Redlining's Long Shadow

The Enduring Legacy of Housing Discrimination in the United States

According to a report titled “The State of U.S. Wealth Inequality,” released by the Federal Reserve Bank of St. Louis, as of May 2024, Black families owned about 23 cents for every dollar of white family wealth, while Hispanic families owned about 19 cents. These significant wealth disparities, however, are not new. They can be traced back nearly a century to policies around housing.

Owning a home is not just a key component of the American dream; it is also one of the most effective ways to build wealth, as the value of a home can grow over time. However, Black people and other people of color have long faced barriers to homeownership. While these racist policies and practices have evolved over time, their underlying aim has remained the same:

Exclude Black Americans from home ownership.

Redlining and Its Origins

In order to buy a house, most people take out a home loan, or mortgage, from a bank. They then have to pay back the loan with interest. But in the 1930s the United States was experiencing an unprecedented economic crisis — The Great Depression. People no longer had money to pay their mortgages. In an effort to help keep people in their homes, two federal agencies were created: the Federal Housing Association (FHA) and the Home Owners’ Loan Corporation (HOLC).

Rebecca Marchiel, history professor and author of After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation, explains the role of the two agencies this way. The HOLC “purchased loans or mortgages from local lenders and then refinanced them back to the homeowners or the person who was paying the mortgage to make the terms easier to deal with.” For example, someone who was paying $52 a month saw their mortgage payment go down to $26 a month.

Meanwhile, the FHA provided insurance to banks so that if a homeowner could not pay their mortgage, the federal government ensured the bank would not lose any money. Combined, these efforts created an immense flow of money into the housing market. But not all Americans benefited equally.

To determine which homeowners should get loans, the FHA created a color-coded system to denote the stability of a neighborhood based on the research of economist Homer Hoyt. Hoyt identified a relationship between the racial demographics of a neighborhood and the value of housing there. Black neighborhoods were often marked red, indicating low stability.

While Hoyt noted that racist attitudes were in part to blame, he did not propose any solutions. Instead, as chief economist for the FHA, he helped codify racism into housing policy. His system became known as redlining due to the color assigned to predominantly Black neighborhoods.

The 1936 FHA Underwriting Manual informed people assessing the value of a neighborhood that they “should investigate areas surrounding the location to determine whether or not incompatible racial and social groups are present… If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same racial and social classes.” In other words, keeping white neighborhoods “stable” meant keeping them segregated. This stability then determined the value of housing in a neighborhood, and how safe it was for banks to issue loans for homes there.

As a result of these policies, people in neighborhoods designated risky, particularly Black people in redlined communities, could not get home loans. At the same time, they couldn’t move to whiter neighborhoods deemed financially safe because of segregation.

The Most Segregated City in America

Redlining may have been applied to cities across the U.S., but it was designed using Chicago as the template. For many, Chicago brings to mind hot dogs, teams like the Cubs or the Bears, and deep dish pizza. But for social scientists, it is also notorious for being one of the most racially segregated cities in the country.

Prior to Hoyt’s work with the FHA, Chicago implemented racially restrictive covenants to segregate neighborhoods by race and prevent Black Chicagoans from moving into white neighborhoods. According to “Mapping Chicago’s Racial Segregation” by Jacqueline Serrato, Pat Sier, and Charmaine Runes, “[Racially restrictive covenants] were stipulations written into deeds of sale that prohibited Black residents and non-Whites from buying, leasing, or inhabiting property in a determined parcel.”

Because of these covenants, Chicago was already heavily segregated prior to the Great Depression. This made the city the perfect candidate for redlining. Serrato, Sier, and Runes explain that, through redlining, Chicago’s Black neighborhoods “were deemed undesirable, and residents from these neighborhoods were usually denied bank loans and insurance, severely limiting their housing prospects and mobility.” A comment by an HOLC agent recorded on a map by the website Segregation by Design bluntly illustrates the racist attitudes that shaped housing policy during this time: “Negro population is largely concentrated south of Division St. This section has no future.”

This meant that Black people and poor people in Chicago did not have the same access to FHA-backed mortgages. But it wasn’t the only form of housing discrimination they faced. As Serrato, Sier, and Runes continue, “[Black Chicagoans] were simultaneously subject to predatory practices such as contract selling.” In this case, realtors would take advantage of Black Chicagoans desperate to own a home. They offered contracts for over-priced houses, high payments, tough penalties for missed payments, and no guarantee that signers would own the home in the end.

