1983]

RESIDENTIAL SEGREGATION ORDINANCES

321

housing units were available.197   Hence, the city exaggerated the
shortage by demolishing many more houses than it created.

"Blockbusting" was the answer. Economists have commented
upon the difficulty of enforcing multi-party agreements in restraint of
trade. The problem is simple: "The temptation of members to cheat is
strong . . . because the returns from cheating are substantial. . . ,"198
This certainly proved to be true in Baltimore's housing industry. The
treaty between white homeowners, the real estate industry, financiers,
and the Federal Housing Administration had left unmet the demand
for black housing. A house could be sold at a premium to a black
buyer by a seller willing to violate the treaty. Moreover, this premium
 could be multiplied by real estate speculators who capitalized on the

 panic in white neighborhoods that had begun to change in racial make-

 up. Brokers bought whole blocks at a distress price from nervous white
sellers, and sold at a premium to housing-hungry black buyers.199

Later, speculators broadened their market. They used their credit
to borrow money from financial institutions. Turned-over houses were
then sold on easy terms to low-income, high-risk black buyers pursuant
to "buy-like-rent" contracts. The sales were often illusory, foreclosure
was the rule rather than the exception. The speculator would sell and
resell the same house to a series of buyers. By this technique the block-
busters took a profit from the under-class as well as the middle-class
Negroes. Blockbusting transferred tens of thousands of houses from
the white market to the black market200

Blockbusting poses an ethical enigma. Its practitioners were out-
laws, violating the real estate industry's code of ethics and cheating on
the cartel between white homeowners, real estate dealers, mortgage
lenders, city government, and the FHA, which restrained the sale or
rental of housing to blacks in white neighborhoods. Speculators em-
ployed a psychology designed to scare white homeowners out of their
accumulated equities. They sold to black purchasers for whatever the
market would bear, sometimes exacting exorbitant profits. Conversely,
its practitioners were providing housing opportunities otherwise un-
available to Negroes. And the "ethical" precept which they violated
was part of a racist conspiracy. Speculators provided financing and
housing when mortgage lenders and "ethical" real estate brokers re-

- 197. Id. at 53-54.	. '                                   •   _ _  .

198. R. POSNER, ECONOMIC ANALYSIS OF LAW 115 (1572).

199. Douglas Connah. Jr., Run Baby, Run: Study of Blockbusting in Baltimore (Nov. 22,
1968) (unpublished manucript).

200. Set S. OLSON, supra note 8, at 378-79 (discussing career of Moms Goldseker).