What Is Blockbusting in Real Estate & Why We Should Avoid It
When managing the renting, buying, and selling of property, there are a lot of terms thrown around that are fundamental to know, but they also can be confusing if you’re not familiar with them. Many times they are incredibly important and can even keep you from breaking laws even if they are contained within a term that you may not be familiar with. One such term is blockbusting. What is blockbusting in real estate exactly? It is actually quite crucial to understand if you’re in the business of finding homes for people in any way.
The words we use when we are part of the real estate industry are not only fundamental to our communication, they can enter into legal dos and don’ts in a lot of ways. Overseeing property management in Boston MA involves being familiar with all the ways in which real estate is kept fair and non-discriminatory. Sometimes it can be subtle. Let’s go over this important topic and alleviate some misconceptions along the way.
Table of Contents
- What Is Blockbusting in Real Estate?
- Why You Should Avoid Blockbusting
- How You Can Avoid Blockbusting
- FAQ
- Pro Management Services Can Help Advise You
What Is Blockbusting in Real Estate?
Blockbusting is the practice of encouraging homeowners to sell their homes below market value due to the neighborhood’s “changing demographics”… it is considered discriminatory. Another name for blockbusting is “white flight,” which refers to the act of white real estate agents and speculators convincing white homeowners that Black people moving in is bad for the neighborhood.
By making homeowners believe that changing demographics will negatively impact property values, agents and speculators convince them to sell quickly, at a below-market-value price, only for the predatory buyers to then resell or rent the properties at a much higher profit margin.
While blockbusting in real estate has historically targeted Black people moving into traditionally white neighborhoods, it also applies to other races, religious beliefs, gender identities, familial status, and more.
Previously blockbusting could be very obvious and overtly discriminatory. Many previous examples included advertisements in papers that mentioned “changing neighborhoods” as a means of buying homes in areas in which Black families had moved in. Today, blockbusting can be more subtle, but just as discriminatory and problematic. Many American cities remain segregated, presenting speculators with opportunities to engage in blockbusting.
It may come in the form of an overt or implied interest in wanting people of a certain ethnicity or religious denomination in their housing. There are plenty of recent examples of accusations that are evidence that the practice still exists and may even be common to this day.
Why You Should Avoid Blockbusting
You should avoid blockbusting in real estate because it is morally wrong. Because there is some nuance and possible implications in the words we use and actions we take, it is important for housing professionals to be trained and careful through every step of the real estate journey.
If an individual or entity is found guilty of blockbusting or other forms of housing discrimination, they may have to:
- Pay damages to the impacted party, which may include damages for humiliation, pain, and suffering.
- Provide other “relief,” like granting access to non-discriminatory loans.
- Pay a penalty fee to the federal government.
- Pay the impacted party’s attorney fees and other costs.
How You Can Avoid Blockbusting
Blockbusting can be obvious or subtle. Some people practicing blockbusters are quite savvy and are very careful to avoid being caught saying or writing anything that could be construed as discrimination.
The definition of blockbusting in real estate is broad and somewhat vague, which makes it possible for real estate agents, especially, to accidentally brush up against blockbusting without fully knowing it. Using the wrong word in a marketing postcard could lead someone to accuse an agent of trying to push homeowners to sell due to changing socioeconomic circumstances.
Real estate professionals who want to avoid blockbusting must treat everybody the same. They should avoid commenting or answering questions from buyers or sellers about the race, sex, religion, color, familial status, disability, or national origin of people in a neighborhood. In addition, they should avoid directly answering questions about crime rates, school quality, or demographic makeup.
FAQ
What is panic selling?
Panic selling is a widespread selloff of an investment or even an entire market or neighborhood due to fear, rumor, or overreaction rather than reasoned analysis. It is closely linked with blockbusting in real estate.
What’s the difference between blockbusting and panic selling?
Blockbusting in real estate and panic selling are interrelated but not exactly the same thing. Blockbusting is the practice of encouraging homeowners to sell their homes due to changing socioeconomic conditions in the neighborhood, which then can lead to panic selling. Panic selling can also be associated with stock buying and selling and other investments that are not related to real estate specifically.
Pro Management Services Can Help Advise You
If you own rental properties and want to avoid rental discrimination, consider hiring a property management team. Companies like Bay Property Management Group are well-versed in all Fair Housing laws and will ensure your rentals and processes are compliant from one tenant to the next. It is peace of mind.
If you own rental properties and want to avoid the possibility of rental discriminatory practices, hire the professionals. If you find yourself spending too much time tending to rentals when you could be growing your business, contact BMG! We offer comprehensive rental property management in Boston, Atlanta, Baltimore, Philadelphia, and elsewhere.