You’ve likely heard of redlining — the practice of systematizing discrimination based on where you live. You’ve probably even heard us talk about the ways its legacy continues to impact the upward mobility of communities of color. But do you know what happened next? In the wake of urban uprisings in the late 1960s, politicians pushed to end redlining, to lift people up out of poverty and improve their lives by making homeownership attainable.

But that’s not what happened. Instead, bad policy and the private market worked together to create a machine that churned out new ways to exploit black homeowners. It’s what Keeanga-Yamahtta Taylor describes as predatory inclusion in her new book, “Race for Profit.” In it, she describes the ways in which policy, race, and institutional forces came together to reinscribe segregation.

Come see Chris Hayes in Los Angeles October 21st with special guests Adam McKay and Omar El Akkad! Get tickets here.

K-Y TAYLOR: We've basically created a society where your quality of life, your social mobility is tied up in your ability to own this huge asset. And even if you do own one, if you're African American, it still doesn't function in the same way that it functions for white people. So there's this embedded inequality within the larger inequality of needing to be a property owner in order to have social mobility in our society that really we need to think about.

CHRIS HAYES: Hello and welcome to "Why Is This Happening?" with me, your host, Chris Hayes. Before we get to today's conversation which, if you listened to last week's conversation with Ted Cruz, is pretty different. We just took the car wheel and we just — errrrr — turned 180 degrees in the opposite direction with today's guest. I'm going to introduce her in a second, but before we get to that, we have still some tickets left for our Los Angeles Live WITHpod, which is happening October 21st. It's this amazing theater at the ACE hotel. Really beautiful. I think it's in downtown LA. Old style kind of theater. You feel like you're going to a Broadway show.

It's going to feature me and Adam McKay, who's the Oscar winning writer and director who was Will Ferrell's comedy partner, wrote at "SNL," started "Funny or Die," did "Talladega Nights," did "Anchorman," and then made this sort of amazing shift into much more serious material. He did the "Big Short" and "Vice" and he's working now on how to do TV and movies about climate change. He's obsessed with this now. In fact, the last time that I dinner with him, he kind of berated me the whole time that I wasn't covering climate enough. I was like, "How about you make a movie about climate, dude?"

So we're going to be talking about that along with a journalist turned author named Omar El Akkad who wrote this incredible book called "American War," which is about a civil war breaking out in the U.S. in the future over climate change and the banning of fossil fuel and its effects. And we're going to have this conversation in Los Angeles Monday, October 21st about how to represent the moment of climate crisis, the existential hinge point in history we're on in art and in culture and in movies and film and books. It's going to be an amazing conversation and it's going to be really fun time and you'll be with a lot of other, WITHpod heads. So if you're in LA or Southern California or want to travel from anywhere in the west coast, go to ticketmaster.com and search for Chris Hayes.

Okay. Today we've got a great writer and thinker who is writing on a topic that is something I think about a lot and the way that I tend to think about it is about the phrase inner city. It's funny. Inner city is such a powerful, potent phrase that smuggles in so much conceptual material underneath these two words. At one level it's just like, "Oh, there's a city and then the inner part ..." I guess it's the center of the city, but when people say inner city, they don't mean Rockefeller Center, which is where I am right now. Even though that's the inner city of New York or near the center of Manhattan. They don't mean the Loop in Chicago. They don't mean downtown San Francisco or Center City in Philadelphia.

We all know what "inner city" means. Inner city is a code word for poor black people that live in urban environments. Inner city youth. I'm working with inner city youth. We want to revitalize the inner city. Why does that word mean that thing? Why is it the case that we have this race neutral geographic descriptor of a place that actually doesn't mean anything about geography? It just means the race and socioeconomic status of the people. And the reason is because over a long process, American cities are incredibly segregated and have created large concentrated pockets of people of color living in poverty. That has been done through incredible efforts by both public actors, the state and private actors, the market. Together, they have produced this system.

Today's conversation is about how that system got made and a really fascinating moment in the late 1960s and early '70s when there was some movement to deal with "the problems of the inner city" in the wake of the Watts riots in 1966 and the post-MLK assassination riots in 1968. There are programs put into place, new legislation that says: "Okay, we got to do something. We got to do something about these pockets of segregated poverty in our cities because they're going to explode. And if they explode, that's bad for all of us. So we've got to do something."

And what today's author's book is about, it's about how a program that ostensibly, on its face was meant to lift people up out of poverty, to bring them out of segregation, to improve the lives of people in the "inner city," actually ends up doing the opposite. It actually pushes them further into misery. It confines them into ghettos. It draws lines around where they can and can't live. It pushes them into substandard housing.

So this is a story about how a government program and the market working together in a moment where people are making ... particularly African-American people... are making demands for racial equity, demands for integration, demands for housing quality, where our program comes in and the government and the private sector working together managed to create the exact opposite. They managed to reinscribe all the boundaries that are the boundaries that constitute the inner city. The book is called "Race for Profit: How Banks and Real Estate Industry Undermine Black Home Ownership" and the author is Keeanga-Yamahtta Taylor, who's a fascinating woman and scholar, writer and activist. She's written a few different books and articles in the kind of popular press and she worked, as you'll hear in this conversation, for years as an organizer and a housing organizer and tenant advocate before she went to academia.

