as the widening of South Park Avenue would aid materially.
Real estate men who have Negroes for clients are finding it advantageous to educate them in the meaning of mortgages, in the method of issuing and renewing them, and in what is expected of the mortgagor and what the mortgagor may expect. When the Negro is carefully informed of the processes involved in financing the purchase of a home, and the terms are thoroughly understood, there is much less likelihood of losing his property. Friendly real estate men are constantly helping Negroes to carry their mortgages and to find means of renewing when that contingency arises. It is helpful also to remind Negroes of the necessity of paying their taxes and meeting other obligations promptly, and of keeping their property in good condition. Some firms stated that the "natural honesty of the Negro and his love of home life" have been fostered by thoughtful friends and leaders, as well as by those who have business transactions with him. This pays dividends in better citizenship.
Widening the market for Negro loans.—The white people need to know the obstacles in the path of the Negro who wishes to establish a good home for his family and thus improve his citizenship and serve as a good example to others of his race. How to finance Negro home buyers is a large difficulty in solving the Negro housing problem. The Commission held a conference devoted almost entirely to this topic, at which various experts and authorities were consulted. It was sought to ascertain the fundamentals for meeting the needs of the future, assuming that the Negro population in Chicago is likely to continue in normal growth, and that the demand for adequate housing for the Negro population is not likely to lessen for several years. Particular attention was given to the question of how a market might be created for the Negro's loans.
An appraiser for the Fort Dearborn National Bank suggested that a system involving partial payments represented by $25 bonds paying semiannual interest might be helpful. Bonds of such low denominations might, he thought, be purchased by Negroes. By such a system Negroes would learn to invest their money wisely, and by putting money into substantial securities would encourage real estate investments. These securities could be sold by Negro bankers and real estate brokers. But he expressed confidence that not a few white people would buy bonds of that character. They would be based on about 60 per cent of the value of the property.
One real estate broker averred that success in financing Negro home buyers would be contingent upon creating definite districts in any portion of the city where the colored men may find it necessary to live in order to be able to reach their business or their place of employment, districts to be known as their exclusive territory. Then it would be possible to go to a mortgage loan house and present a definite case when a mortgage falls due. Knowing that the property was that of a Negro, and knowing the district, one would have a definite basis for estimating future increase or depreciation of value. It was his opinion that white people would support a market of that nature, because it would not only protect the colored man and the white man alike but all of the property interests of the city. He disclaimed any desire to promote segregation. But he maintained that so long as the races mixed, clashes were inevitable, and that the problem of selling Negro loans, erecting houses, and renewing mortgages would solve itself under this plan, "because white men will be very glad to come to the assistance of colored."
It happens, however, that some subdivisions developed "especially for Negroes" present low standards as well as exploitation. One such subdivision is called Lilydale. An investigator reported on it as follows:
Lilydale is on a flat prairie and was laid out as a subdivision for Negro residents near the corner of Ninety-fifth and State streets several years ago. It is about five blocks square. The developer is a prominent white real estate dealer active in subdivision property generally. Another well-known real estate man, who is also a prominent local politician, is interested in establishing a Negro colony on this property. The latter is agent for a great deal of property on the South Side tenanted by Negroes.
Many Negroes purchased lots in Lilydale at fairly high prices, considering that virtually no improvements had been made to the property. Water has since been laid in some of the streets and some of them are supplied with sewers, but there is no paving and no lighting. Sidewalks are few, mud holes many. Yards, streets, and alleys are unkempt.
Those who promoted the subdivision set up the shells of a few houses, mainly of the bungalow type. Most of these were sold and the inside finish was supplied by the purchasers. Most of these sale houses, though, remain unfinished. The building of houses in Lilydale has been half-hearted, and most of the structures are so poorly constructed that they are conspicuously uncomfortable. Some of these were built by piecemeal with any kind of waste building material that could be gathered. The people in this isolated community apparently are making the best of a hopeless situation. They express a desire to recover the money they have invested. Provisions are obtained from two or three small stores. There is a church in the vicinity, but at the time of the investigation no services were being held in it. The children attend a branch of the Burnside School, which is conveniently located. The teacher is a Negro woman, a graduate of a southern normal school. She reported that there is apparently no prejudice between the white and Negro children; that their only differences are those to which all children fall heir. She regards the Negro colony of Lilydale as a bad mistake and would discourage other Negroes from making purchases there. She regards the investment there as of doubtful value.
There is a car line on Ninety-fifth Street which connects with the industries of South Chicago, where a number of the men of Lilydale are employed.
Adding to the loneliness of the general aspect is the fact that most of the surrounding area is still what is termed "acreage."
Pertinent also is the statement of a man who for years has been interested in the housing difficulties of Negroes.
