Redlining

A HOLC 1936 security map of Philadelphia showing redlining of lower income neighborhoods.[1]

In the United States and Canada, redlining is the systematic denial of various services to residents of specific, often racially associated, neighborhoods or communities, either directly or through the selective raising of prices.[2][3] While the best known examples of redlining have involved denial of financial services such as banking or insurance,[4] other services such as health care (see also Race and health) or even supermarkets[5] have been denied to residents. In the case of retail businesses like supermarkets, purposely locating stores impractically far away from targeted residents results in a redlining effect.[6] Reverse redlining occurs when a lender or insurer targets particular neighborhoods that are predominantly nonwhite, not to deny residents loans or insurance, but rather to charge them more than in a non-redlined neighborhood where there is more competition.[7][8]

In the 1960s, sociologist John McKnight coined the term "redlining" to describe the discriminatory practice of fencing off areas where banks would avoid investments based on community demographics.[9] During the heyday of redlining, the areas most frequently discriminated against were black inner city neighborhoods. For example, in Atlanta in the 1980s, a Pulitzer Prize-winning series of articles by investigative reporter Bill Dedman showed that banks would often lend to lower-income whites but not to middle-income or upper-income blacks.[10] The use of blacklists is a related mechanism also used by redliners to keep track of groups, areas, and people that the discriminating party feels should be denied business or aid or other transactions. In the academic literature, redlining falls under the broader category of credit rationing.

History

Although informal discrimination and segregation had existed in the United States, the specific practice called "redlining" began with the National Housing Act of 1934, which established the Federal Housing Administration (FHA).[11][page needed][12] Racial segregation and discrimination against minorities and minority communities pre-existed this policy. The implementation of this federal policy aggravated the decay of minority inner-city neighborhoods caused by the withholding of mortgage capital, and made it even more difficult for neighborhoods to attract and retain families able to purchase homes.[13][page needed] The assumptions in redlining resulted in a large increase in residential racial segregation and urban decay in the United States.

In 1935, the Federal Home Loan Bank Board (FHLBB) asked Home Owners' Loan Corporation (HOLC) to look at 239 cities and create "residential security maps" to indicate the level of security for real-estate investments in each surveyed city. On the maps, the newest areas—those considered desirable for lending purposes—were outlined in green and known as "Type A". These were typically affluent suburbs on the outskirts of cities. "Type B" neighborhoods, outlined in blue, were considered "Still Desirable", whereas older "Type C" were labeled "Declining" and outlined in yellow. "Type D" neighborhoods were outlined in red and were considered the most risky for mortgage support. These neighborhoods tended to be the older districts in the center of cities; often they were also black neighborhoods.[11][page needed] Urban planning historians theorize that the maps were used by private and public entities for years afterward to deny loans to people in black communities.[11][page needed] But, recent research has indicated that the HOLC did not redline in its own lending activities and that the racist language reflected the bias of the private sector and experts hired to conduct the appraisals.[14][15][16]

Some redlined maps were also created by private organizations, such as J.M. Brewer's 1934 map of Philadelphia. Private organizations created maps designed to meet the requirements of the Federal Housing Administration's underwriting manual. The lenders had to consider FHA standards if they wanted to receive FHA insurance for their loans. FHA appraisal manuals instructed banks to steer clear of areas with "inharmonious racial groups", and recommended that municipalities enact racially restrictive zoning ordinances.[17][18]

Following a National Housing Conference in 1973, a group of Chicago community organizations led by The Northwest Community Organization (NCO) formed National People's Action (NPA), to broaden the fight against disinvestment and mortgage redlining in neighborhoods all over the country. This organization, led by Chicago housewife Gale Cincotta and Shel Trapp, a professional community organizer, targeted The Federal Home Loan Bank Board, the governing authority over federally chartered Savings & Loan institutions (S&L) that held at that time the bulk of the country's home mortgages. NPA embarked on an effort to build a national coalition of urban community organizations to pass a national disclosure regulation or law to require banks to reveal their lending patterns.[19]

For many years, urban community organizations had battled neighborhood decay by attacking blockbusting, forcing landlords to maintain properties, and requiring cities to board up and tear down abandoned properties. These actions addressed the short-term issues of neighborhood decline. Neighborhood leaders began to learn that these issues and conditions were symptoms of a disinvestment that was the true, though hidden, underlying cause of these problems. They changed their strategy as more data was gathered.[20]

With the help of NPA, a coalition of loosely affiliated community organizations began to form. At the Third Annual Housing Conference held in Chicago in 1974, eight hundred delegates representing 25 states and 35 cities attended. The strategy focused on the Federal Home Loan Bank Board (FHLBB), which oversaw S&L's in cities all over the country.

In 1974, Chicago's Metropolitan Area Housing Association (MAHA), made up of representatives of local organizations, succeeded in having the Illinois State Legislature pass laws mandating disclosure and outlawing redlining. In Massachusetts, organizers allied with NPA confronted a unique situation. Over 90% of home mortgages were held by state-chartered savings banks. A Jamaica Plain neighborhood organization pushed the disinvestment issue into the statewide gubernatorial race. The Jamaica Plain Banking & Mortgage Committee and its citywide affiliate, The Boston Anti-redlining Coalition (BARC), won a commitment from Democratic candidate Michael S. Dukakis to order statewide disclosure through the Massachusetts State Banking Commission. After Dukakis was elected, his new Banking Commissioner ordered banks to disclose mortgage-lending patterns by ZIP code. The suspected redlining was revealed.[21]

NPA and its affiliates achieved disclosure of lending practices with the passage of The Home Mortgage Disclosure Act of 1975. The required transparency and review of loan practices began to change lending practices. NPA began to work on reinvestment in areas that had been neglected. Their support helped gain passage in 1977 of the Community Reinvestment Act.