What is redlining?
For decades, many banks in the U.S. denied mortgages to people, mostly people of color in urban areas, preventing them from buying a home in certain neighborhoods or getting a loan to renovate their house. The practice —
once backed by the U.S. government — started in the 1930s and took place across the country. That includes in many of the nation's largest cities, such as Atlanta, Chicago, Detroit, Tampa and others with large minority populations.
As a result, banks and other mortgage lenders commonly rejected loans for creditworthy borrowers based strictly on their race or where they lived. As part of that practice, financial firms, real estate agents and other parties demarcated geographic areas that were effectively off limits for issuing loans.
Scholars who study housing discrimination
point to redlining as one factor behind the gulf in wealth between blacks and whites in the U.S. today. Black families have lost out on at least $212,000 in personal wealth over the last 40 years because their home was redlined,
said real estate app Redfin.
In 1933, faced with a housing shortage, the federal government began a program explicitly designed to increase — and segregate — America's housing stock. Author Richard Rothstein says the housing programs begun under the New Deal were tantamount to a "state-sponsored system of segregation."
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The government's efforts were "primarily designed to provide housing to white, middle-class, lower-middle-class families," he says. African-Americans and other people of color were left out of the new suburban communities — and pushed instead into urban housing projects.
Rothstein's new book,
The Color of Law, examines the local, state and federal housing policies that mandated segregation. He notes that the Federal Housing Administration, which was established in 1934, furthered the segregation efforts by refusing to insure mortgages in and near African-American neighborhoods — a policy known as "
redlining." At the same time, the FHA was subsidizing builders who were mass-producing entire subdivisions for whites — with the requirement that none of the homes be sold to African-Americans.
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Rothstein says these decades-old housing policies have had a lasting effect on American society. "The segregation of our metropolitan areas today leads ... to stagnant inequality, because families are much less able to be upwardly mobile when they're living in segregated neighborhoods where opportunity is absent," he says.