By Ofo Ezeugwu, huffingtonpost.com
Home ownership – the means by which most Americans begin to generate familial wealth. Understanding this, I wanted to take a look at the history of home ownership, dating from the 1930’s through present day, and find out exactly how redlining impacted housing segregation in the United States, especially amongst the African American and Latino communities.
First, what is redlining? According to Dictionary.com, “redlining is a discriminatory practice by which banks, insurance companies, etc., refuse or limit loans, mortgages, insurance, etc., within specific geographic areas, especially inner-city neighborhoods.” It’s important to understand this concept as it directly assisted in the boxing out of a solid chunk of America’s population from realizing the dream of acquiring their own home.
Following the Great Depression, FDR’s administration began pushing the idea of home ownership and the ability for the average working folk to expand their horizons and take a bite out of the American dream. Playful ad campaigns pushed suburban ownership. The public and private sectors worked in conjunction to develop new neighborhoods that would surround the great cities we’ve come to know. In 1934, the Federal Housing Administration (FHA) was created to assist in providing Americans federally guaranteed loans and 30-year mortgage terms to begin migrating from cities to the suburbs (a movement which would later be widely referred to as white flight). The goal was simple: build the middle class (while keeping others out of it).
Throughout American history, banks were known for unfair loan practices; but, nothing made it an acceptable way of business more than in the early 1930s when the Home Owners Loan Corporation (HOLC), accompanied by local lenders and realtors, began evaluating the mortgage loan risk of 239 cities nationwide. They looked at a series of factors to help determine where the government’s investments would stand the greatest opportunity of return with the greatest weight being tied to the general racial makeup of a neighborhood; or, in their words: “[the] threat of infiltration of foreign-born, negro, or lower grade population.” Upon receiving the city assessment and security maps, generated by the FHA, private banks would take a red marker and literally outline neighborhoods on the map that were given the lowest grades, hence redlining.
City maps were examined and broken down into four categories:
Grade A (green): highly desirable
Grade B (blue): somewhat desirable
Grade C (yellow): declining
Grade D (red): to be avoided
Areas that were more black than others or even located near black people were given lower grades of C and D. Simply put, your chances of receiving an insured mortgage loan in either of these two categories was nearly zero. By excluding African Americans and Latinos from the mortgage market, it opened up many families to predatory lending which assisted in sparking subsequent generations of despair and poverty. By the 1950s, industrial companies had packed up and moved to the surrounding suburbs where white people now abundantly lived. This meant people of color were relegated to levels of high unemployment and diminishing neighborhoods that were being disinvested in and ignored. For twenty years, between the 1930s and 50s, three-fifths of homes purchased were financed by FHA. Realize, of that number, less than 2% of FHA loans went to non-white homebuyers.