This is her first academic work and it got longlisted this year for the National Book Award in the nonfiction category. That's an enormous deal, an enormous deal. I would kill to have a book on the National Book Award long list. There's only, I think, about 10 on the long list. And this year they include other #WITHpod authors: Patrick Radden Keefe, his book about the Troubles; Tressie McMillan Cottom, her book of essays, "Thick." So Keeanga is part of this very illustrious crew. And her book is a fascinating look at the dynamics of policy, race, institutional forces in the market coming together to reinscribe segregation. And it's also an absolutely vital cautionary tale about the danger of bad policy, about the ways in which bad policy and bad politics around those policy and allowing private markets to sort of do what they will with a lot of government money, all of the ways in which that can produce truly disastrous outcomes. And that lesson applies way, way, way, way more broadly than just housing in the 1970s.

Keeanga, maybe you can just tell me where you grew up.

K-Y TAYLOR: So I was born in Buffalo, New York, and then moved to Dallas, Texas with my mom when I think I was around three and then went back to Buffalo where my dad lives when I was 16.

CHRIS HAYES: And your dad is an academic as well, right?

K-Y TAYLOR: Yeah. We do remarkably, very similar things, which is strange because when I was growing up, I think I was probably very resentful of his work because he spent a lot of time working and not really interested and this is sort of a funny story. I was in grad school, first year grad school, I was taking a bus from Chicago to Wisconsin, to Madison to look at some archives there. And I was reading Tom Sugrue's "Making of the Urban Crisis" and-

CHRIS HAYES: That's an amazing history of Detroit in the 1960s and '70s.

K-Y TAYLOR: And so somewhere in the first or second chapter, I was looking at a footnote and he had a paragraph long footnote about all of my dad's work. So I was like, "I can no longer avoid this." Yeah. So, yeah.

CHRIS HAYES: I mean, it is interesting to me. I guess it's not uncommon across all different professions that people end up doing things that their parents have done, but in academia specifically, it's not uncommon to find that. And particularly I think people ... That trajectory, I've heard from multiple people, which is grow up thinking, "I don't want to be an academic," and then they find themselves.

K-Y TAYLOR: I mean for me it was a much more circuitous route. I kind of drifted in and out of school for a long time. There's like a 17-year-gap between when I started and got my bachelor's.

CHRIS HAYES: Oh wow. What were you doing?

K-Y TAYLOR: Doing politics, organizing and just living my life. Not very interested in school for probably reasons similar to my dad's obsession with his work. Finally I was in a job working as a tenant advocate, meaning that I went to court with people to try to stop them from getting evicted. I liked that job. I liked that job a lot, but I didn't like my boss and I had to figure out how to get out of it. And I didn't have a degree. So I was lucky enough that Northeastern Illinois University, which is like a working class commuter school in Chicago, was less than a mile from my office. So for about 16 months I took classes from 8:00 a.m. to 8:50 a.m., which left me enough time to get to work by nine o'clock. And then from 12 p.m. to 12:50 p.m. for my lunch break, I took another class and then from 6:00 p.m. to 9:00 p.m. I took classes at night. So I was working full time and going to school full time for 16 months.

CHRIS HAYES: And that work, the work you were doing then, you said, as an organizer and an advocate, was that in housing equity, housing justice work, generally? It was.

K-Y TAYLOR: Dealing with tenant issues but also a lot of Section 8 issues. And it really sparked my interest in residential segregation. I mean, that is probably one of the most palpable things about Chicago is the intensity of the segregation and it's something that, when you're living there, it just becomes a part of the backdrop. And through working with this organization, then I became interested in how it was connected to these really bad living conditions that people I was meeting with were dealing with.

CHRIS HAYES: I moved to Chicago right after college and I'm not from Chicago, I'm from New York City. Obviously, New York City is also a very segregated in certain ways, particularly the education system-

K-Y TAYLOR: Different, though.

CHRIS HAYES: But it's very different and I'll never forget the first time being in the Loop at rush hour and going-

K-Y TAYLOR: Oh, yes. When everyone gets on and everyone gets off. Yeah.

CHRIS HAYES: And going out on the red line and looking down the platform of the red line and all the black folks are on one side and all the white and Latino folks are on the other side and it's just the starkest thing you could imagine. That image is still burned into my head from the first time I was down there as a New Yorker being like, "This is deep, dude. This is like-"

K-Y TAYLOR: No. For me, it was when ... I lived in New York and then moved to Chicago and it was driving in on 94 and going through a black neighborhood that was not a black neighborhood. It was a black enclosure. It went for miles and miles. And then when I first lived in Chicago, I lived near the University of Chicago. I wasn't a student, but I lived in Hyde Park and just a few blocks south ... this was like the late '90's, the early 2000's... You would not see white people.

Activists rally against the Trump administration proposals to cut the Housing and Urban Development's budget on April 20, 2017 in New York City. Spencer Platt / Getty Images file

CHRIS HAYES: Oh, it was like there was this sort of intense racialized propaganda messaging about the border of the Midway.

K-Y TAYLOR: Oh, yeah.

CHRIS HAYES: Like not crossing it.

K-Y TAYLOR: It was like a moat. It's like a grass moat. But once you cross it and if you go a mile in, you just won't see white people.

CHRIS HAYES: None. Yeah.

