How redlining compounded inequities for black Americans today
Though outlawed by the Fair Housing Act in 1968, the racist housing practice of redlining perpetuated a wealth gap for black people still widening today, according to an analysis of historical data by Redfin.
Redlining dates back to the 1930s, when the Home Owners' Loan Corp. assigned colors and grades to neighborhoods based on what it referred to as "mortgage security." The green neighborhoods, populated by well-to-do white people, received grades of "best" or Type A. Then came blue, "still desirable" Type B; yellow, "definitely declining" Type C; and red, "hazardous" Type D. The HOLC largely marked urban zones with high populations of black families red and it became almost impossible to get approved for a loan for homes in those areas.
Since 1980, homeowners in redlined neighborhoods gained 52% less wealth in property value than those in greenlined neighborhoods, an average difference of $212,023, according to Redfin. Additionally, black borrowers are almost five times more likely to own a home in a redlined neighborhood than in a greenlined neighborhood.
"More than half a century after it was abolished, redlining continues to dictate the racial makeup of neighborhoods and black families still feel the socioeconomic effects of such a discriminatory housing policy," Daryl Fairweather, Redfin chief economist, said in a press release. "Black families who were unable to secure housing loans in the neighborhoods where they lived have missed out on one of the major ways to build wealth in this country. And even families who were able to buy homes in their neighborhood after redlining ended haven't earned nearly as much home equity as people who bought homes in neighborhoods that were considered more valuable."
Wealth discrepancy through homeownership compounds generationally. Homeownership rates sit at 73.7% for whites and 44% for blacks in the first quarter of 2020, per the Census Bureau.
In 2017, neighborhoods that had been demarcated as green under redlining rules had overall homeownership rates of 66% while redlined neighborhoods had a rate of 38.5% across the 41 metro areas Redfin analyzed. In 1980, those rates stood at 65.5% and 46.3%, respectively.
Unsurprisingly, the numbers greatly diverge by race. For Type A neighborhoods, white families had homeownership rates of 71% in 2017 and 66.9% in 1980. Black families in Type A neighborhoods had a homeownership rate of 44% in 2017 and 50.4% in 1980. In Type D neighborhoods, white families owned at rates of 45.6% in 2017 and 46.3% in 1980 versus 29.8% and 30.8% for black families.
"The expanding homeownership gap between black and white families can in part be traced back to diminished home equity due to redlining, as it's one major reason why black families today have less money than white families to purchase homes either as first-time or move-up homebuyers," Fairweather said. "It's important to note that other factors play a role in lower homeownership rates for black families, too. For instance, employment discrimination prevents black workers from earning equitable income."