As crime rates began to decline in 1994, the NYPD claimed that the root of the violence plaguing areas like East New York was the lack of policing of petty offenses (signs of disorder like graffiti or litter), reiterating the now-debunked “broken windows” theory that defined the Rudy Giuliani administration’s stance on crime. It was an explanation that blamed East New York’s predominantly poor Black and Puerto Rican residents, assuming they were responsible either for the drug traffic that fueled so many of the shootings or for standing by as chaos took over. But as journalist Stacy Horn finds in her damning, gripping book The Killing Fields of East New York, the genesis of the neighborhood’s collapse was not a rise in street crime, but rather a white-collar criminal conspiracy that lined the real estate industry’s pockets while destroying what had recently been an affordable enclave for working- and middle-class families.
Horn traces the devastation back to two laws that should have bolstered neighborhoods like East New York and made them more accessible for low-income families of color: the Civil Rights Act of 1968 and the Housing and Urban Development Act of the same year. Instead, as Horn argues, these last pieces of President Lyndon B. Johnson’s Great Society program “allow[ed] the design for the perfect financial crime to arise.”
The Civil Rights Act outlawed the housing discrimination, redlining, and blockbusting that had so often barred Black people from homeownership. Meanwhile, the Housing and Urban Development Act sought to further fair housing, in large part by decreeing that the Federal Housing Authority (FHA) could insure mortgages in areas that had previously been redlined—that is, in neighborhoods like East New York, where it had become all but impossible to secure a loan. The unintended consequence of the government’s effort to promote private lending to low-income families of color was, effectively, the creation of the subprime mortgage industry.
In insuring “risky,” or subprime, loans, the FHA inadvertently incentivized realtors, brokers, appraisers, and mortgage-issuing banks to defraud both the government and the very people the government was trying to help achieve homeownership. If the homeowners defaulted, the FHA would pay out the loan in full to the issuer and take responsibility for the vacant, foreclosed building. This created a market for the risky subprime loans, as bad actors colluded to sell dilapidated buildings in “older, declining urban areas” to people who could not actually afford the mortgage payments.