K-Y TAYLOR: And if you do, you're like, "What are you doing here?" And it's not quite that stark on the north side, but it was enough that when I moved in that direction, if you saw another black person, it was like, "Oh, there's another black person."

CHRIS HAYES: Right.

K-Y TAYLOR: It was rare enough to be noticeable. So I was interested in, how did this come to be and where did these dynamics come from? Because I had no idea.

CHRIS HAYES: The book, which is called "Race for Profit," which ... congratulations ... was recently long listed for the National Book Award-

K-Y TAYLOR: Thank you.

CHRIS HAYES: In 2019, which is an enormous deal. There's like eight nonfiction books that are on that list. So maybe the way to talk about it, it's your dissertation work, but there's sort of a narrow lens for it and a wide lens.

K-Y TAYLOR: Yeah.

CHRIS HAYES: So the narrow lens is about a specific program that is inaugurated in the early 1970's around black homeownership and the federal government subsidizing it, but much more broadly, it's about, what's the political economy of urbanized segregation, what role do the different market actors, non-market actors, state actors have in reproducing spatialized segregation, particularly substandard housing for African Americans in that segregated housing.

I want to start with a foundational insight in the book that is at one level ... I guess it's not obvious, it's clear, but it's profound and I hadn't thought of it, which is that, you sort of say that segregation is actually constitutive of housing value.

K-Y TAYLOR: Yes.

CHRIS HAYES: That's the first place to maybe start. Unpack that idea which is really central, in some ways, to what you lay out the book.

K-Y TAYLOR: Well, this is really about understanding why cities have come to be arranged and organized in the way that they are. I wanted to cut against this idea that segregation is just about individual attitudes and whether or not white people want black neighbors and to really look at the economic incentives around segregation also as a way to understand why it persists. Even after fair housing is imposed on a national level, which comes after fair housing is fought for on local levels in dozens of places, why does it continue to persist?

And what I kept coming back to is because it's profitable. It's profitable in two ways. One, in the idea of the exclusive white neighborhood, that the further white people are away from black people, the more value their housing becomes, the more valuable their communities become. And it doesn't mean that black neighborhoods are then invaluable, that there is value in the segregation of black people. But unlike for white housing, the value doesn't accrue to the owner of the home. In black housing, the value accrues to the network of private actors who are active in the urban housing market.

CHRIS HAYES: So you've got all these intermediaries. There is a lot ... When you sum total up the amount of housing money flowing through the neighborhood of Austin on the west side of Chicago, there's tens if not hundreds of millions of dollars flowing around there. And what you're saying is there's money to be made there. It's just being made by the intermediaries and in the exclusive white neighborhoods, it is essentially being made by the homeowners, themselves, who are sitting on the value.

K-Y TAYLOR: Right. I mean the banks are making money, too. The real estate industry is making money, too. But white people are cut into the deal in ways that black homeowners, during this period ... and I would argue it still persists to this day ... are either marginalized or cut out of the enormous amounts of money that are being generated. So one is I wanted to challenge the idea that cities at this time, which are defined by urban crisis, are just these kind of blighted, emptied out places that have no value. There is tremendous value, but you have to look for it in different places that are really not about the people who are purchasing property, black people who are buying homes, who see themselves as investing in some ways but who are not able to access the massive amounts of capital that are being generated. In many ways, they're seen as vessels, as ways through which money can flow. But they are not seen in the same way as white homeowners.

CHRIS HAYES: I mean a big player in this is the real estate industry and we'll get to that in a second, but you quote in the book actual, textual citations from appraisers and real estate that essentially come down to, when appraising a house in a neighborhood, figure out how white it is and that is, that means it's more valuable.

K-Y TAYLOR: Well, you think about-

CHRIS HAYES: They don't quite say that, but-

K-Y TAYLOR: What is value? We can be led to believe that value is this tangible, real thing in the world, but it's not. Value is what one thinks that something is worth. And that is deeply influenced by the social factors that exist in society. So when we talk about the social construction of race or the social construction of gender, we should also be talking about the social construction of value. And so in that case then, understanding the ways that race functions in our society, that we live in a racist society, certainly then influences what is considered to be of value in the society. And so that is certainly mapped on to housing in a very profound way.

CHRIS HAYES: You make this argument about these sort of bifurcated markets, right? That segregation is sort of almost a fundamental feature of those markets-

K-Y TAYLOR: Yes.

CHRIS HAYES: -and then the program you talk about, the federal government plays an enormous role in building home ownership, equity and wealth among white people, particularly in the post-war years in which there's a housing shortage. The initiation of a whole variety of subsidies, backstops by the Federal Government to encourage white home ownership, to build out the suburbs, the interstate highway system, all these investments, right? Your book sort of picks up at a moment of increasing claims for equity among racial justice movements-

K-Y TAYLOR: Right.

CHRIS HAYES: -some response by the political system and sort of an idea of like, "Okay, well we should do this for black people too," who were quite clearly written out of that first deal, often explicitly, right?

K-Y TAYLOR: Right.

CHRIS HAYES: The idea behind red lining was the federal government circulated maps of where you couldn't and couldn't lend. And so describe the program that you're writing about here, and the theory of it, at least in its best, most charitable interpretation.

