The History of Redlining Policies Implemented by the FHA

A Photo of a document describing a C-rated neighborhood in Richmond, VA. Sourced from American Panorama

The Home Owners' Loan Corporation (HOLC) was a U.S. federal agency created in the 1930's that graded mortgage investment risk of neighborhoods. HOLC created maps to determine which neighborhoods were worth investment and which were being disinvested in, essentially redlining. "The systematic implementation of discriminatory lending practices that denied mortgages in neighborhoods of color while insuring mortgages and reinvestment in predominantly white neighborhoods" (Connolly, 2018). The term comes from the red colors used on HOLC maps some 80 years ago to mark communities that were considered high investment risk.

During the Great Depression in 1933, HOLC refinanced mortgages that had gone into default and worked to improve credit markets and the overall borrowing climate for those everyday Americans who had taken on real estate related debt (Connolly, 2018). This mapped inequality by using four colors corresponding to four letter grades. Green, blue, yellow, and red corresponded respectively to letters A through D. ‘Safe’ neighborhoods for home mortgages received ‘A’ and ‘B’ grades, with a respective green or blue color designation on the map. ‘Risky’ communities were graded ‘C,’ with a yellow coloring, and ‘D’ neighborhoods were colored red, the lowest possible grade.

This document shows an area description for a C-rated neighborhood in Richmond, VA, illustrates the variety of data HOLC officials collected from local lenders and realtors about American cities. The clarifying remarks section poses the effect of African Americans walking through the neighborhood as detrimental.

A Photo taken by Warren K Leffler showing a march that took place in Washington on Aug. 28, 1963. African Americans carry placards demanding equal rights, integrated schools, decent housing and an end to bias. Sourced by The New York Times.

Nationwide, mob violence, frequently led or encouraged by police, drove black families out of homes they had purchased or rented in previously all-white neighborhoods. There were campaigns to exclude African-Americans from all inner cities to maintain their neighborhoods’ ethnic homogeneity (Rothstein, 2020).

In 1962, President John F. Kennedy issued an executive order prohibiting federal agencies from continuing to promote housing segregation (Rothstein, 2020). In 1968 the Fair Housing Act was signed nd implemented, however it failed to undo the damage the government had instilled. In class we read the article How Did Jews Become White Folks and What That Says About Race in America which talked about the FHA a little. At the time systemic racism was clearly an issue. The FHA enforced red lining, discouraging builders from selling homes and properties to Jewish or African American people. Europeans were at an advantage because the FHA was providing home loans, low interest rates and low down payments. The goal during this time was to create homogenous communities of white and black people. So not only were African Americans excluded from receiving benefits, but the neighborhoods where black communities were located were destroyed.  There were freeways being built right through these neighborhoods, which led to less housing for working class people. 

A Photo of a paragraph from the the article The Rising of Systemic Racism and Redlining in the United States of America. Sourced from Journal of Social Change.

As defined by The Annie E. Casey Foundation (2020), systemic racism (known as “systemic racialization”) is “a dynamic system that produces and reciprocates racial ideologies, identities, and inequities.