1934–1935
At the same time Blacks were beginning to migrate in record numbers, a new set of U.S. policies were establishing permanent white communities across the country. As the demand for labor shortened with returning troops resuming their jobs in factories, officials were faced with overcrowding and a growing unemployment in many major cities across the country. Paired with growing economic turmoil caused by slowing global demand for manufactured products, many cities began to experience a deep crisis that would last for a decade.
To meet the crisis the federal government began drafting policies that would deepen the wealth divide and help establish Black Americans as an underclass. In 1933, the Federal Housing Authority (FHA) and the Home Owner’s Loan Corporation (HOLC) began outlining banking policies that prevented home ownership to Black Americans.
The government’s efforts were designed to provide housing to white, middle-class, lower-middle-class families says author Richard Rothstein. In The Color of Law, he notes, that the Federal Housing Administration (FHA) furthered segregation efforts by refusing to insure mortgages in and near African-American neighborhoods. At the same time, the FHA began subsidizing suburban communities for whites residents. The covenants in these agreements barred African-Americans from being sold homes.
The U.S. government drew maps of every metropolitan area in the country. The Home Owners Loan Corporation color-coded the maps. The Federal Housing Administration and the Veterans Administration used these maps to subsidize growing suburban communities. The color codes were cues to indicate where it was safe to insure mortgages. African-Americans communities were colored ‘red’ to indicate neighborhoods that were too risky to insure.
Although the Fair Housing Act of 1968 and the Community Reinvestment Act of 1977 sought to reverse housing discrimination based on race, a groove within the American landscape had been created. While urban White Americans were able to enjoy a subsidized suburban lifestyle gained from equity in their home loans, Black welfare suffered.
Divestment in urban centers heightened economic turmoil in major cities across the country. Shifting demand in manufacturing jobs; technological advancement; deteriorating infrastructure; and relocation of thriving job markets, all helped to disconnect Black communities from opportunities of economic prosperity and create distressing conditions impacting many Black communities.
The Center for Investigative Reporting analyzed Home Mortgage Disclosure Act records that showed ‘modern-day redlining persisted in 61 metro areas even when controlling for applicants’ income, loan amount and neighborhood’. The analysis — independently reviewed and confirmed by The Associated Press — showed black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three. In the nation’s capital, Reveal found all four groups were significantly more likely to be denied a home loan than whites.
In the United States, “wealth and financial stability are inextricably linked to housing opportunity and homeownership,” said Lisa Rice, executive vice president of the National Fair Housing Alliance, an advocacy group. “For a typical family, the largest share of their wealth emanates from homeownership and home equity.” Figures from the U.S. Census Bureau show the median net worth for an African American family is $9,000, compared with $132,000 for a white family. Latino families did not fare much better at $12,000.
Gross, Terry. A 'Forgotten History' Of How The U.S. Government Segregated America. 2017. NPR.
Glantz, Aaron. Martinez, Emmanuel. 2018. Kept Out: For people of color, banks are shutting the door to homeownership. Reveal.
