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.