The end result was that poor communities and communities of color were confined to certain neighborhoods, their residents unable to secure loans for homes in their own neighborhoods or anywhere else.

Cementing Segregation

Over time, many white people began to move out of cities like Chicago and into the suburbs. This was driven in part by better-off Black residents trying to integrate segregated neighborhoods. Some realtors and banks would engage in “blockbusting.” If a Black family moved into a neighborhood, realtors would encourage neighbors to sell their houses quickly under the threat of their property values dropping. In some cases, just the possibility of Black people integrating a neighborhood was enough to cause white homeowners to sell. This trend, known as “white flight,” further solidified racial and economic segregation in cities.

At the same time, during the 1950s and 60s, cities like Chicago undertook efforts of “urban renewal.” The Chicago Housing Authority (CHA) built large public housing projects, including the largest in the country at the time, the Robert Taylor Homes. These were almost all built in majority-Black neighborhoods, further reinscribing racial segregation. According to Serrato, Sier, and Runes, “CHA high-rises were stigmatized by the city and the media, which portrayed them as vertical drug-ridden ganglands.” This would come into play when the city began building highways to connect the white suburban dwellers to the city.

The Dan Ryan Expressway, built in Chicago in 1961, was initially planned to go through Bridgeport, a majority white neighborhood and home to the city’s white mayor. When Bridgeport community members objected, the expressway was moved eight blocks east. Its construction displaced a disproportionate number of Black people and resulted in “a multi-lane barrier between Bridgeport and the Black Belt, literally cementing the segregation of Black and white communities.” Similar projects created and reinforced segregation across the United States including the Cross-Bronx Expressway in The Bronx, New York, the Santa Monica Freeway in Los Angeles, and Interstate-95 in Miami.

The Fight for Fair Housing

Though the history of segregation and housing inequality in the United States is bleak, it also contains stories of resistance. Rebecca Marchiel’s book tells the story of a multiracial group of Chicagoans who fought back against redlining and disinvestment in their community. According to Marchiel, this group, which would go on to organize the National People’s Action, worked together and saw that realtors and banks were “responsible for [their] declining neighborhood, not neighbors of different races.” One of their slogans was, “We found the enemy and it’s not us.”

Ultimately, this movement for housing justice led to the Home Mortgage Disclosure Act of 1975. The HDMA required transparency in the mortgage lending process and aimed to prevent discriminatory lending practices. Then, in 1977, Congress passed the Community Reinvestment Act, which made redlining illegal.

Still, Black residents in Chicago continue to deal with the legacy of racist housing and infrastructure policies today. “Some neighborhoods have never really shaken their reputation as being slums,” Marchiel says. This is in large part because of policies that segregated Black people into high poverty communities. Even when new efforts of renewal arise, old patterns of racism persist. Serrato, Sier, and Runes describe how in the early 2000s, then-mayor Richard Daley (son of the mayor who oversaw the construction of the Dan Ryan Expressway), put forward a plan to transform public housing in the city. It was touted as a way to break up concentrations of Black poverty and create mixed-income housing.

“Tenants were promised a ‘right to return’ to soon-to-be-built housing on the sites and placed on voucher waiting lists, but many residents struggled to meet the bureaucratic requirements to be considered,” write Serrato, Sier, and Runes. “CHA admitted they lost track of thousands of displaced people as they moved to other Black neighborhoods. Much of the promised housing failed to materialize, and it’s uncertain whether the CHA will ever build new housing for the 40,000 families currently on their waiting lists.”

Discriminatory Practices Persist

Beyond Chicago, housing discrimination continues to affect Black people nationwide. In an article from May 2024 titled, “She Made an Offer on a Condo. Then the Seller Learned She Was Black,” Debra Kamin explains, “A multiyear undercover investigation by the National Fair Housing Alliance, a Washington-based nonprofit coalition of housing organizations, found that 87 percent of real estate agents participated in racial steering, opting to show their clients homes only in neighborhoods where most of the neighbors were of their same race. Agents also refused to work with Black buyers and showed Black and Latino buyers fewer homes than white buyers.”

Despite some triumphs, the shadow of segregation still looms large. The racial wealth gap is a stark reminder of decades of systemic racism and the challenges of unraveling years of unfair housing policies. The real test lies ahead. It will take a shift in both attitude and policy in order to pave the way ahead for true economic equality and finally dismantle these deep entrenched barriers.