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Wed, 06.27.1934

Redlining in Black America, a story of Home Ownership

*On this date in 1934, redlining began as American public policy.  This is the systematic denial of several services by federal government agencies, local governments, the private sector either directly or through the selective raising of prices.  

Although informal discrimination and segregation had existed in the United States, the specific practice called "redlining" began with the National Housing Act of 1934, which passed on this date established the Federal Housing Administration (FHA).  Racial segregation and discrimination against non-white and non-white communities predated this policy. The implementation of this federal policy aggravated the decay of non-white inner-city neighborhoods caused by the withholding of mortgage capital and made it even more difficult for neighborhoods to attract and retain families able to purchase homes.  The assumptions in redlining resulted in a large increase in residential racial segregation and urban decay in the United States.  

In 1935, the Federal Home Loan Bank Board (FHLBB) asked the Homeowners’ Loan Corporation (HOLC) to look at 239 cities and create "residential security maps" to indicate the level of security for real-estate investments in each surveyed city. On the maps, the newest areas those considered desirable for lending purposes were outlined in green and known as "Type A". These were typically affluent suburbs on the outskirts of cities. "Type B" neighborhoods, outlined in blue, were considered "Still Desirable", whereas older "Type C" were labeled "Declining" and outlined in yellow. "Type D" neighborhoods were outlined in red and were considered the riskiest for mortgage support. These neighborhoods tended to be the older districts in the center of cities; often they were also Black neighborhoods.  

Urban planning historians theorize that the maps were used by private and public entities for years afterward to deny loans to people in Black communities.  But recent research has indicated that the HOLC did not redline in its own lending activities and that the racist language reflected the bias of the private sector and experts hired to conduct the appraisals.  Some redlined maps were also created by private organizations, such as J. M. Brewer's 1934 map of Philadelphia. Private organizations created maps designed to meet the requirements of the Federal Housing Administration's underwriting manual. The lenders had to consider FHA standards if they wanted to receive FHA insurance for their loans. FHA appraisal manuals instructed banks to steer clear of areas with "inharmonious racial groups” and recommended that municipalities enact racially restrictive zoning ordinances.  

Neighborhoods with high proportion of non-white residents are more likely to be redlined than other neighborhoods with similar household incomes, housing age and type, and other determinants of risk, but different racial composition.  While the best-known examples of redlining have involved denial of financial services such as banking or insurance, other services such as health care (see also Race and health) or even supermarkets have been denied to residents. In the case of retail businesses like supermarkets, purposely locating stores impractically far away from targeted residents’ results in a redlining effect.  Reverse redlining occurs when a lender or insurer particularly targets minority consumers in a non-redlined area, not to deny them loans or insurance, but to charge them more than would be charged to a similarly situated white consumer.

In the 1960s, sociologist John McKnight coined the term "redlining" to describe the discriminatory practice of fencing off areas where banks would avoid investments based on community demographics.  During the heyday of redlining, the area’s most frequently discriminated against were Black inner city neighborhoods. For example, in Atlanta in the 1980s, a Pulitzer Prize-winning series of articles by investigative reporter Bill Dedman showed that banks would often lend to lower-income whites but not to middle-income or upper-income Blacks.  The use of blacklists is a related mechanism also used by redliners to keep track of groups, areas, and people that the discriminating party feels should be denied business or aid or other transactions. In the academic literature, redlining falls under the broader category of credit rationing.  


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