Redlining didn’t happen quite the way we thought it would

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In recent years, a once obscure lending practice has become a touchstone for America’s understanding of its racist past and the repercussions it still has today. But new research complicates our understanding of the historical practice of redlining, where certain neighborhoods are cut off from credit for reasons of race and class. It didn’t quite work the way it’s commonly understood.

In mainstream journalism and political discourse, redlining is associated with cards established by the Home Owners Loan Corporation (HOLC). This New Deal era institution was created to refinance the existing loans of troubled borrowers during the Great Depression. In the late 1930s, the agency drew up color-coded maps that rated neighborhoods based on their presumed prospects, those with the worst prospects drawn in red.

It was long assumed that these maps, which covered most black residents of U.S. cities and about half of whites, directed loans and investments away from the red areas to the green and blue areas (which were almost all predominantly white).


But new research shows that the cards most likely did not guide private lenders or the Federal Housing Administration (FHA), who clearly engaged in racist lending practices on their own. The HOLC, however, has actually lent heavily in black neighborhoods and other areas shaded in red.

“If you’re trying to use the HOLC charts to tell us how federal policy has influenced things, then it’s not the right deck of cards,” says Price Fishback, professor of economics at the University of the Arizona. “Some people have done these long-term studies and said it’s all FHA policy in using the HOLC charts. They’ve used various techniques that require you to explicitly look at those limits. But they’re using the wrong limits.

Although the two agencies were created at the same time, HOLC was a temporary program (it ceased to operate in 1951) intended to help homeowners who were in danger through no fault of their own. The FHA did not interact with existing loans, but was tasked with creating a new insurance program supporting “economically sound” loans with lower interest rates and longer terms than was traditional in the past. the time.

Fishback and his co-authors do not claim that the racist mortgage practices did not take place. But they are trying to disentangle the politics of the two New Deal-era mortgage institutions, one of which engaged in strongly anti-black practices (the FHA) and the other not (HOLC). It also means that the famous redlining cards issued by the latter agency do not reflect how discriminatory loans have been put into practice.

Researchers studied more than 16,000 loans in three cities: Baltimore, Maryland; Peoria, Illinois; and Greensboro, NC This unique dataset includes all loans made by HOLC between 1933 and 1936 and all loans insured by the FHA from 1935 to 1940 in these three jurisdictions.

They found that in all three cities, HOLC was refinancing many loans in neighborhoods coded in red, with no evidence of discrimination against black homeowners. The FHA, on the other hand, did not insure mortgages in neighborhoods where black homeowners lived and primarily targeted newly built homes, which catered almost exclusively to whites, and those in wealthier neighborhoods.

“People treated HOLC as if they were bad or very discriminatory,” says Fishback. “But the share of their loans held by blacks is greater than the share of loans from any private lender group you can find during that time. HOLC has this very bad reputation, despite the fact that they were doing more for black people than anyone else at the time.

While HOLC has embarked on its now famous analysis of urban neighborhoods, it has kept its cards a secret and does not appear to have shared them with private lenders. Although it shared them with the FHA, this agency instead adopted its own discriminatory block-by-block policies.

Fishback and his colleagues find no difference in the racialized lending practices of the FHA before or after the completion of the famous HOLC cards. They show that the FHA had already acted in a discriminatory manner before HOLC created its cards. (The FHA had its own cards, but the agency destroyed them all in response to a discrimination lawsuit in 1969.)

There is a long pedigree of renowned academics who are mistaken about causality between agencies. Famous historian Kenneth Jackson claimed that HOLC “initiated the practice” of redlining in its 1985 classic The border of crabgrass. More recent books, including that of Richard Rothstein The color of the law, cemented the agency’s alleged role: “the cards had a huge impact and declared that the federal government considered African Americans, simply because of their race, to be low risk.”

The Fishback and Company paper is not the first to question these claims. The University of Pennsylvania Amy Hillier showed that HOLC itself has lent out heavily in black neighborhoods and other red-shaded areas. (In Philadelphia, 60 percent of her loans were in such locations.) She instead argued that if the cards are not the smoking gun they have long been presumed to be, they reflect existing patterns of discrimination in the larger housing sector.

The new research paper is able to make it clear that the FHA has carried out its mission in a racist manner, which Hillier says pushes the argument it has made even further.

“Twenty years ago, I was concerned that my nuanced interpretation of HOLC cards was taken as ammunition to say that redlining didn’t really happen,” Hillier explains. “[These authors] we really have the second part of this story that clearly demonstrates that, yes, the redlining happened, it just didn’t happen exactly the way we think it was.

Fishback says there are lessons contemporary policymakers can learn from these New Deal-era institutions and the way they carried out their missions. Looking at the wording of their enabling statutes, the FHA was created to encourage “economically sound” loans that mainly resulted in new construction – especially in the suburbs – which, at that time, went almost entirely to white families. .

HOLC legislation, on the other hand, is written to center struggling homeowners and pull them out of a macroeconomic crisis they did not create. It makes sense that one lends to homeowners, regardless of race, while the other exacerbates existing patterns of real estate discrimination.

For his part, Hillier says this new document definitely seems to argue against HOLC cards as a cause or accelerator of redlining. But she doesn’t know how important this is to popular narrative, as long as journalists and academics modify their work to show the real meaning of these documents as a reflection of existing models and practices in the 1930s (not the because of these).

“It’s so tempting to see causality in HOLC charts because they’re dramatic and they’re widely available,” says Hillier. “It really looks like the smoking gun. But that wasn’t really what was causing the violence. We have to remember that housing discrimination can happen in very subtle ways that are at least as insidious as very dramatic red cards with lines on them. “


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