Redlining
Redlining is a discriminatory practice of denying or limiting financial services for specific nonwhite neighborhoods by coloring or outlining the targeted neighborhoods in red. Specifically, banks, insurance companies, and the Federal Housing Administration would not issue mortgages or terms would be profoundly unfavorable.
Many banks had a policy of not issuing mortgages to Black people at all. Realtors actively tried to maintain segregated housing. If a single Black person purchased a home in a white neighborhood, that could trigger redlining.
During the Great Depression, the Roosevelt Administration worried about home ownership, and created the Home Owners’ Loan Corporation – (HOLC) in 1933 to prevent struggling home owners from defaulting. “[HOLC] purchased existing mortgages that were subject to imminent foreclosure and then issued new mortgages with repayment schedules of up to fifteen years…HOLC mortgages were amortized, meaning that each month’s payment included some principal as well as interest, so when the loan was paid off, the borrower would own the home.” This made it possible for working- and middle-class people to build equity gradually, even as their home was mortgaged, and this is now common practice. In order to assess the value of the homes, HOLC used realtors to determine risk, and those realtors generally included an assessment of the racial makeup of a community to evaluate risk. If a neighborhood was deemed safe, it was colored in green. If a neighborhood had a single person of color, even if it was a solidly middle-class area, it was colored in red to indicated riskiest investment.
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Even so, middle class Americans struggled to save enough to move out of rentals and into their own homes, so the FHA (Federal Housing Authority) was created in 1934 to insure bank mortgages for 80 percent of the purchase price. The FHA required amortized loans with twenty-year terms. Like HOLC, the FHA got involved in risk assessment, and it refused to insure mortgages in redlined areas. (To be clear: a Black person automatically triggered redlining, and the Federal Housing Administration refused to insure mortgages in redlined areas, which in turn ensured that the federal government participated actively in creating obstacles in the path of home ownership for Black people).
Following World War II, a well-known benefit of the G.I. Bill was a FHA housing program to assist former soldiers in securing their first homes. The public viewed this as a reward for service, but the government promoted it as an economic program to build a solid middle class. The program meant returning soldiers could put down much less than the traditional 20 percent down payment. The program excluded returning Black soldiers.
When cities determined how to grant permits, they also considered the same risk assessment maps and allowed pollution-emitting industry, vice business, such as bars, liquor stores, and gambling near redlined neighborhoods, but not near green-coded parts of the city. This continued to negatively impact property values in redlined areas while protecting property values in predominantly white spaces. As property values declined so too did taxes, which in turned helped cities justify investing less in Black neighborhoods. City services including road and sidewalk maintenance, garbage collection, street lighting were reduced. Property taxes also bolstered public education in most communities, so combined with neighborhood schools, we can see how Black schools came to be underfunded in regions that did not appear to be deliberately discriminatory on the surface.
The interactive tool Mapping Inequality allows us to see how redlining worked in 1940s Saginaw. Descriptive language such as “threat of Negro invasion” has a psychological impact that justified continuing the practice. As you interact with the maps ask yourself what the language would indirectly teach people about Saginaw neighborhoods. Consider what you see in 1940 and how that has an impact on the way Saginaw looks today.