How Redlining’s Legacies Demand New Policy Action

“It was a map… buried and folded in a musty box of documents in the National Archives in Washington… untouched. It was color coded in shades of green, blue, yellow, and red… marked with the letters A, B, C, and D to correspond with each color….. it was hard to believe that in this map, in the careful and deliberate choice of colors and grades for each section of the city, like the inverse of a secret treasure, lay the startling evidence of the seeds of the city’s destruction.”

“First grade” areas were colored green and marked with the letter A, signifying that they were well planned areas, mostly free of Black people. These areas were eligible for 100 percent backing loans from the federal government.

“Second grade” areas were colored blue and marked with the letter B, signifying areas that were still desirable but not as great as the First Grade areas due to a marginally higher presence of minorities which were labeled a risk for residential mortgage lenders. For this reason, blue property was given an 85 percent backing loan.

“Third grade” areas were colored yellow and marked with the letter C, characterized by the government as an area with the “infiltration of a lower grade population.” The government encouraged mortgage lenders to be careful with making any loans within that area. Despite this, yellow property was still eligible for 15 percent of backing loans.

And “fourth grade” areas were colored red and marked with the letter D, characterized by the government as “detrimental influences in a pronounced degree, undesirable population or an infiltration of it.” These areas weren’t eligible for anyloans.

The banks succeeded in stopping certain areas, and people of color, from fully participating in the American economy by getting on the path to homeownership. The beneficiaries were typically white, middle-class individuals who could afford to buy houses in the first place.

In recent years, the national homeownership rate was 44 percent for Black families versus 73.7 percent for white families. According to Redfin, over the past 40 years, homeowners in redlined neighborhoods have earned 52 percent less in home equity.

To further put the wealth divide into perspective, the recent Still A Dream: Over 500 Years to Black Economic Equality report from the National Community Reinvestment Coalition and the Institute for Policy Studies states that, in 2021, African Americans had 62 cents to the white household’s dollar. At that rate, it would take Black people 513 years to achieve the white median household income.

Not much is better on the renter’s side: the National Multifamily Housing Council reports that 38 percent of multifamily units were owned by individual investors in 2021 while 42 percent were owned by corporate entities.

This is only widening racial disparities. Nationwide, 58 percent of Black families rent rather than own their homes, compared to just 28 percent of white families. Says Dr. Carter: “No good jobs, no good housing, and no good schools have killed more of our people than a lot of wars.”

From the 1960s to present day, Black workers remain twice as likely as white workers to be among the “working poor,” meaning they have a job but it doesn’t pay enough to cover basic living expenses.

Redlining doesn’t just adversely affect housing or material wealth: It has devastating physical consequences. According to the National Community Reinvestment Coalition, there are statistically significant associations between residence in a redlined neighborhood and heightened risk for hypertension, kidney disease, strokes, diabetes, and lower life expectancy at birth.

The same source also notes that the average prevalence of poor mental health also increased from 12.7 to 16.1 percent in historically redlined areas.

And redlining puts communities of color on the frontlines of climate change’s worst consequences: A recent One Earth study reveals a link between urban segregation and exposure to extreme heat risks, as neighborhoods with less regional income are more likely to bear higher temperatures.

It’s well past time to banish redlining and its toxic effects. 

Over the last few years, lawmakers have taken steps to build more equitable housing and attendant financial systems.

In 2020, for example, the Consumer Financial Protection Bureau filed a lawsuitagainst Townstone Financial, Inc., a Chicago-based mortgage lender and broker that discouraged redlined African-American neighborhoods from applying for their mortgage loans on the basis of race.

This suit set a precedent as the first public redlining case to be brought against a non-bank lender, providing a framework for the rest of the nation to analyze when forming claims against other non-banking institutions which have no legal obligation to lend in any specific geography like banks do.

But as the Still A Dream report from the National Community Reinvestment Coalition and the Institute for Policy Studies outlines, there’s far more work to do.

The report proposes that American governments close the appraisal gap, implement federal reparations policies, and use luxury transfer taxes to fund affordable housing. The country, its states, and its cities should use modern tools to solve an age-old crisis.

The Still A Dream report’s authors also support the reintroduction of the American Housing and Economic Mobility Act which would, among other solutions, allocate a $445 billion investment to finance over 2 million homes for low-income families and require mortgage companies to provide assessments of their community development on cities across the country to narrow the racial wealth divide in the U.S.

The Still A Dream report also makes it very clear that offering reparations for Black communities is a fundamental step towards repairing historical and present-day wealth disparities.

Similarly, San Francisco — where the median Black income in 2019 was $31,000 compared to $116,000 for white households — is considering a non-binding draft reparations plan put forth by the San Francisco African American Advisory Committee.

The draft serves as a model for federal strategy, offering more than 100 reparations recommendations to address the Black-white racial wealth divide like providing tax relief and incentives to help grow Black-owned enterprises, funding for state-level affirmative action programs, and forming of a community land trust for housing governed by Black residents to create a pool of permanently affordable housing.

As cities incubate innovative solutions, Congress’ Reparation Proposals for African Americans Act would study the role of the federal government and states in supporting the institution of slavery, analyze discriminatory laws and policies against freed African slaves and their descendants, and recommend ways the United States may remedy the effects of slavery and discrimination on the African American community.

While only the federal government has the financial capacity to take on the deep-rooted issue of white socioeconomic supremacy, the Still A Dream report makes a convincing case for how we can move forward by using the power of government on every level.

“It is time for our country to take a comprehensive approach and marshal our resources in support of that,” says Dr. Carter. “We must treat our entire population as if it deserves quality housing and, with that, the better opportunity to build community. Given our incredible diversity, we live in a country that is a summary of human-kind in being able to live in safe, quality housing and in a community that allows us to engage and learn from one another with a strong sense of ‘We.’ Our failure to do so would surely undermine the ever-evolving American dream.”