How to Ensure a New Redlining Initiative SucceedsRoundup
tags: redlining, housing discrimination, Fair Housing, real estate, Community Reinvestment Act
Robert Henderson is an independent scholar.
Rebecca Marchiel is an associate professor of history at the University of Mississippi and the author of After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation.
The Justice Department recently announced an initiative to combat redlining, the refusal of lenders to issue credit to borrowers in communities of color.
Congress baked the practice into New Deal housing policies and later the Servicemen’s Readjustment Act, better known as the GI Bill, after World War II, making it responsible for a massive expansion of homeownership for White Americans in largely segregated suburbs into the 1950s. Meanwhile, Black and integrating neighborhoods suffered from disinvestment and, as Attorney General Merrick Garland recently noted, a substantial and stubborn wealth gap between Black and White families that has persisted. And the whole thing was invisible to most White Americans — epitomizing the racism built into the structures of everyday American life.
Yet the Justice Department effort isn’t the first initiative to tackle redlining. Forty-four years ago, Congress passed the Community Reinvestment Act to curb the practice. But despite this legislation, redlining and its legacies have remained stubbornly durable. And understanding why will be key to ensuring the success of this new initiative.
Discriminatory real estate practices have a long history, but the late 1960s provided a new opening to combat them. Inspired by the direct action of the civil rights movement and empowered by the 1968 Fair Housing Act, which banned racial discrimination in home financing, urbanites began to challenge banks’ lending policies as rooted in racial bias rather than sound business decisions.
In the 1970s, a multiracial coalition of people from redlined neighborhoods demanded that banks meet their credit needs. As part of this push, they hoped to prove that these neighborhoods had, in fact, been redlined. But they quickly learned how hard that was.
Activists charged that banks stopped lending when their neighborhoods integrated, but bankers countered that loan demand was just nonexistent in such places. Seeking documentation, anti-redlining activists persuaded Congress to pass the Home Mortgage Disclosure Act of 1975, legislation that forced banks to make their geographic lending data public for the first time. When banks shared the data the following year, activists’ complaints gained new credibility with influential lawmakers such as Sen. William Proxmire (D-Wis.).
Two years later, Congress approved the Community Reinvestment Act (CRA) so these same activists could do something with the lending data. The law gave ordinary people standing to stop bank mergers or acquisitions if one of the banks in question had redlined. Armed with data, residents of redlined neighborhoods used the CRA to bring banks to the negotiating table, where they demanded actions to repair the damage done by this practice. Impressively, community groups used the CRA to generate an estimated $1.4 trillion in mortgage loans in redlined communities by 2004.
Despite these real victories, the reach and impact of the CRA was significantly constrained both by limitations in the design of the bill itself and by changes in the mortgage business that accelerated just after Congress passed it. First, residents and activists had little leverage over redlining lenders except at those moments when a bank sought to merge or expand. Congress designed the CRA to ameliorate the impact of redlining, but without overly burdening banks. As such, it forced them to make amends for past conduct only when they asked for the privilege of expanding their operations.
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