Free Minds & Free Markets

Philip Payton Jr.: The Crusading Capitalist Who Outwitted New York's Racist Landlords

Best known as the "father of Harlem," he was guided by the theory that free markets penalize bigotry.

The former residents of two square blocks at West 98th and 99th Streets in Manhattan have been holding annual neighborhood reunions since the mid-1950s, when the federal government bulldozed their homes in a "slum clearance project" spearheaded by Robert Moses.

This formerly all-black enclave was home to an A-list of black artists and intellectuals, including singer Billie Holiday, historian Arturo Schomburg, poet James Weldon Johnson, and actor Robert Earl Jones. Bordering Central Park, the community was settled in 1905 in an area with modern housing and easy access to the city's brand new subway.

The founder of the community was an African-American realtor named Philip Payton Jr., also known as "the father of Harlem." His role in the formation of what would later become the cultural capital of black America is well established. Less appreciated is the economic philosophy that guided his life's work.

Payton was an unabashed free-marketeer whose approach, as one headline writer put it, was "to make the color line costly." He believed that property owners participating in racial covenants could be forced to pay a penalty in a competitive marketplace, and that even bigoted landlords might choose "profit over prejudice" when faced with the choice.

"Race prejudice is a luxury, and like all other luxuries, can be made very expensive in New York City," Payton wrote in his company prospectus.

Payton anticipated by more than half a century some of the insights in Gary Becker's The Economics of Discrimination (1957), part of a body of work that earned Becker a Nobel Prize. He observed, as did Payton, that in a market economy, bigots who discriminate against blacks must "either pay or forfeit income for this privilege."

Just as a refusal to hire blacks means that an employer must forgo worthy employees and pay higher salaries, refusal to rent to blacks means that a landlord must forgo worthy tenants and accept less in rent. "The man who exercises discrimination pays a price for doing so," as Milton Friedman wrote in his landmark Capitalism and Freedom (1962).

Payton understood that he could exploit this market reality to buy buildings at a discount, and to sway even bigoted landlords to rent to blacks to maximize their incomes. In a racist society, with fewer options open to them in the housing market, blacks tended to pay higher rents for equivalent properties. Payton recognized he could use this regrettable fact to undermine racial covenants. "The very prejudice which has heretofore worked against us can be turned and used to our profit," he wrote.

Through competition, in theory, race-based price differentials would narrow over time. As Friedman wrote in Capitalism and Freedom, "there is an economic incentive in a free market to separate economic efficiency from other characteristics of the individual."

Born in Westfield, Massachusetts, in 1876, Payton moved to New York City at the age of 23, working briefly as a handyman and barber, before landing a job as a porter at a real estate company. That piqued his interest in the city's booming housing market, and in 1900 he went into business managing "colored tenements."

"All of my friends discouraged me," Payton later recalled. "They tried to convince me that there was no show for a colored man in such a business in New York."

At the time, black New Yorkers were relegated to a handful of overcrowded neighborhoods, with a dilapidated housing stock that typically lacked private bathrooms and hot running water. The tenements of the Tenderloin District, New York's largest black neighborhood at the time, were "human hives, honeycombed with little rooms thick with human beings," in the words of Mary Ovington, a co-founder of the NAACP.

After launching his business in 1900, Payton initially struggled for customers. But in 1902, he attended Booker T. Washington's National Negro Business League conference and began cultivating contacts among the city's black business elites. In 1904, he incorporated the "Afro-American Realty Company" with substantial backing.

"The fight that I am making has got to be made sooner or later and I see no better time than now," he wrote. His goal was to create a world where "a respectable, law-abiding negro will find conditions so changed that he will be able to rent wherever his means will permit him to live."

The origins of the West 99th and 98th Street community date to 1905, when, according to a contemporaneous article in The New York Times, a landlord on West 99th had a dispute with a neighboring property owner and retaliated by placing a sign across her two buildings welcoming "respectable colored families" to apply for tenancy. According to the Times, bigoted whites reacted by exiting the block en mass, leaving landlords desperate to fill their vacant apartments.

Enter Payton, who had written in a 1904 article: "[Why would landlords] keep their apartments empty thereby losing much money in rent, when there is an applicant for it, and no other objection can be raised to him other than that he has a black face?"

With whites fleeing, Payton started buying and leasing buildings on West 99th Street and renting them to blacks. By August of 1905, according to property records, he controlled seven out of 48 buildings on the block. He would continue acquiring more.

"Negroes Filling Up 99th Street Block," declared the headline of an August 14, 1905 article in the Times. The article described a "constant stream of furniture trucks loaded with the household effects of a new colony of colored people who are invading the choice locality is pouring into the street," while an "equally long procession moving in the other direction is carrying away the household goods of the whites from their homes of years."

