PROSPERITY, DEPRESSION, REFORM 201The Great Depression ravaged the nation’s housing
market. The widespread failure of banks dramatically
limited the availability of loans, while millions
of Americans faced foreclosure. The Roosevelt
administration responded by regulating lending and
banking practices through the creation of agencies
such as the Federal Housing Administration (FHA)
and the Home Owners’ Loan Corporation (HOLC).
Through the introduction of longer-term
mortgages and mortgage insurance, the FHA sought
to stabilize the market and to extend homeownership
to new segments of the population. At the same time,
the HOLC helped to buy and refinance mortgages
on more favorable terms to help homeowners avoid
foreclosure. To systematize the process of property
appraisals, the HOLC also sponsored detailed
assessments of lending risks in 239 urban areas
across the country. From Buffalo to Seattle, from
Dallas to Atlanta, the HOLC relied on local real-estate
professionals, lenders, and appraisers to evaluate
and map the credit risks of America’s cities.
These assessments were based not just on housing
stock and economic stability, but also on the “social
status of the population.” That category became the
source of lasting controversy, for the agency judged
this status according to the presence of “Negro,”
“foreign born,” or other “undesirable” groups. The
HOLC asked that neighborhoods be rated from
A to D, with A (green) being the most desirable and
stable, B (blue) as “still desirable,” C (yellow) as
“definitely declining,” and D (red) as “hazardous.”
In one region after another, areas with heavy
populations of blacks, Mexican Americans, or
poor ethnic whites were deemed hazardous and
least desirable, marked with red (or “redlined”).
Yellow areas were often described as having been
“infiltrated” by blacks. As the HOLC officials
explained, this did not mean that good mortgages
did not exist in these lower areas, but instead that
these loans and mortgages ought to be extended and
serviced in different ways.
REDLINING, HOME OWNERSHIP, AND CIVIL RIGHTS
Home Owners’ Loan Corporation,
“Metropolitan Cleveland Security
Map,” 1936
This HOLC map of Cleveland was typical,
assessing the neighborhoods in terms of their racial
and economic cast. It shows wealthy neighborhoods
concentrated in the eastern and western suburbs,
with the “declining” and “hazardous” areas—
inhabited mostly by working-class whites and African
Americans—clustered around the urban center.
Shaker Heights was marked in green on the eastern
edge of the city as “A-16,” classified as one of the
area’s best neighborhoods. This suburb was founded
as a planned residential community in the early
twentieth century, and became an incorporated city
in 1931. The community originally exercised racial
and ethnic restrictions on homeownership, though
it successfully integrated in the 1970s and 1980s.
These maps, and the practices behind them,
influenced the nation’s housing market. They defined
norms that were then institutionalized by the FHA’s
regulation, and exposed a generation of appraisers,
lenders, and real-estate experts to policies that
segregated by class and race. Some scholars argue
that the HOLC maps reveal a federal agency actively
codifying discriminatory lending practices. The maps
institutionalized segregation by characterizing black
neighborhoods as unworthy of credit in ways that
only hardened after World War II. And by preventing
lower-income blacks from accessing credit and
homeownership, they contributed to the wealth gap
between blacks and whites.
Other scholars disagree, pointing out that in many
instances the maps were confidential and did not
circulate, and that “redlining” practices of the FHA
and private lenders alike long predated the HOLC. In
some cities, lower-rated areas actually received loans
at higher rates than more desirable neighborhoods.
No doubt the maps were used differently in
different cities. But even if these maps only reflected
practices that were already in place, they are a sober
reminder that discrimination is compounded across
generations to widen the gulf between those who
have access to credit and those who do not. As one
study of these maps observed, the lower-rated areas
only became more segregated over time, an indication
that local lenders and brokers were paying attention
to the boundaries. With these maps, the Roosevelt
administration expanded homeownership for some
but not for others.