Some people have suggested taking a vacant piece of property and building it up for colored occupancy, but there is the biggest hubbub raised when any such attempt is made. People complain: "You will ruin this whole neighborhood! You will ruin the street car line! Everything out in that neighborhood will be ruined all along the street, because if you build up a colored neighborhood in any one particular location nobody else will want to go out that way." So that I have come to the point where I say there is no solution. I can't do anything. I'd have been willing to put in a million dollars in property anywhere where there would have been a chance to get 5 per cent return on my money. There isn't any use in doing a thing that isn't economically sound. I wanted to bring this up to show that I had given it some thought, and that I am very desirous of having somebody make a suggestion that is feasible so that something can be done.
The difficulty of disposing of loans in a district inhabited by Negroes was touched upon by a loan expert from the Chicago Trust Company, which handles such loans. The trouble, he thought, centers on the character of the property and of the district, rather than on the fact that the property happened to be owned or occupied by Negroes. He said that even Negro investors object to property in such a district for the reason that it is old, little in demand, and generally a poor risk. He suggested the possibility of small mortgage bond issues with separate notes. This would save the expense of printing the bonds, which is considerable at present prices, and the investor would be afforded the same security. He also suggested having "baby" bonds printed in standard form, so that they could be simply filled in, thus saving expense.
Another real estate broker who had dealt in mortgages of South Side Negroes for a number of years declared that the average mortgage buyer seems to prefer those on new bungalows where the margin of security is less than that on property in the Negro district. Since the bungalow's cost of construction was less, the chance of revenue under adverse circumstances would be less. He maintained that a ten- or twelve-room apartment house in the Second Ward (South Side) affords a better margin of security than the ordinary cheap bungalow, and that it was therefore a question of educating mortgage buyers on the question of security. The best evidence on this, he maintained, would be the number of foreclosures. He had never had to foreclose with Negroes in the fifteen years of his experience. In that time only two contracts had been forfeited, both because of disputes between the heirs and the buyers. His firm had, however, made new contracts when illness or other adverse circumstances had halted payments, thus allowing the buyers to start over again. Means had also been taken to see that buyers paid their taxes, in which process they had required education. White people must be depended upon to buy the Negro's loans. Very few Negroes buy loans. Their tendency, he said, is to invest in a home earlier in their career than the white people, and they buy as soon as they have accumulated enough to make the initial payment.
According to a bank appraiser's opinion Negroes do not understand values, and they are often led to purchase a building at much more than its worth. In consequence the amount of loans they need is much greater than it ought to be. He had not found, however, that the Negroes allow their property to deteriorate unduly. A different situation had been found where white people lease to Negroes.
According to some real estate dealers, there are cases where houses are allowed to deteriorate, where the payment has been larger than the purchaser could carry conveniently. But "after he has taken care of the payment and has his deed, he will give attention to the improvement of the house." Others agreed that the Negro mortgage debtor is quite as reliable as a white debtor of the same class.
The president of the Cook County Real Estate Board suggested that one means of creating a market for Negro loans would be the passage of the "Home Loan Bank Bill." Its provisions are that no loan would be made in excess of $5,000, but loans would be made up to 80 per cent of the fair value of the property. Many of the loan houses, he declared, do not consider small loans, a fact confirmed by the Commission. He cited one house that will not consider a loan of less than $500,000. For this reason he suggested that this business should be handled by the building and loan associations, since they do business on a smaller margin of operating cost and he regarded them as the proper media for finding suitable markets for Negro mortgages.
Involved in the plan for funding the Negro's loans was the question of segregation. It has been maintained that not much financing could be expected from white people unless boundaries were allotted to the Negroes, so that investors in loans would know definitely what to expect. Opinions, of course, differed on segregation. It was admitted that a spreading out of the Negro population in Chicago is to be expected, that Negroes can hardly be expected to remain in the districts in which they have hitherto virtually segregated themselves. But the opinion was also given that their tendency is to remain among and near their own people.
IV. FINANCIAL RESOURCES OF NEGROES
The chief concern of investors, brokers, and real estate dealers is as to the ability of Negroes to meet obligations. There is a common belief, not shaken even by the satisfactory experiences of those who have dealt with them, that Negroes have no financial resources, and are thriftless and improvident. Inasmuch as a large part of the present housing difficulty hinges upon this point, the Commission made inquiries as to the thrift of Negroes. A group of large banks in the "Loop" and in neighborhoods of Negro residents were asked to give their experiences with Negroes as depositors and investors. In spite of contrary opinion it appears that the resources of Negroes in Chicago are astonishingly large. In the summer of 1920 in one of the South Side banks operated by white men Negroes had deposits of $750,000. One banker told of a Negro banker who sold among the Negroes a bond issue of $150,000 on an old building on Wabash Avenue, paying solicitors 10 per cent commission to make sales. The savings deposits in his bank recently had grown very materially. It was his experience that only a few Negroes buy bonds. They only inquire casually about them.
The sales manager for bonds at a large savings bank, however, told of the sale of $3,000 worth of bonds to a Negro woman who paid for them from a roll of bills of $10 to $50. Another "downtown" broker told of a Negro porter in a "Loop" hotel, who recently loaned $6,000 through his firm.
