Around the country, individuals are beginning to discuss ideas about how to eradicate some of the many injustices in America. There are groups of people that have lived through injustice in its ugliest forms. These inequalities have had long-lasting effects on the people that have been treated unfairly and with prejudice. This blog post seeks to highlight one unfair practice that has dramatically impacted the social and wealth gap in America, particularly for African Americans.

Redlining is a problem that has plagued America for decades, but what is it exactly?

As defined by the Merriam-Webster dictionary, redlining is “the illegal practice of refusing to offer credit or insurance in a particular community on a discriminatory basis.” A more descriptive definition is “the practice of denying or limiting financial services to certain neighborhoods based on racial or ethnic composition without regard of the residents’ qualifications or creditworthiness,” as explained by the Fair Housing Center. Simply put, redlining is the refusal to offer financial products to credit-worthy applicants that live in certain geographic areas.

“From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market” as explained in the article “The Case for Reparations” by Ta-Nehisi Coates. The article focuses its work heavily on the North Lawndale community of Chicago, Illinois; however, the practice of redlining was instituted across the country. In reading Coates’s article, one may assume that housing discrimination and segregation were the direct result of individuals refusing to sell property to African-Americans, but the reality is not so simple.

Historically, many U.S. policies have been put in place to ensure segregation by race, but, perhaps, none as momentous as the National Housing Act of 1934. During the Great Depression, which lasted from 1929 to 1939, many Americans could not afford to purchase property. As a result, the Federal Housing Authority (FHA) was created to regulate mortgage rate loans and interest rate terms. By design, the FHA would insure mortgages so lenders would be protected. The FHA set the lending standards for the country. As explained in detail by the “Fair Housing Center of Central Boston” Also known as Boston Fair Housing, “The FHA’s strict lending standards, contained in the FHA Underwriting Handbook, determined which kinds of properties it would approve mortgages for. In addition to physical quality standards, the FHA based its decisions on the location, and racial and ethnic composition of the neighborhood where the property existed. For example, in 1934 the FHA Underwriting Handbook incorporated ‘residential security maps’ into their standards to determine where mortgages could or could not be issued.” The map classified neighborhoods on a A-D, or green-red, scale, impacting 239 U.S. cities.

As defined, the classes were: (A-Green) – new, homogenous areas, in demand as residential location in good times and bad; (B-Blue) – still desirable areas that had reached their peak, but were expected to remain stable for many years; (C-Yellow) – declining neighborhoods, generally sparsely populated fringe areas they were typically bordering on all black neighborhoods, and; (D-Red) – things taking place in C (yellow) had already happened. This practice not only institutionalized racism and segregated neighborhoods, or so-called “ghettos,” but the categorization created the term “redlining” and many minorities and low-income communities were deemed to be the worst for lending.

The detrimental impacts of redlining are plentiful and span across generations. Typically, generational wealth is transferred from one generation to the next by the transference of property. Since African Americans were largely excluded from the home-buying process through restrictive mortgage and ownership policies; some contracts being so explicit as to state that the resale of the property of black people was strictly forbidden; the ability to accrue and transfer wealth across generations was all but eliminated. In instances where some African Americans were able to purchase property, they were subjected to predatory lending practices that made the interest so steep that blacks ended up paying drastically more than the valued price of the home and the mortgage requirements written so that if they missed even one payment the home could be taken. This made home ownership nearly impossible for many African-Americans; even those who could afford to purchase properties, were faced with challenges. No group was probably more surprised by this than African American soldiers who had returned home from war. Richard Rothstein, author of the book “The Color of Law: A Forgotten History of How Our Government Segregated America,” explains how the U.S. Department of Veterans Affairs adopted the racial exclusion programs of the FHA when insuring mortgages that restricted African American soldiers from purchasing homes once they returned from serving in the military.

Due to these circumstances, the Fair Housing Act was included in the Civil Rights Act of 1968. The Fair Housing Act sought to prohibit future discrimination by creating protected classes of individuals who were legally protected from discrimination. Over time, the list has expanded and currently includes: race, color, religion or creed, national origin of ancestry, familial status, sex, and disability. Though the creation of protected classes is an important factor, it does not singlehandedly prevent the occurrence discriminatory housing practices. In fact, many are still alive and well in many places in America. Hopefully, by highlighting the history and legacy of the issue of redlining, we can all play a part in eradicating its damages. Though no person can control the actions of others, it is important when considering buying a home to know your rights and work with a knowledgeable Realtor to ensure that you not only get the home of your dreams, but that you are protected throughout the process to the fullest extent of the law.

By: Jameel A. Scott

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