Redlining: How can we remedy it?
This post is part of our blog series about diversity, equity, and inclusion. These posts are written by staff on our Equity Committee and originally shared internally. We're sharing them publicly to be transparent about our internal dialogue, reflections and learning process as we work on being an anti-racist organization.
Redlining is an immoral and unconstitutional practice. In this post, we look at how we can remedy these practices.
As the United States reckons with its history of racial injustice, the country is revisiting a topic that is a major part of the problem: housing segregation. According to a Reuters Foundation’s report, the huge racial wealth gap is rooted in a system of housing segregation based on racial discrimination that the government spearheaded decades ago, called redlining.
What is Redlining?
Redlining is a set of racist federal policies that systematically and purposefully prevented Black people and other minorities from getting home loans. Redlining was intentionally created by the government to oppress Black people and other minorities and continue to ensure that White people remain prosperous.
Redlining resulted the systematic denial of mortgages, insurance, and other financial services based on a location and area’s default history, rather than an individual’s qualifications and creditworthiness. Banks and federal agencies used red ink to mark maps, indicating neighborhoods where mortgages should be denied.
Redlining was weaponized to deny Black people and communities of color access to credit and opportunities. This problem was created by the government and continues to shape the modern American cityscape. Redlining is just one example of systemic racism, and its lasting effects are still present in the U.S. today. Ignoring this issue only perpetuates it. We are all morally and constitutionally responsible for remedying it.
Sample of Maps
In the 1930s, President Franklin D. Roosevelt started loan programs to help Americans buy homes. To decide who got loans, the U.S. government intentionally created color-coded housing area maps based on discrimination against Black people and other under-privileged communities. Maps like these were created by the Home Owners’ Loan Corporation (HOLC) and were used to distinguish which people should be refused home buyer loans.
Printed in 1936, the HOLC map for Seattle warned investors off of lending to high-minority neighborhoods while encouraging loans to White neighborhoods with racist covenants. Areas in blue and green were considered good investments, while yellow and red were presented as riskier.
Green: “Best” – Most desirable neighborhoods; Predominantly White upper/middle class; Easy to get loan. Green areas represented in-demand, up-and-coming neighborhoods where “professional men” lived. These neighborhoods were explicitly homogenous.
Blue: “Still Desirable” – Neighborhood is probably still predominantly White, but not as wealthy. These neighborhoods had “reached their peak” but were thought to be stable due to their low risk of “infiltration” by non-White groups.
Yellow: “Definitely Declining” – Diverse neighborhoods. Most yellow areas bordered Black neighborhoods. They were considered risky due to the “threat of infiltration of foreign-born, Black people, or lower grade populations.”
Red: “Hazardous” – Predominantly Black neighborhoods; Hard to get loan. Red areas were neighborhoods where “infiltration” had already occurred. These neighborhoods, almost all of them populated by Black residents, were described by the HOLC as having an “undesirable population” and were ineligible for FHA backing.
What does redlining affect today?
Pretty much everything.
The Impact of Redlining on Economic Opportunity and Wealth Accumulation:
Most neighborhoods that were redlined in the 1930s are still low-to-moderate income today, and still have large minority populations. In the average U.S. city, homes in majority Black neighborhoods are valued at roughly half as much as homes in White neighborhoods. A study from Federal Reserve shows, on average, White households own 10x more wealth compared to Black households.
Graph displays median and mean wealth by race and ethnicity, expressed in thousands of 2019 dollars. Source: Federal Reserve Board, Survey of Consumer Finances.
Home ownership is one of the main ways Americans build wealth and pass it on to the next generation. For many families, their home is their most valuable asset. As a result of redlining, and related practices, from 1934-1968, 98% of home loans were given to White families.
Home equity was the single biggest contributor to household net wealth in 2015, accounting for 34%, according to the U.S. Census Bureau. The same study showed that homeowners' median net worth was 80 times larger than renters'. Owning a home accrues wealth. So White families in green neighborhoods kept getting richer, while Black families in red neighborhoods were stuck in poverty. Redlining helped the wealthy stay wealthy and the poor stay poor. However, the destructive legacy of redlining has been more than economic.
The Impact of Redlining on Education:
Laws were eventually passed to make this discriminatory practice illegal. But families in red areas could not afford to move out – keeping neighborhoods and schools separated by race and class. It remains one of the chief drivers of racial inequities that persist today.
There are wide, well-documented race gaps in educational outcomes. School quality is a significant factor. Schools tend to serve specific areas, so residential segregation leads to school segregation.
Most school districts received money from the property taxes of their district. Therefore, neighborhoods with higher average household income have access to more resources than the lower income neighborhoods.
The compounding effects of wealth, race and place means that even middle-income Black students are more likely to attend high-poverty schools, as recent research by Sean Reardon, Demetra Kalogrides and Kenneth Shore shows. This may be one reason why Black children born into middle-income families are twice as likely to be downwardly mobile as middle-income white children.
The Impact of Redlining on Health:
A new 2020 study by researchers at the National Community Reinvestment Coalition, the University of Wisconsin/Milwaukee, and the University of Richmond finds that, the history of redlining, segregation and disinvestment not only reduced minority wealth, but it also impacted health and longevity, resulting in a legacy of chronic disease and premature death in many high minority neighborhoods. On average, life expectancy is lower by 3.6 years in redlined communities, when compared to the communities that existed at the same time but were high graded by the HOLC.
Minority families were forced into neighborhoods with declining housing stock, putting these communities at a higher risk for environmental health issues. Due to neighborhood location, access to quality medical care is also strained for Black and other minority communities.
Does redlining still happen?
The actual practice of drawing red lines on maps mainly took place from 1935 to 1939. Racial discrimination in the sale or rental of housing and related services was outlawed with the 1968 Fair Housing Act.
However, research shows Black Americans are still denied loans at far higher rates than White Americans. Today, "redlining" is sometimes used to refer to continued racial discrimination in the housing and lending markets. Redfin, a Seattle-based real estate brokerage company, is being sued for having practices similar to redlining. See the full complaint by National Fair Housing Alliance here.
What's the solution?
Housing experts say there is no quick fix. Black neighborhoods need more investment, but we cannot artificially raise home prices, or the residents will be priced out.
Reuters Foundation reports that Andre Perry, a fellow at the Brookings Institute and author of a new book about the devaluation of Black communities suggests that the solution is to invest in people, eliminate racial discrimination from the housing market, offer low-interest loans and find ways to help renters buy homes.
Researchers from the same institution suggest taxation of income from wealth could be the solution to the Black–White wealth gap.
Lastly, Jesse Van Tol, CEO of the National Community Reinvestment Coalition, suggests that cities could revise their zoning policies to promote more diversity and inclusion.
Like many other major cities in the U.S., Seattle has a long history of redlining. Bellwether Housing is against redlining injustice immoral practice in the city. We follow the Fair Housing Law in our work and continue to make our practices more just and equitable.
Ignorance of housing injustice only perpetuates it, We are all morally and constitutionally responsible for remedying it. The Equity Committee invites staff to learn more about how redlining and its lasting impacts on their own neighborhoods.