Redlining Happened, but Not Exactly the Way We've Thought it Did

In recent years a once obscure lending practice has become a touchstone for America’s understanding of its racist past and the reverberations it still has today. But new research complicates our understanding of the historic practice of redlining, where certain neighborhoods are cut off from lending for reasons of race and class. It did not quite work in the way that it is popularly understood.

In mainstream journalism, and political discourse, redlining is associated with the maps drawn up by the Home Owners Loan Corporation (HOLC). This New Deal-era institution was created to refinance extant loans for borrowers who were struggling during the Great Depression. In the late 1930s, the agency drew up color-coded maps that evaluated neighborhoods based on their presumed prospects, with those believed to have the worst outlooks drawn in red.

It has long been assumed that these maps, which covered most Black residents of American cities and roughly half of whites, guided lending and investment away from red areas and toward green and blue ones (which were almost all majority white).

But new research shows that the maps very probably did not guide private lenders or the Federal Housing Administration (FHA), which clearly engaged in racist lending practices all on their own. The HOLC, however, actually loaned widely in Black neighborhoods and other red-shaded areas.

“If you're trying to use the HOLC maps to tell us how federal policy influenced things, then that's the wrong set of maps,” says Price Fishback, professor of economics at the University of Arizona. “Some people have been doing these long-range studies and saying this was all FHA policy using the HOLC maps. They've been using various techniques that require you to explicitly look at these boundaries. But they're using the wrong boundaries.”

Although the two agencies were set up at a similar time, HOLC was a temporary program (it ceased operating by 1951) meant to help homeowners who were in danger through no fault of their own. The FHA didn’t interact with existing loans, but was tasked to build a new insurance program backing “economically sound” loans with lower interest rates and longer duration periods than was traditional at that time.
Fishback and his co-authors are not arguing that racist mortgage practices did not occur. But they are trying to disentangle the policy of the two New Deal-era mortgage institutions, one of which engaged in heavily anti-Black practices (the FHA) and the other of which did not (HOLC). This also means that the famous redlining maps issued by the latter agency do not reflect how discriminatory lending was put into practice.

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Fishback and company’s paper is not the first to call these claims into question. The University of Pennsylvania’s Amy Hillier showed that HOLC itself lent heavily in Black neighborhoods and other red-shaded areas. (In Philadelphia, 60 percent of its loans were in such places.) She instead argued that while the maps aren’t the smoking gun they have long been presumed to be, they reflect existing patterns of discrimination in the larger housing sector.

The new research paper is able to clearly show that the FHA did execute its mission in a racist way, which Hillier says pushes the argument she made even further.

“Twenty years ago, I was worried that my nuanced interpretation of HOLC maps was going to be taken as ammunition to say that redlining didn't really happen,” says Hillier. “[These authors] really have the second part of that narrative that clearly demonstrates that, yes, redlining happened it just didn't happen exactly the way we think.”