Redlining

History

In the 1930s, the U.S. federal government initiated programs to increase the availability of home ownership and simultaneously increase employment in construction and related industries. As a result, the Home Owners' Loan Corporation (HOLC) was birthed in 1933 with the purpose of refinancing urban mortgages and providing those who lost their homes due to foreclosure opportunities to buy them back with low-interest loans. In developing a rating system to evaluate the risk of loans made to specific urban areas, the HOLC institutionalized and formalized redlining.

The ranking system put neighborhoods into one of four categories: type A (green), type B (blue), type C (yellow), and type D (red). These colors were drawn onto residential security maps, which were used to inform lending decisions. The actual term redlining was coined By sociologist and activist John McKnight in the 1960s and was in reference to the red lines on residential security maps. Those homes located in yellow or red regions on residential security maps rarely (if ever) were approved for HOLC loans. The ranking systematically undervalued older, more racially and ethnically mixed, central-city neighborhoods, placing a priority on new construction in suburban areas. Additionally, African Americans were almost always redlined, ranked in the lowest rating category. As a result, mortgage funds were channeled away from [Page 1117]African American neighborhoods as well as those suspected to be likely to contain substantial African American populations in the future.

The HOLC residential security maps became somewhat of a standard, and soon, private banks and lenders in the 1930s and 1940s relied on the HOLC maps or created their own similar maps when making lending decisions. The redlining issue was thus not restricted to the HOLC but became a massive disinvestment By private institutions in predominantly African American communities as well.

Redlining was enforced By racially restrictive covenants implemented through neighborhood associations, which were contracts among property owners stating that they would not lease to an African American, sell to an African American, or otherwise let an African American occupy their property. If restrictive covenants were violated, as contracts, they could be taken to court and the violator could be sued for damages. Contract terms were typically 20 years in duration and required 75 percent of neighborhood association property owners' backing to be enforceable. Peer pressure often served as an effective means to gain the necessary backing.

In April of 1968, partly in response to conclusions drawn from the race riots in the 1960s, Congress passed the Fair Housing Act, officially banning discrimination in the sale or rental of housing. Unfortunately, enforcement provisions under the act were relatively weak—these provisions were weakened as the bill passed through Congress—and residential racial integration did not follow after its passing. The act had a short statute of limitations (180 days from the alleged violation) and relied on individual efforts to combat housing discrimination rather than a large-scale institutional effort. Housing testers at local fair housing commission offices continue to be the primary means of prosecuting or uncovering housing discrimination, and no systemic federal government approach to deal with housing discrimination or residential segregation has been established to date.

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