Redlining was the vehicle the federal government used, under Federal Housing Administration (FHA) rules, to deny mortgage loans to people, usually those of color. The term "redlining" comes from the practice of literally outlining in red pen on a map the areas with a largely Black population. The redlined areas served as a warning to mortgage lenders of perceived riskier loans, based not on creditworthiness but on race.
History of redlining
Redlining went on from the 1930s until 1968, when it ended with the passage of the Fair Housing Act, which makes it illegal to practice housing discrimination based on race. The effect of redlining was to segregate white and Black people, with white people largely living in subdivisions with detached homes and Black people mainly living in urban housing projects or in rental units bought by investors who rented to Black families unable to get mortgage loans.
A growing disparity
The aftermath of redlining is still felt today. Because a home is most people's first investment and the vehicle people most often use to gain wealth, people who are denied mortgage loans are effectively prohibited from homeownership and therefore do not gain home equity appreciation or the corresponding wealth.
When redlining became illegal in 1968 and Black people could theoretically get mortgage loans, homes in many cities appreciated to the point of being unaffordable for working-class families. In other words, while working-class white people were allowed to take out a mortgage when homes were cheap in the 1940s and 1950s, working-class Black people were not. And by the time Black people were, in the late 1960s and 1970s, those homes had often appreciated to the point of being unaffordable to those same families who could have afforded them had they been allowed to buy in the first wave when they were still cheap.
The inequity of redlining doesn't end there. Equity appreciation in homes owned largely by white families allowed those families to send their children to college, helping to ensure upward mobility. Meanwhile, Black families, who were largely renters, did not gain equity from home appreciation and largely could not send their children to college. Black families also could not pass wealth to their children as white families who gained wealth through homeownership could.
What the future holds
Fast-forward to today, and we still see a discrepancy in real estate investing and wealth between Black and white communities in the United States.
The federal government created this mess. So should the federal government then be the vehicle to rectify the situation it caused? Maybe; maybe not. There are many approaches to try to fix this complex situation and level the playing field for people of color. Some plans being considered include the following:
- Have the government provide down payment and closing cost assistance to low-income people who live in redlined areas.
- Have the government buy abandoned properties in redlined districts and let residents acquire them.
Those might be good ideas, but a mapping project from the University of Richmond found that due to demographic shifts, people who currently live in redlined areas are no longer mostly Black. In fact, as of 2017, most of these residents are Latino or Hispanic, followed by white people, with Black people coming in third. So any plans that focus on people who live in formerly redlined areas might not target the very group that experienced the greatest discrimination during the redlining years: Black people.
According to the mapping project, these are the 10 cities with the largest redlined areas:
- New York.
- Los Angeles.
- San Francisco.
- San Diego.
In those cities, only 27% of the population is Black.
Some good news: Black-majority cities
One of the solutions to the decades of inequities Black families experienced includes Black-majority cities, numbering 1,262 as of 2017. And these cities are on the rise. Large metro areas like Atlanta, Memphis, Baltimore, and Detroit, and smaller suburbs such as Ferguson, Missouri, and East Cleveland, Ohio, are Black-majority cities.
These cities, according to Brookings, "have assets worth building upon, investing in, and fighting for." And rather than the forced segregation of the redlining days, Black-majority cities are reshaping all communities across America: urban, suburban, and rural. Many suburban neighborhoods, for example, once a bastion for white people, have become great melting pots, with 35% of the suburban population now being nonwhite, and with 51% (as of 2010) of Black people living in the suburbs. Black-majority cities reflect, according to Brookings, a "quest for opportunity, sustainability, and investment."
Take Baltimore, a neighborhood heavily segregated from redlining. Social entrepreneurs are reclaiming abandoned storefronts and building affordable condos. These social entrepreneurs, many of whom are affiliated with a group called "Undesign the Redline," seek to build a new future.
The bottom line
Redlining left an unfortunate mark on America's past and harmed a great many Americans. We can't change history, but we can learn from it and make a better future by allowing everyone the chance to invest in America.