The History of Redlining

A redlining map of New Orleans
A redlining map of New Orleans.  Mapping  Inequality

Redlining, a process by which banks and other institutions refuse to offer mortgages or offer worse rates to customers in certain neighborhoods based on their racial and ethnic composition, is one of the clearest examples of institutionalized racism in the history of the United States. Although the practice was formally outlawed in 1968 with the passage of the Fair Housing Act, it continues in various forms to this day.

History of Housing Discrimination: Zoning Laws and Racially Restrictive Covenants

Fifty years after the abolition of slavery, local governments continued to legally enforce housing segregation through exclusionary zoning laws, city ordinances which prohibited the sale of property to Black people. In 1917, when the Supreme Court ruled these zoning laws unconstitutional, homeowners swiftly replaced them with racially restrictive covenants, agreements between property owners which banned the sale of homes in a neighborhood to certain racial groups.

By the time the Supreme Court found racially restrictive covenants themselves unconstitutional in 1947, the practice was so widespread that these agreements were difficult to invalidate, and almost impossible to reverse. According to a magazine article, 80 percent of neighborhoods in Chicago and Los Angeles carried racially restrictive covenants by 1940.

The Federal Government Begins Redlining

The federal government was not involved in housing until 1934, when the Federal Housing Administration (FHA) was created as part of the New Deal. The FHA sought to restore the housing market after the Great Depression by incentivizing home ownership and introducing the mortgage lending system we still use today. But instead of creating policies to make housing more equitable, the FHA did the opposite. It took advantage of racially restrictive covenants and insisted that the properties they insured use them. Along with the Home Owner’s Loan Coalition (HOLC), a federally-funded program created to help homeowners refinance their mortgages, the FHA introduced redlining policies in over 200 American cities.

Beginning in 1934, the HOLC included in the FHA Underwriting Handbook “residential security maps” used to help the government decide which neighborhoods would make secure investments and which should be off-limits for issuing mortgages. The maps were color-coded according to these guidelines:

  • Green (“Best”): Green areas represented in-demand, up-and-coming neighborhoods where “professional men” lived. These neighborhoods were explicitly homogenous, lacking “a single foreigner or Negro.”
  • Blue (“Still Desirable”): These neighborhoods had “reached their peak” but were thought to be stable due to their low risk of “infiltration” by non-white groups.
  • Yellow (“Definitely Declining”): Most yellow areas bordered black neighborhoods. They were considered risky due to the “threat of infiltration of foreign-born, negro, or lower grade populations.”
  • Red (“Hazardous”): Red areas were neighborhoods where “infiltration” had already occured. These neighborhoods, almost all of them populated by Black residents, were described by the HOLC as having an “undesirable population” and were ineligible for FHA backing.

These maps would help the government decide which properties were eligible for FHA backing. Green and blue neighborhoods, which usually had majority-white populations, were considered good investments. It was easy to get a loan in these areas. Yellow neighborhoods were considered “risky” and red areas—those with the highest percentage of Black residents—were ineligible for FHA backing.

Many of these redlining maps are still available online today. Search for your city on this map from the University of Richmond, for example, to see how your neighborhood and surrounding areas were classified.

The End of Redlining?

The Fair Housing Act of 1968, which explicitly prohibited racial discrimination, put an end to legally-sanctioned redlining policies like those used by the FHA. However, like racially restrictive covenants, redlining policies were difficult to stamp out and have continued even in recent years. A 2008 paper, for example, found denial rates for loans to Black people in Mississippi to be disproportionate compared to any racial discrepancy in credit score history. And in 2010, an investigation by the United States Justice Department found that the financial institution Wells Fargo had used similar policies to restrict loans to certain racial groups. The investigation began after a New York Times article exposed the company’s own racially-biased lending practices. The Times reported that loan officers had referred to their Black customers as “mud people” and to the subprime loans they pushed on them “ghetto loans.”

Redlining policies are not limited to mortgage lending, however. Other industries also use race as a factor in their decision-making policies, usually in ways that ultimately hurt minorities. Some grocery stores, for example, have been shown to raise prices of certain products in stores located in primarily Black and Latino neighborhoods.

Impact

The impact of redlining goes beyond the individual families who were denied loans based on the racial composition of their neighborhoods. Many neighborhoods that were labeled “Yellow” or “Red” by the HOLC back in the 1930s are still underdeveloped and underserved compared to nearby “Green” and “Blue” neighborhoods with largely white populations. Blocks in these neighborhoods tend to be empty or lined with vacant buildings. They often lack basic services, like banking or healthcare, and have fewer job opportunities and transportation options. The government may have put an end to the redlining policies that it created in the 1930s, but as of 2018, it has yet to offer adequate resources to help neighborhoods recover from the damage that these policies inflicted.

Sources

  • Coates, Ta-Nehisi. “The Case for Reparations.” The Atlantic, Atlantic Media Company, 17 Aug. 2017, www.theatlantic.com/magazine/archive/2014/06/the-case-for-reparations/361631/.
  • “1934: Federal Housing Administration Created.” Fair Housing Center of Greater Boston, www.bostonfairhousing.org/timeline/1934-FHA.html
  • “The Legacy of Redlining in Rust Belt Cities.” Belt Magazine, beltmag.com/the-legacy-of-redlining-in-rust-belt-cities/.
  • Redlining (1937- ) | The Black Past: Remembered and Reclaimed, www.blackpast.org/aah/redlining-1937.
  • “Understanding Fair Housing,” U.S. Commission on Civil Rights Clearinghouse Publication 42, February 1973. Electronically accessed, http://www.law.umaryland.edu/marshall/usccr/documents/cr11042.pdf
  • Lab, Digital Scholarship. “Mapping Inequality.” Digital Scholarship Lab, dsl.richmond.edu/panorama/redlining/.