K-Y TAYLOR: There is the decision that, okay we have to include black people, but it's for utterly cynical reasons. It's that there is a saturation of the white housing market, meaning that by 1960 almost 60 percent of white people are homeowners. So there's always the push for how can we get more, especially as the housing industry, home building, real estate become more and more important in the overall US economy. The driving question is how can we push the bounds of this? But then there are structural problems which urban renewal and the destruction of millions of units of urban housing creates a problem.

CHRIS HAYES: A shortage.

K-Y TAYLOR: Yeah. It creates a shortage, and some of that problem is dealt with through public housing. So the high-rise public housing that became infamous in the 1960s and 1970s is in many ways built to contain black populations that have been displaced by urban renewal. But, because there is downward pressure on who is eligible for public housing, in that they want to make this housing of last resort to the poorest people, black people's incomes are rising during this period. So many of them don't qualify for public housing. So as early as 1954 the FHA, the Federal Housing Administration, begins to tweak its policies to allow for some home ownership, a very small experimental basis for people living in cities who need replacement housing, who don't qualify for public housing.

So that's really the beginning of the transition and the FHA's policy. But the FHA is only one part of it. You need banks to lend. So the FHA provides insurance for mortgages for working class people so that in the event, if they are to go into foreclosure or default, that the government will step in and pay off those mortgages so that the banks don't suffer a loss.

CHRIS HAYES: And so they're ... just so that people understand the math, the sort of basic finance here, they're backstopping a loan-

K-Y TAYLOR: Yes.

CHRIS HAYES: -and because they're backstopping the loan, the loan is cheaper, which is that they're taking on the risk. And because they're taking on the risk, the actual price of the loan comes down.

K-Y TAYLOR: Yes.

CHRIS HAYES: It's a subsidy by the federal government in terms of what you end up paying.

K-Y TAYLOR: Absolutely. And so this means that you need a lender, all right?

CHRIS HAYES: They're not lending the money-

K-Y TAYLOR: They're not the lender.

CHRIS HAYES: -they're just backing up the private bank-

K-Y TAYLOR: Exactly.

CHRIS HAYES: -that's going to lend you the money.

K-Y TAYLOR: And so even as they're tweaking their policies, the banks are still very reluctant to actually lend money. And it's only that this begins to change in the 1960s with the eruption of urban rebellions across cities. Two hundred and twenty-five cities experienced uprisings of one sort or another from 1964 through 1968, and so it's in 1967 that a consortium of life insurance companies, 300 of the wealthiest life insurance companies, come together to create a mortgage pool, a billion dollar mortgage pool to finance home ownership, and also to finance black businesses and other initiatives that are aimed at redeveloping urban neighborhoods.

CHRIS HAYES: So this is part of the kind of cultural political moment in the wake of these urban rebellions, as you call them, in '66 in Watts particularly, and then later after this in '68 — obviously the assassination of MLK. There's the Kerner Commission, and there's this kind of like handwringing among political elites.

K-Y TAYLOR: Yeah.

CHRIS HAYES: What is to be done? People are clearly very angry. We've got to do something in response to this and this sort of pool of mortgages kind of grows out of that political cultural moment.

K-Y TAYLOR: Right, so there's a recognition, there's the threat of violence, which is destabilizing, it's shocking. And there is the changing circumstance in black life, that black incomes are rising, that black people want to be homeowners. Black people want to enjoy the benefits that they see all around them that home ownership is providing. So there's pressure from below, there's pressure from respectable black people, and there is a growing concern that if we don't actually satisfy this demand around home ownership, not only are we missing out on a new market opportunity, but they might come to our neighborhood. Because this is also when the demands around fair housing, both on a local level and a national level, are picking up steam. And so if you keep black people locked out of the places where they live, they might show up in your neighborhood, so maybe we need to take this more seriously.

CHRIS HAYES: And in fact, it's during this period that MLK has a march in Chicago for fair housing through a segregated white neighborhood where a brick is hurled at him. He later comments that those people could teach the folks in Mississippi how to hate. And again, to go back to Chicago, like it's these Northern cities with large black populations produced by the great migration are now on this front line question of we mean it.

K-Y TAYLOR: Right, right.

CHRIS HAYES: Some sort of integration, some sort of housing equity and fairness here. We're not going to just allow you to lock us in ghettos.

K-Y TAYLOR: That's what's so interesting, because people usually think about these rebellions as nationalists, as exclusive, as trying to separate from the nation. When in fact what they are are demands for inclusion. The U.S. is projecting itself as the affluent society, and black people's children are being mauled to death by rats in urban neighborhoods. And so people want to be included into this affluence. And home ownership, as we know, is a central pillar of that. And so the culmination of these different pressures leads the federal government in 1968 to pass this legislation, the Housing and Urban Development Act of that year, that includes at its center, really, a low-income home ownership program. But it breathes new life into these earlier efforts that had been abandoned because they couldn't actually find lenders to participate, and now there's a kind of blanket mortgage insurance and guarantees that brings these other programs to life as well.

So there are actually five or six different kinds of home ownership programs for low-income, but also poor people, people who are on welfare, to dramatically expand the number of homeowners and in some of their ... the eyes of the legislators, the what we might call stakeholders in cities, because Nixon cynically commented about home ownership in cities that, "Well, if they own their own homes, then they won't burn the cities down." So there's a lot of different motivations. But the final product is the creation of these programs in '68.