The information as to Negro deposits, sought by the Commission, was provided by seven trust and savings banks, three state banks, two national banks, and one trust company. These were able to isolate and check up their Negro deposits. One of the banks had $1,500,000 on deposit for Negroes; another $1,000,000. Still another had 4,000 Negro depositors. A state bank had $650,000 on deposit for Negroes, another $150,000 and one of the national banks had $47,000.
The average deposits of the Negroes are not so large as those of all the depositors. The comparison, however, reveals a fair proportion when it is considered that there are many very large individual depositors and business houses among the whites. This is how the amounts run, by institutions:
| Average Individual Savings Balance (White and Negro Combined) | Average Individual Balance (Negroes Only) |
|---|---|
| $125.00 | $ 50.00 |
| 108.88 | 66.76 |
| 545.00 | 332.00 |
| 400.00 | 200.00 |
| 120.00 | 60.00 |
| 235.00 | 100.00 |
| 125.00 | 10.00 |
| 196.00 | 105.00 |
| 186.82 | 300.00 |
| 230.00 | 186.00 |
It was the almost unanimous report that Negroes are more likely to withdraw their accounts than are white people, that their accounts are less permanent. In two instances only was the opinion expressed that they were about the same with both races.
Accompanying the questionnaire to banks was a list of questions concerning real estate loans. One of these was: "Does your bank make loans to Negroes on real estate, collateral, commercial paper, or personal notes?" All except one of the trust and savings banks replied in the affirmative. One of the state banks buys commercial paper on proper security, but not real estate loans because of the difficulty in selling them. One of the national banks buys commercial or collateral paper on its merits, without regard to color. Indeed, it appears that no color line is drawn in this line of business except by the few institutions that decline all loans to Negroes.
In general it was found that the Negroes are showing strong tendencies to open bank accounts, that they are steadily improving in the amount of deposits made, in the steadiness of their accounts, and in thrift in general. However, it appears that in only a few of the banks are they welcomed and in most of them they are only tolerated. In banks located in neighborhoods in which Negroes live there is an amazing number of Negro depositors, who receive, as a rule, friendly advice and help in their financial transactions. Thus Negroes are taught banking formalities, while thrift is encouraged, and a good spirit is developed among the white employees toward Negro depositors. In some instances, however, Negroes, like their white brothers, show suspicion of banking institutions when they have suffered losses.
It appears also that, in addition to the growing desire to invest in homes of their own, Negroes are showing a strong tendency to engage in business ventures. They are developing insurance companies, co-operative stores, retail stores of various kinds, and kindred enterprises.
Negroes' lack of opportunities for banking experience.—In order to carry forward successfully their business undertakings Negroes need practical personal experience and training in banking and financial methods. Yet there is a strong tendency to bar Negroes from employment in banks, except as porters or in some unskilled capacity, and they are thus denied the experience needed in solving financial problems among their own race.
Bankers were asked: "If Negroes competent to learn practical banking were available, could you employ them?" Here are some of the condensed replies:
1. Other employees would refuse to co-operate with them and associate with them.
2. They are not reliable as a rule.
3. Do not think so.
4. Yes.
5. No.
6. We have no objections beyond the fact that 95 per cent of our depositors are white; consequently we would not care to employ colored tellers or clerks in handling their business.
7. We could not have them in clerical positions.
8. In a general way we feel that the employment of Negroes by banking institutions would cause trouble with certain classes of our depositors.
9. Very difficult to work white and colored in same office or cages. White customers prefer to have white clerks wait upon them.
10. Clerks who were antagonistic to Negroes would bring about constant difficulties through the misplacing of papers, mistakes, etc., which would seem to be the fault of the Negroes.
11. Have found that a Negro will appear to be strictly honest for a period of years and then turn around and prove not to be.
12. Our section of the city is entirely white, but with a fear of colored invasion. There is, therefore, a strong prejudice against them. We have only about half a dozen accounts with colored people. Two of these are in the savings department and are maintained with large balances. These two customers are thrifty and careful with their money. The others are not.
13. In former years a bank position was eagerly sought and considered exceptionally good. At present, because of higher salaries which can be offered by concerns which make greater earnings than banks and can therefore pay more, the banks are not getting the same high grade of employees. With the former class it would have been possible to appeal to their sense of duty to help educate the Negroes and to overcome prejudice. With present conditions it is not likely that this appeal would have the same effect, and prejudice against Negroes would make trouble in our routine.
14. Social factors enter. For instance, banks often have dinners or other events for or among their employees. No "Loop" hotel would put on an affair for whites and Negroes. There is also the difficulty of washrooms, and lockers, etc., where prejudiced employees could make a great deal of trouble.
It would seem, then, that there is not much chance for the hundreds of intelligent Negro high-school and college graduates in Chicago to obtain a practical education in banking methods through direct experience. Banks owned by Negroes are few and small, and there is scarcely any opportunity to obtain similar experience in Negro building and loan, insurance, and other companies, which are also limited in number.