In my final blog post, I will be discussing redlining and how it contributes to systemic racism and the wealth gap in America today. The practice of redlining began with the National Housing Act of 1934, which established the Federal Housing Administration (FHA). The National Housing Act was created as part of the New Deal in order to make housing and home mortgages more affordable after the Great Depression. While racial segregation and discrimination against minorities and minority communities pre-existed this policy, this act made housing segregation federally mandated. In 1935, the FHA asked the government-sponsored Home Owners’ Loan Corporation (HOLC) to create “residential security maps” in 239 cities across the U.S. The security maps showed the level of security for real-estate investments and the market value of neighborhoods based on factors involving the homes and elements such as the homogeneity and the “desirability” of the area’s residents. This “desirability” was based on one’s racial and ethnic background. The most desirable areas, typically ones with affluent, White, Anglo-Saxon and Protestant citizens, were outlined in green and labeled “Type A”. “Type B” neighborhoods, outlined in blue, were considered “Still Desirable” and 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 older districts in the center of cities and were often also black neighborhoods. Black and Mexican neighborhoods tended to be redlined, regardless of the wealth or class of its citizens.
It is interesting to note how the election of Roosevelt marked the political realignment of black voters from the Republican to the Democratic party, even though his policies hurt African Americans. He was able to receive voting support from African Americans because of his progressive New Deal policies that were intended to help them. According to the NPR podcast,
“A ‘Forgotten History’ of How the U.S. Government Segregated America,” Roosevelt included policies to help African Americans in order to create Southern support for the New Deal’s economic programs. In actuality, the New Deal’s economic programs reinforced the racial hierarchy in the U.S. and created more problems, such as redlining, for African-Americans.
The HOLC subsidized mass production builders of entire suburbs and provided loans, under the condition that the company wouldn’t sell to blacks. Also, during this post-Depression era, all builders were dependent on government loans since they were too poor on their own. HOLC policy also included restrictive covenant prohibitions on the resale to African Americans. Moreover, the government helped white families move to the suburbs by ensuring cheap mortgages for them. Government propaganda, such as pamphlets and lectures, urged whites to move into single-family homes in the suburbs, away from blacks, as a way to “avoid racial strife”. The justification for the HOLC’s racist policies was that if blacks bought homes in or near the suburbs, the property values of the white homes they were ensuring would decline and therefore, their loans would be at risk. In actuality, African-Americans increased the property value when they moved into all-white neighborhoods because they were more willing to pay for homes than whites since their housing market was restricted.
Loans in redlined areas were either nonexistent or expensive, which forced families to rely on speculators and private sales by unscrupulous homeowners. Neighborhoods that were deemed unfit for investment by local banks were left underdeveloped or in disrepair. When existing businesses would collapse, new ones were unable to replace them, often leaving entire blocks empty. As a result, residents of these areas were often limited in their access to banking, healthcare, retail merchandise, food, and other basic services. In addition, schools in redlined areas would receive less funding from taxes and have fewer resources than the better schools in white neighborhoods. The lack of economic activity in segregated neighborhoods created job shortages. This made it even more difficult for neighborhoods to attract and retain families able to purchase homes. These bad conditions further encouraged landlord abandonment which caused the population density to decrease. Abandoned buildings became centers for drug dealing and other illegal activity, which caused more social problems and instability in these areas. Although the Fair Housing Act of 1968 removed racial housing restrictions by law, it was an empty promise. The homes that African-Americans could have afforded when whites were buying into homes were no longer affordable because the neighborhood value went up.
In order to understand the present-day effects of redlining, one needs to be aware of home equity. Home equity is an asset that comes from a homeowner’s interest in a home and is calculated by subtracting the amount that one owes in mortgages from the property’s market value. Home equity can increase over time if the property value increases or the loan balance is paid down. A homeowner can take out a home equity loan based the property’s value and spend the money on other things. Today, the median household income for black families is 60% of whites. The wealth ratio, which includes income and the value of one’s assets, for black families is 5% of whites. In Washington D.C., the median white family has a staggering 81 times as much wealth as the median black family. This wealth gap across America can largely be attributed to federal housing restrictions from the 1930s-1960s. African Americans are less likely to own homes and other assets, such as investments and trusts, that passively create wealth over time. They are also less likely to have inherited wealth from family members. The long term negative effects from housing segregation are one of the main causes of poverty among African Americans today. Although Roosevelt’s New Deal was outwardly progressive as it included clauses to help African Americans, the success of its economic policies was dependent upon the maintaining of the racial hierarchy. The effects of the Roosevelt administration’s efforts to create segregation in the North and in urban metropolitan areas through housing restrictions is still discernible in our country today.