CHRIS HAYES: Describe what the programs start doing.

K-Y TAYLOR: So the most well-known of them is Section 235 of the '68 Housing Act, and what that does is basically say that for $200 down and for 20 percent of your income — not the value of the house, 20 percent of your income — you can be a homeowner. And that makes it incredibly easy for thousands of people to partake in the program. And because the 20 percent is attached to income and not the value of the house, it also creates an incentive for kind of nefarious activity among real estate speculators to flip very poorly-conditioned housing very quickly, in some cases, to collude with FHA appraisers who, for a bribe of between $100 and $300, will inflate the value of the house. Because it doesn't really matter to the homeowner, because their payment is based on their monthly income. So it's really those two factors open up the opportunity to own a home for thousands of people who are targeted by these programs.

CHRIS HAYES: And I want to talk about what the experience was like for those homeowners, right after we take this quick break. At one level, when you're looking at this, you're thinking, "Okay, well, there's a certain kind of equitable logic here." It is certainly the case, the federal government massively subsidized the entire mortgage market and post-war housing construction boom for white families, A. And B, it is also the case that that was a very successful wealth-generating enterprise. Like it really did lower the cost of mortgages, massively boost white home ownership and massively boost the amount of equity, home equity and wealth in white families.

K-Y TAYLOR: Yes. This is why black people want in.

CHRIS HAYES: Right, right, exactly. So for those reasons, you could look at this program and say, "Okay, we're talking equity now."

K-Y TAYLOR: Totally different.

CHRIS HAYES: We're going to come in and we're going to do something similar. We're going to backstop these loans. In fact, we're going to do something even more important. We're actually going to cap it so that you don't have to have a lot of income. If you're on welfare, you can buy a home. But it doesn't produce the same.

K-Y TAYLOR: So many differences. In the post-war period when the initial federal program was underway, these were new houses, these were newly built houses in the suburbs. Interest rates were at historic lows during this period of time.

CHRIS HAYES: Right.

K-Y TAYLOR: And so those two conditions made a big difference. So what is happening in the urban market? The housing is incredibly old. In some places, like St. Louis, the houses in black neighborhoods are between 70 and 80 years old.

CHRIS HAYES: And untouched, largely.

K-Y TAYLOR: Yeah. Interest rates are on the rise in the late-1960s because of the Vietnam War, because of global markets and the instability of the American dollar, interest rates are going up to historic highs at that particular point in time. And so this becomes a very expensive venture. And home ownership is difficult under good circumstances, because it's unpredictable.

CHRIS HAYES: It sure is.

K-Y TAYLOR: You never know if you're going to have to get a hole in the roof fixed, if a pipe in the basement bursts-

CHRIS HAYES: The costs are really unpredictable-

K-Y TAYLOR: Yeah, yes.

CHRIS HAYES: -and it can be catastrophic, particularly if you're operating at a razor-thin margin.

K-Y TAYLOR: And so if you're on a fixed income, it's even more complicated. And so part of the issue that dated back to the consortium of life insurance companies was with their program, your ability to get a loan was contingent on the property being in what they described as an area that would ordinarily be redlined, which meant the ghetto. And so that logic was still applied under these new circumstances, which essentially meant that Africa Americans were continuing to be segregated. And so not only does that raise moral questions and moral dilemmas, but what does it do to the housing market? It means that as black people continued to be a captured market, it drove the price up and the quality of the housing down. It dramatically limited their ability to function, to be mobile, within the housing market,

CHRIS HAYES: Right, because they're already constrained sort of socially by segregation. The fact that all these sometimes legal but not always legal sort of institutional arrangements, including the realtors themselves are sort of maintaining this bifurcated market. Now, legally they're pegged into these redlined areas, again as a kind of like ... some sort of egalitarian racial liberalism because that's who the program is targeted to apply to but ends up having the perverse effect of further re-inscribing the bifurcated market. And then there's all these subsidy monies flowing through, but there's not actually sufficient supply of good housing.

K-Y TAYLOR: Exactly.

CHRIS HAYES: So now you've set up the conditions for ... you call it in the book predatory inclusion.

K-Y TAYLOR: Right.

CHRIS HAYES: What happens? Give us examples of what it ends up looking like at the ground level.

K-Y TAYLOR: So predatory inclusion is really a way of understanding how the previous conditions of segregation that help to erode the quality of housing in urban areas also then becomes the basis upon declaring those neighborhoods what we would call today as subprime. And so the subprime nature of these neighborhoods then legitimizes bank's efforts to charge more, to have a different set of criteria to really make African Americans' engagement with lending more expensive. And so it's really a way of trying to understand the continuities between the previous period of racist exclusion and how that really creates new vulnerabilities for black people to be included, but on different and still exploitative terms.

CHRIS HAYES: Right, because the system is now set up where there's money to be made essentially by finding an applicable borrower, in many cases a black woman with children public aid, putting her in totally substandard housing, housing that was worthless before because it was so substandard. So it was essentially zombie housing, right?

K-Y TAYLOR: Right.

CHRIS HAYES: It's zero dollars sitting on a ledger. But now you could perform this magic trick of exploiting the subsidy by taking some woman, putting her in there, she is not a homeowner, and now all of a sudden there's value that's grown up around this substandard housing that you are essentially getting from the federal government.

