Redlining

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For the automotive term, see redline.

Redlining is the practice of denying or increasing the cost of services, such as banking, insurance, access to jobs^[1], access to health care^[2], or even supermarkets^[3] to residents in certain, often racially determined,^[4] areas. The most devastating form of redlining, and the most common use of the term, refers to mortgage discrimination. The term "redlining" was coined in the late 1960s by community activists in Chicago. It describes the practice of marking a red line on a map to delineate the area where banks would not invest. During the heyday of redlining these areas were most frequently minority inner city neighborhoods.

[edit] History of the practice

HOLC's 1936 security map of Philadelphia showing redlining of minority neighborhoods. People who lived in the red zones could not get mortgages to buy or improve their homes.

Redlining began in the United States with the National Housing Act of 1934 which established the Federal Housing Administration (FHA). In 1935, the Federal Home Loan Bank Board (FHLBB) asked Home Owners' Loan Corporation (HOLC) to look at 239 cities and create "residential security maps" to indicate the level of security for real estate investments in each surveyed city. In these maps many minority neighborhoods in cities were not eligible to receive loans at all. This meant that ethnic minorities could secure mortgage loans only in certain areas, and it resulted in a large increase in the residential racial segregation and urban decay in the United States. Urban Planning historians theorize that the maps were used for years afterwards to deny loans to people in black communities by private and public entities.

On the maps the most affluent areas, those considered desirable for lending purposes, were outlined in blue and known as "Type A". "Type B" neighborhoods were less well off and outlined in yellow. "Type D" neighborhoods were outlined in red on the map. Most of the Black neighborhoods were characterized as "Type D" and were considered to be the worst for lending.

Some redlined maps were also created by private organizations. (Such as J.M. Brewer's 1934 map of Philadelphia.) The maps created by private organizations were designed to meet the requirements of the Federal Housing Administration Underwriting Manual. The manual encouraged lenders to consider these standards if they wanted to receive FHA insurance. FHA appraisal manuals instructed banks to steer clear of areas with "inharmonious racial groups" and recommended that municipalities enact racially restrictive zoning ordinances as well as covenants prohibiting black owners.^[5][6]

Dan Immergluck writes that in 2002 small businesses in black neighborhoods still received fewer loans, even after accounting for businesses density, businesses size, industrial mix, neighborhood income, and the credit quality of local businesses.^[7] Gregory D. Squires wrote in 2003 that it is clear that race has long affected and continues to affect the policies and practices of this industry.^[8]

[edit] Challenges to redlining

In the United States, the practice was fought through passage of the Fair Housing Act of 1968 (which prevents redlining when the criteria for redlining are based on race, religion, gender, familial status, disability, or ethnic origin), and the Community Reinvestment Act of 1977, which requires banks to apply the same lending criteria in all communities.^[9]

The private sector fight against redlining in Chicago is generally acknowledged as having been led by ShoreBank, a community development bank in Chicago's South Shore neighborhood.^[10] Founded in 1973, ShoreBank sought to combat racist lending practices in Chicago's African-American communities by providing financial services, especially mortgage loans, to local residents.^[11] Many sources characterize ShoreBank's efforts as overwhelmingly inspirational and successful.^[12] In a 1992 speech, President Bill Clinton called ShoreBank “the most important bank in America.”^[10]

[edit] Sources

1. ^ Racial Discrimination and Redlining in Cities
2. ^ See: Race and health
3. ^ In poor health: Supermarket redlining and urban nutrition, Elizabeth Eisenhauer, GeoJournal Volume 53, Number 2 / February, 2001
4. ^ How East New York Became a Ghetto by Walter Thabit. ISBN 0814782671. Page 42.
5. ^ Principles to Guide Housing Policy at the Beginning of the Millennium, Michael Schill & Susan Wachter, Cityscape
6. ^ "Racial" Provisions of FHA Underwriting Manual, 1938

   Recommended restrictions should include provision for the following ... Prohibition of the occupancy of properties except by the race for which they are intended...Schools should be appropriate to the needs of the new community and they should not be attended in large numbers by inharmonious racial groups. Federal Housing Administration, Underwriting Manual: Underwriting and Valuation Procedure Under Title II of the National Housing Act With Revisions to February, 1938 (Washington, D.C.), Part II, Section 9, Rating of Location.

7. ^ Redlining Redux Urban Affairs Review, Vol. 38, No. 1, 22-41 (2002)
8. ^ Racial Profiling, Insurance Style: Insurance Redlining and the Uneven Development of Metropolitan Areas Journal of Urban Affairs 25 (4), 391–410.
9. ^ Comeback Cities: A Blueprint for Urban Neighborhood Revival By Paul S. Grogan, Tony Proscio. ISBN 0813339529. Published 2002. Page 114.

   The goal was not to relax lending restrictions but rather to get banks to apply the same criteria in the inner-city as in the suburbs.

10. ^ ^{a b} Douthwaite, Richard. "HOW A BANK CAN TRANSFORM A NEIGHBOURHOOD", "Short Circuit". Retrieved on January 8, 2007
11. ^ Thomsen, Mark. "ShoreBank Surpasses $1 Billion in Community Development Investment", "Social Funds", 2001-11-1. Retrieved on January 8, 2007.
12. ^ Wisniewski, Mary. "Milton Davis, community banking pioneer", "Chicago Sun-Times", 2005-16-2. Retrieved on January 9, 2007.

[edit] See also

• Blockbusting
• Computer-assisted reporting
• Inclusionary zoning
• Mortgage Discrimination
• Planned shrinkage
• Racism
• Urban renewal
• White flight
• Community Reinvestment Act
• Timeline of Racial Tension in Omaha, Nebraska

[edit] External links

• Redlining in Philadelphia. Amy Hillier, PhD
• Redlining, and Neighborhood Appraisals in Philadelphia
• Housing Policy History, NC Housing Coalition
• From 'black-balling' to 'marking': the suburban origin of redlining in Canada
• "The Color of Money": Bill Dedman received the Pulitzer Prize in investigative reporting in 1989 for this series of articles, which described racial discrimination in mortgage lending in the Atlanta area.