Part II
The Second Great Migration of blacks from the south to the north began in the latter years of the Great Depression when manufacturing finally began to expand, both from modest economic recovery and from the beginning of arms manufacturing for WWII. Hundreds of thousands of black workers went north and found a still severe shortage of housing.
In Chicago only a few neighborhoods were open to blacks purchasing homes or renting. Because of the severe shortage of housing, black were willing to pay premium prices for housing, but to no avail.
A second form of discrimination in housing was organized to capitalize on black housing needs. Speculators (generally real estate operators or lawyers) bought physically distressed properties in either black or mixed neighborhoods in South and West Chicago and sold or rented them at inflated prices to black workers through a contract for deed. Substantial downpayment and higher-than-average monthly payments were required. If the buyer missed a month's payment, the seller could repossess the property and evict the buyer. The repossessed building could then be sold to somebody else.
Rental property was over-loaded with tenants. Larger apartments were subdivided by tenants (often by DIY efforts) in order to cover their high rent. Black people buying a building did the same thing -- subdivided maybe twice over, so that they could pay off the building and not miss payments, thus losing their whole investment.
Over time, this predatory system extracted a tremendous amount of wealth from the black community in Chicago (just one community among many). Mark Satter -- a bona fide Jewish Social Justice Warrior lawyer who fought to end this system of systematic exploitation in the 1950s (unsuccessfully), calculated that the large black community of Chicago was losing about a million dollars a day through this property predation.
In the meantime, white home owners were accumulating value in their houses. They were not becoming rich, they were only gaining a margin of security. It was generally their only asset. Their future security depending on its preservation. They worried intensely about blacks moving into their neighborhood, because they had been assured many times (it was in their loan agreement) that they could not sell to blacks, and if their property value dropped (as a result of blacks moving in) then they would lose whatever value they had accumulated.
Banks, real estate agents, and the FHA itself wanted to make sure home values didn't drop. Again, local real estate agents provided a workforce for maintaining segregation. They made it clear to white home owners that selling to blacks would be a personal economic disaster for them. Real estate agents were in a position to make value drop by stampeding white people out of a neighborhood. "Sell right now! The niggers are coming, and your property value will fall into the basement." So, people did sell, and moved to more distant, more secure suburbs.
Were blacks actually a threat to property value?
Yes and no. No, in that they were often willing and able to pay a premium to get housing at all, and decent housing even more. (Many of the southern black people in Chicago were hard working and thrifty.)
Yes, in that the housing density in black neighborhoods was extremely high, and the housing stock (mostly owned by absentee landlords--slum lords, quite often) were poorly maintained. High density and a lack of maintenance is a bad combination for any demographic group. The black neighborhoods became physically degraded.
Crime existed in the white neighborhoods before the presence of blacks could be a significant consideration (say, 1935). People produce their own anti-social elements who then engage in the usual sort of crime -- burglary, theft, knifings, vandalism, public drunkenness, disorderly behavior, a quite rare killing or two, and so on.
Why did the black neighborhoods produced much more crime?
Several factors. A major factor in crime generation is parental supervision. Because of the unusually high cost of housing in black neighborhoods, both parents needed to work at least 1 job to produce enough income to make ends meet. Because the parents were working, the children were unsupervised after school. Unsupervised children generally get into trouble of one kind or another whatever their race or socio-economic background.
Chicago's public schools could not handle the very high census of students in a small area that segregation caused. The schools went to two shifts --AM and PM. The quality of education provided was thus degraded, and children were left unsupervised not for an hour or two after school, but all morning or all afternoon (in families where both parents worked).
Many blacks were unable to achieve economic stability and ended up on welfare -- then the Aid For Dependent Children program (AFDC) which excluded males from benefits, pretty much. AFDC was support at a poverty level.
So, the black community deteriorated, crime became worse (we haven't reached the 1970s, yet), education was inadequate, social services was inadequate, and so on. Bad.
None of this was the result of racism on the part of the white workers who bought houses on the FHA program. They didn't keep blacks from doing the same thing. It was governmental, banking, and real estate sales institutions that instituted and enforced the rigid segregation. Of course, there was a certain amount of native racism among white working people -- much of it probably xenophobia as much as racism. But official policy bolstered, aggravated, and shaped native racism or xenophobia as a part of its segregation objectives.