K-Y TAYLOR: So this is the scandalous aspect of this. Speculators rush into what has been previously an abandoned market, and they start to buy up, not just substandard, in many cases, these houses had been legally condemned.

CHRIS HAYES: Literally condemned houses.

K-Y TAYLOR: Condemned, unfit for human habitation. And that could be another show about Philly. There are literally hundreds of apartments, houses in the city of Philadelphia that are designated unfit for human habitation that thousands of people live in. And so the speculators come in, they do a cosmetic paint job, they find someone, a black woman who wants to get out of public housing, who is lured by the promise of becoming a homeowner, who agrees to purchase the home, who is able to get a loan through these new low-income home ownership programs. And then within a matter of weeks and months, the house begins to fall apart around them, with no kind of help or assistance because these are all your problems now.

CHRIS HAYES: Right, now you own this condemned house.

K-Y TAYLOR: Then they walk away, and the banks don't care because the federal government has guaranteed the loan. The realtor has made their commission.

CHRIS HAYES: And they're making commission on the sale price, too.

K-Y TAYLOR: Yes, exactly.

CHRIS HAYES: They could do quite well. You're finding someone who has very low ... again, the payments of the mortgage are capped to income.

K-Y TAYLOR: Right, right.

CHRIS HAYES: But the commission the realtor is getting is on the sale price.

K-Y TAYLOR: Right, exactly. And the other part of the scandal was that FHA appraisers, many of whom were part-time real estate agents working in the same market that they are appraising, are taking bribes, are taking kickbacks to inflate the value. Because all of these homes, in order to qualify for the loan, have to be inspected, and so an actual official has to sign off on the value, and so that was part of the deal. Together, these stories begin to mount, and so by the early 1970s, certainly by 1972, the scandals are front page news in every major city in the United States. 60 minutes does two exposes on HUD and the home ownership programs, one in 1971, another in 1975.

The Chicago Tribune wins a Pulitzer Prize in 1975 for its coverage of the HUD scandals in that city. The Philadelphia Inquirer was a finalist for the Pulitzer for its coverage in Philadelphia. And it was really black homeowners in Philly that reported these conditions to their congressman, who then was very quick to summon a hearing. And so some of that was politics. Some of that was Democrats who had unceremoniously been removed from the presidency and had lost control of the program, because this was a Johnson program that was now under the auspices of Nixon. And so some of that was politics that... look at how the Republicans are mismanaging-

CHRIS HAYES: Right. This is what happens when you elect a Republican to run-

K-Y TAYLOR: Yeah, exactly.

CHRIS HAYES: ... a fair housing program.

K-Y TAYLOR: But it very quickly grew into much more of that because the scandals kept expanding wider and wider and wider.

CHRIS HAYES: And you write in the book how in some ways the scandals — and I think there's a really interesting parallel to subprime prices, which we can talk about — has all the ready made ingredients for a reactionary narrative, in which the African-American homeowners who are the victims of the scam. They are the victims of the predatory inclusion set up by incentive structure, by the actual system that's set up. And there's a moral lesson for white America about what happens if you try to take these people and make them homeowners.

K-Y TAYLOR: Right. The focus almost immediately shifts to the program participants, and the conditions of the house, are those because black women don't actually know how to keep a clean house? Which of course is richly ironic because many of these congressmen had black women cleaning their own homes. And so-

CHRIS HAYES: Literally going home to that after their speeches.

K-Y TAYLOR: Yeah. And so black women become the face of the scandal as unsophisticated buyers, that they don't know enough, they don't understand enough about home maintenance. HUD creates a pamphlet to show women in public housing and in these home ownership programs how to clean house properly. It's like a 10-page illustrated pamphlet on how to sweep a floor, how to wipe off a countertop, how to clean your oven. This becomes a central part of the story, and the role of the banks, the role of the real estate industry, began to fade into the background, and there is a much more narrow focus on the perceived problems of the people who are participating in the program is maybe the root of the issue, and this becomes a new example of how government can go too far.

This is kind of like a social engineering experiment gone crazy where one congressman from Ohio says, "You can't build a middle-class program in the ghetto," and there's a sense that the federal government is trying to fit square pegs into round holes.

CHRIS HAYES: I did not realize until I read your book what a story it was at the time, and also how it is really similar to the arguments that many on the right made about the financial crisis, right?

K-Y TAYLOR: Yeah.

CHRIS HAYES: That the problem with the financial crisis wasn't banks. It wasn't collateralized debt obligations. It wasn't-

K-Y TAYLOR: It's the community reinvestment act.

CHRIS HAYES: Yes, right. It was the community reinvestment act, and it was too many loans, basically, to black people. The problem was black people brought down the system because-

K-Y TAYLOR: They wanted too much house.

CHRIS HAYES: ... because they wanted too much house and because our bleeding heart government lent them, subsidized too many loans to them.

K-Y TAYLOR: Yeah. They can't live within their means, and home ownership isn't for everyone, especially these people. Look at what they did to public housing. And so George Romney, everyone's beloved liberal Republican, the last among them, is one of the key actors who participates in making these associations, collapsing the problems with public housing in with the black women who are homeowners. And he, feeling particularly scrutinized because of the ongoing congressional investigations, in many ways is one of the most vitriolic in talking about the housekeeping skills of black women and the notion that the problems in these programs are just another example of how people want something for nothing.

