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Redlining Didn’t Happen Quite the Way We Thought It Did

Scholars have always placed two New Deal era federal agencies at the center of the racist policy that steered private mortgage lenders away from Black neighborhoods. However, new research paints a different picture.

Image of an original 1938 HOLC map of Atlanta with color-coded gradation of neighborhoods by risk level. (Mapping Inequality Project, University of Richmond)
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.

The researchers studied over 16,000 loans in three cities: Baltimore, Md.; Peoria, Ill.; and Greensboro, N.C. This unique data set includes every loan made by HOLC between 1933 and 1936 and every loan insured by the FHA from 1935 to 1940 in these three jurisdictions.

They found that in all three cities the HOLC refinanced many loans in neighborhoods coded red, with no evidence of discrimination against Black homeowners. The FHA, on the other hand, did not insure mortgages in the neighborhoods where Black homeowners lived and chiefly targeted newly constructed homes, which almost exclusively catered to whites, and those in wealthier neighborhoods.

“People have been treating the HOLC like they're evil or highly discriminatory,” says Fishback. “But the share of their loans that were held by Blacks is larger than the share of loans by any group of private lenders you can find during this time frame. HOLC has this really bad reputation, despite the fact that they were actually doing more for Blacks than anybody else at the time.”

While HOLC embarked on its now famous analysis of urban neighborhoods, it kept its maps secret and does not appear to have shared them with private lenders. Although it shared them with the FHA, that agency enacted its own discriminatory policies on a block-by-block basis instead.

Fishback and his colleagues find no difference in FHA’s racialized lending practices before or after the completion of the famous HOLC maps. They show that FHA had already been acting in a discriminatory fashion before HOLC created its maps. (The FHA had maps of its own, but the agency destroyed them all in reaction to a discrimination lawsuit in 1969.)

There is a long pedigree of renowned scholars getting the causality between the agencies wrong. The renowned historian Kenneth Jackson claimed that the HOLC “initiated the practice” of redlining in his 1985 classic The Crabgrass Frontier. More recent books, including Richard Rothstein’s The Color of Law, cemented the agency’s presumed role: “the maps had a huge impact and put the federal government on record as judging that African Americans, simply as a result of their race, were poor risks.”

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.”

Fishback says there are lessons that contemporary policymakers can learn from these New Deal-era institutions, and the ways they carried out their missions. Looking at the wording of their enabling acts, the FHA was created to encourage “economically sound” loans that mostly translated into new construction — especially in the suburbs — which at that time almost entirely went to white families.

The HOLC’s legislation, by contrast, is written to center struggling homeowners and to bail them out of a macroeconomic crisis they did not create. It makes sense that one would lend to homeowners, no matter their race, while the other exacerbated existing patterns of real estate discrimination.

For her part, Hillier says this new paper seems to definitely make the case against the HOLC maps as a cause or accelerator of redlining. But she isn’t sure how important that is for the popular narrative, as long as reporters and academics change their work to show the actual meaning of these documents as a reflection of existing patterns and practices in the 1930s (not the cause of them).

“It's so tempting to see causality in the HOLC maps because they're dramatic and they're widely available,” says Hillier. “It really looks like the smoking gun. But it wasn't actually what was doing the violence. We need to remember that housing discrimination can happen in very subtle ways that are at least as insidious as very dramatic red maps with lines on them.”

Jake Blumgart is a senior writer for Governing and covers transportation and infrastructure. He lives in Philadelphia. Follow him on Twitter at @jblumgart.
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