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  • Longtobefree||

    Must be fake news. Everybody knows that all capitalists are rich racist white men.

  • CatoTheChipper||

    No. However, if he were alive today, progressives would call Mr. Payton an "oreo".

  • dave b.||

    Oreos are blacks who want to be white, which Mr. Payton is not.

  • Sevo||

    "Oreos are blacks who want to be white, which Mr. Payton is not"

    I'm glad you're here to educate us all.

  • BambiB||

    Just as a refusal to hire blacks means that an employer must forgo worthy employees and pay higher salaries, refusal to rent to blacks means that a landlord must forgo worthy tenants and accept less in rent.

    Precisely. That's why all the "affirmative action" stuff is purest crap. If blacks/females are BETTER at a job than white males, then any company who doesn't hire the more-qualified candidate loses out - by not making progress, and by allowing their competition to poach the best workers.

    Of course, if the reverse is true - if women and minorities do NOT do as good a job, then the company that doesn't hire them will eat the lunch of the PC companies who do.

    So either "affirmative action" is not needed, because the market will achieve the same results OR affirmative action just forces companies to hire substandard workers.

    Which is it?

  • CatoTheChipper||

    This is a great story! Thanks for bringing it to light.

    However, I have one small, pedantic criticism. At the end, you refer to Payton as a "realtor". The term REALTOR® has one, and only one, meaning: REALTOR® is a federally registered collective membership mark which identifies a real estate professional who is member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics.

    I seriously doubt that the National Association of Realtors would have admitted Payton to its ranks in 1905. At one time the NAR Code of Ethics included the following: "A Realtor should never be instrumental in introducing into a neighborhood a character of property or occupancy, members of any race or nationality, or any individuals whose presence will clearly be detrimental to property values in that neighborhood."

    It seems to me that it would be more accurate to describe Mr. Payton as a real estate investor.

  • Juice||

    Damn, so much shit like that back then. Reminds me of that fake investment commercial from SNL. "And we will only invest in white owned businesses."

  • Scarecrow Repair & Chippering||

    Oh, hogwash. "Realtor" may have once had that specific trademarked meaning, but it is no more special now than "kleenex"or "fridge".

  • Zeb||

    The NAR will sue you if you call yourself a Realtor and aren't part of their organization.

    And as far as I know "refrigerator" was never a trade mark.

  • Scarecrow Repair & Chippering||

    I'm not talking abut going into business as a realtor, any more than I am talking about going into business selling Kleenex. I am talking about common usage. People mention realtors all the time without caring about the trademarked definition, same as with "give me a kleenex".

  • Zeb||

    That's also true, but both Kleenex and Realtor both still have their specific trademarked meanings as well as their common usage.

  • IceTrey||

    Fridge is from Frigidaire.

  • dew||

    I have small, pedantic criticisms with your criticism.
    The National Association of Realtors did not exist until 1908.
    It didn't even have that name until 1972, and did not register "Realtor" as a a collective trademark until 1949.
    So, in summary, your small, pedantic criticism is bunk.

  • VinniUSMC||

    If the term hadn't even been in existence yet, that make it even more incorrect to call him a "Realtor".

    So, in summary, your small, pedantic criticism of CTC's small, pedantic criticism is bunk.

  • ||

    It's not pedantic at all. I'm a REALTOR and real estate professional/salesman. From 1947 to about the 1980s in this country I'd probably be a REALTIST or member of the National Association of Real Estate Brokers.

    The distinction pertinent to Payton's story.I'm sure loss of dollars was on their minds when the NAR eventually opened up their doors to minorities.

  • Unicorn Abattoir||

    Best known as the "father of Harlem," he was guided by the theory that free markets penalize bigotry.

    But if you won't bake a gay wedding cake, the power of The State™ must be used to destroy you.

  • ||

    "After years of lobbying by an Upper West Side real estate group, which deemed the black community a source of blight, the two blocks were bulldozed as part of a massive urban renewal project. And rent regulation, which was first imposed in New York City during World War I, began the process of ossifying the city's housing patterns. It's a case study of how government interference in the housing market undermined the penalties that the market imposes on bigots."

    Is this where 'rent control' was born?

    If so, chalk one up to another cherished progressive policy - that is minimum wage - rooted in racism.

    Good story. Payton was the man.

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  • Sidd Finch v2.01||

    ctrl+f "flight" 0/0

  • Sevo||

    "Race prejudice is a luxury, and like all other luxuries, can be made very expensive in New York City," Payton wrote in his company prospectus."

    That's an easy guy to like...

  • VinniUSMC||

    Talk about successfully gaming the system. Bravo Mr Payton.

  • ||

    Are there any books about Payton?


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