CHRIS HAYES: To me the ideological project here is that you have a policy that is explicitly from the beginning a public/private partnership. There's private market actors which are acknowledged and part of it collaborating with public government actors to create a kind of subsidized market, and there's two ideological directions to attack that from. The right-wing libertarian direction, which is the same one that we've seen in the 2007 subprime crisis and the financial crisis, is this is what happens when you social engineer in a market, when you create these incentives, when you create these backstops and government subsidies. You're trying to make the argument from the other side.

K-Y TAYLOR: Yeah. I think with that argument, part of the problem is that HUD makes no effort to enforce its own rules, makes no effort to enforce the Fair Housing Act, makes no effort to enforce anything having to do with civil rights. And so this is part of the problem.

CHRIS HAYES: The original conditions of segregation are not eroded by the passage of the 1968 act.

K-Y TAYLOR: Right. So the law has to be enforced, and so the enforcement capacity is left to HUD. It relies on appropriations to be able to finance that, and so in 1969 get $6 million, $5 million of which is dedicated to staffing, and that leaves $1 million and 120 people to investigate all claims of discrimination in housing in the United States. And so that's part of the problem with that.

On the other end, for me it's very basic that in real estate the objective is to make money. That's what speculation is about. That's what the real estate game is about. It's about making money. That is very different from defending or protecting the public's welfare and the public's interest, and these clash wildly in these home ownership programs. You could say that about public/private partnerships in any realm where you're talking about the need to deliver public services in general, but there is something particular to the real estate industry, whose entire history is bound up with the racial exclusion of black people and the profiteering from racism. To then empower that sector with the authority and legitimacy of the state is a recipe for disaster. There is a reason why African-American organizations, community groups, have always called for a greater role of the state, because of the ways that racism and discrimination run rampant and unchecked in the private sector.

So there was no regulatory impositions placed on the private sector in these different programs, and part of it has to do with the nature of the programs themselves, which is when you're in partnership, it makes it difficult to then be the police of the same relationships, especially when the-

Activists rally against Trump administration proposals to cut the Housing and Urban Development's budget on April 20, 2017 in New York City. Spencer Platt / Getty Images file

CHRIS HAYES: Right. We're partnering on running this thing in the Chicago South Side or West Side. We're not also going to be the cop that turns you in.

K-Y TAYLOR: But that's the logic of the program, that the state can somehow still fulfill its regulatory responsibilities, and it just didn't happen. And when you consider that the U.S. government was in the process of ending its managing, creating public housing, housing that it was responsible for, and saying, "No, we are going to let the private sector produce the housing. We will subsidize the private sector so that it distributes the housing, but the state is extracting itself from this role," that makes regulating even more complicated.

And even throughout the process of the early '70s, where you have hearing after hearing that is uncovering malfeasance after malfeasance, the dependent relationship meant that there was nothing that could be done, that people literally just watched these programs devolve. That created an opening for Nixon to use the scandals as a way to completely shut down the subsidized housing programs across the board in 1973. Nixon essentially imposes a moratorium on all subsidized housing, so not just the home ownership programs, but the moratorium included all subsidized housing in the United States until an audit and an investigation was completed to learn more about the programs, which lasted for about two years.

CHRIS HAYES: What do you see as the lesson here about the kind of political market and institutional structures of segregation and how they can or cannot be overcome?

K-Y TAYLOR: For me, there were big questions that were raised, and it's not just about this or that public policy, but there's a question about the role of home ownership in general in our society, and that we've basically created a society where your quality of life, your social mobility, is tied up in your ability to own this huge asset. And even if you do own one, if you're African American, it still doesn't function in the same way that it functions for white people. So there's this embedded inequality within the larger inequality of needing to be a property owner in order to have social mobility in our society that really we need to think about.

CHRIS HAYES: It's also crazy how much those incentives affect people's behavior.

K-Y TAYLOR: This is why you have the crazy white moms. It's because of the... Your home values do matter.

CHRIS HAYES: Even now, I have a mortgage on a home in New York. We have a home in Brooklyn. We're very lucky to be able to afford that. And even now I will see reporting in the paper, and this has actually been the case in the last years, that home values in New York are down. The public policy part of me is like, "Good. It's too expensive to live in New York. We need housing to come down." I would love for it to drop year over year for several years in a row that more. But the homeowner part of me is like, "Oh, that's not great."

K-Y TAYLOR: No, this is-

CHRIS HAYES: And that's exactly the problem.

K-Y TAYLOR: We've organized our society where you need... People look at the house to finance their retirement, to send their kids to school, to weather a healthcare emergency or crisis. This is crazy. This is crazy. And so we have to detach these things that create social mobility, that create a decent quality of life, from your ability to own a home for white people. For black people, you can own a home and it still doesn't function in that same way. So for me, this raised much bigger systemic questions than just the constant, "Well, we just need to find ways to create more openings for black people to become homeowners," never addressing the fact that number did increase, and yet the racial wealth gap never goes away, because housing for black people is valued differently than it is for white people.

CHRIS HAYES: That's the paradox at the heart of it, which is that if you look at it from a metric standpoint... This was particularly true up to 2007, which is that black home ownership rates increasing year after year, but the racial wealth gap not getting smaller, because clearly one is not solving the other precisely because of the bifurcated market that you talked about in the book.

K-Y TAYLOR: Right. And so the constant droning on that is found in every presidential candidate's platform: "Our solution for housing, we need more black homeowners," doesn't deal with this basic inequity that is embedded in the housing market because of the way that race shapes value in the United States.

CHRIS HAYES: I guess I'm curious about where you think we are in this ideological moment, particularly on the left, where I think there is a turn, more than I've ever seen in the time that I've covered politics, away from, for lack of a better word, neoliberal interventions that have to do with the kinds of market incentive measures that we see in this program, that you document, and more broad universal publicly provisioned goods.

K-Y TAYLOR: Yeah. I think that the fact that Sanders in 2016 got 13 million votes, and the fact that, as underreported as it is, that he's a leading contender for the Democratic Party's nomination this late in the game for the 2020 race, speaks to the ways that American capitalism is not working for tens of millions of people in this country. And these are supposed to be the good times. It's 10 years out from the crisis.

CHRIS HAYES: That's what's wild.

K-Y TAYLOR: There's 3 percent growth. There's historic low unemployment, and who cares?

CHRIS HAYES: Historic low black unemployment, as the President likes to tell everyone.

K-Y TAYLOR: Historic low. That's right. It's 5 percent, and who cares? Because everyone is broke. Everyone is just walking around with this debt tumor, and so it cuts into any sense that you're actually able to get ahead. 17 percent of people are paying 51 percent of their income for rent. There's another 30 percent that are paying more than 30 percent of their rent, so it means most people are paying more for rent than is supposed to be healthy for their own economic lives.

And so these are the good times, and people are living check to check, stressed out. And that has created an opening to think about a different way to perhaps not completely organize our society, but we're probably on the road to thinking that way.

CHRIS HAYES: You really think so?

K-Y TAYLOR: Oh yeah. I think this isn't... It's not working. It's not working. And I think for millions of people, whether it's healthcare, whether it's student loan debt... And the idea that you will never be able to get ahead. So you assume all this debt, they tell you go to college, you assume all this debt, you can't find a job. For most people, you can't find a job that will actually allow you to pay it back, so you just spend your life paying off bills and working long hours and not being able to afford the rent because the rent's too d---.

CHRIS HAYES: Call it the American dream, Keeanga.

K-Y TAYLOR: I know. I know. It's turned into a nightmare, as Malcolm X said, and not just for black people, but for millions of people. White people, working class white people, life expectancy has gone in reverse. This does not happen in the developed world. And it's driven by alcoholism, opioid addiction, and suicide. And so what is that? Greatest country in the history of humanity? American exceptionalism. Yes. Exceptionally depraved and cruel. And that's the reality for millions of people in this country. That's why everybody's on drugs. That's why everybody's looking at their phone, because we live completely alienated lives, and it's driven by capitalism.

CHRIS HAYES: Wow. What am I going to say after that? Keeanga-Yamahtta Taylor is an assistant professor of African-American studies at Princeton. Her book "Race for Profit, How Banks and the Real Estate Industry Undermined Black Home Ownership," is out now. It was also on the long list for the 2019 National Book Awards for nonfiction, which is a very big deal. It's really excellent, as you can tell from the conversation. I suggest you pick it up. Thank you, Keeanga.

K-Y TAYLOR: Thanks, Chris.

CHRIS HAYES: Once again, my great thanks to Keeanga-Yamahtta Taylor. The book is called "Race for Profit, How Banks and the Real Estate Industry Undermined Black Home Ownership." Also, if you liked that conversation, there's a few other conversations you can listen to, our conversation with Tressie McMillan Cottom on her book "Thick," a great conversation about our real estate obsession and how housing and home ownership got built in the U.S. in the postwar period with Giorgio Angelini, and Patrick Radden Keefe's discussion, ghosts of the dirty war, since Patrick also is on the long list for the National Book Award. I'm not on that list, just in case you're wondering. No, I'm not. I'm not there, but maybe I could interview myself and get myself on the list.

We got a lot of great feedback from you guys, actually. Well, how do I say this? We got a lot of feedback about the Ted Cruz interview. It did really run the gamut. You guys downloaded and listened to it, which was awesome. I love seeing all the feedback. I think, again, we're always trying to do new things and take different risks here and talk to different people, and I thought it was in certain moments really substantive and fascinating and illuminating, in other moments really maddening. But that's just the nature of these kinds of discussions, and I think we'll do them again. That's not the last time we do that for sure. It will also not be an every week thing.

And finally, but perhaps most importantly, if you're in LA, don't forget to buy tickets to our live show on sale now. It's October 21st at the theater at the Ace Hotel. You can go to ticketmaster.com and search Chris Hayes. Buy one for your friend, buy a few for your friends, and come out, and I can't wait to see you.

Related:

Pre-order "Race for Profit" by Keeanga-Yamahtta Taylor

"Say Nothing," by Patrick Radden Keefe

"Thick," by Tressie McMillan Cottom

Talking 'thick' descriptions with Tressie McMillan Cottom

Documenting our real estate obsession with Giorgio Angelini

"Why Is This Happening" is presented by MSNBC and NBC News, produced by the "All In" team, and features music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to NBCnews.com/why-is-this-happening.