The prevailing conservative logic that minority communities remain impoverished due to their own lack of initiative would be laughably untrue were it not so horrifying. To the contrary — minority communities are systematically under-developed and leeched for profit, all but ensuring they remain impoverished. This is a process known as redlining, and it has segregated minorities into neighborhoods of financial stagnation and despair across the country.

Although the practice has been around since the 1930s, the term was first coined in the 1960s by sociologist John McKnight to describe the literal "red line" drawn around city maps by the federal government. Traditionally defined by excluding or denying loans and financial services, redlining also includes limiting healthcare (hospitals/urgent care clinics), as well as grocery stores (creating food deserts). The scale of redlining could be argued to include education as well, including recent reports that banks like Wells Fargo and Upstart have been accused of charging more for the student loans of institutions deemed "less credible," such as community colleges.

As a practice still coded into modern day resources people need for advancement, it's time to reassess how we can stop the current political movements engaging in the damages of redlining, as well as encourage policy to reinvest back into our communities.

How Redlining Began

Redlining was first introduced after the Great Depression via the National Housing Act of 1934. It established the Federal Housing Administration, who refused to insure mortgages in or near Black neighborhoods.

The drawing of "redlining" comes from another post-Great Depression initiative by the Home Owners Loan Corporation (HOLC), which was responsible for assessing the financial risk and security of lending in over 200 cities. HOLC’s criteria not only included the factors of housing conditions, but race, ethnicity, and immigration status as well, drawing color-coded boundaries around the "best," "desirable," "declining," and "hazardous" neighborhoods. Today, 74 percent of the neighborhoods marked as "high-risk" in the late 1930s are low to moderate income, with 64 percent of them minority as well.

Redlining historically decreased housing values in Black neighborhoods (and subsequently, the investment put into them), but Black people often had to pay higher prices. From the 1930s all the way into the 1970s, real estate agents and speculators would participate in blockbusting, where they’d convince white homeowners to sell their house in minority-adjacent neighborhoods by instilling the fear that their property value was about to go down. Although home values would fall, Black people still had to pay an artificially inflated higher price to live in the area known as a "Black tax."

The first significant piece of legislation to try and combat redlining was The Civil Rights Act of 1968, aka The Fair Housing Act, which prohibits discrimination in the sale, rental, and financing of housing based on race, color, national origin, religion, sex, familial status, and disability.

Almost a decade later, Congress passed the Community Reinvestment Act, which encouraged depository institutions to help meet the credit needs of their community, including low to moderate income neighborhoods, consistent with safe and sound operations. Aiming to reverse the role of segregation, both of these pieces of legislation were steps in the right direction; however, the negative impacts of redlining were already well-established in communities, including those who already hosted pockets of Black wealth.

Modern Impacts of Redlining

In 1988, the Atlanta Journal-Constitution published a series of articles written by journalist Bill Dedman called The Color of Money (which he won the Pulitzer Prize for in 1989).

The Color of Money’s biggest takeaway was that banks were more likely to loan to white middle-income earners over Black middle-income owners based on the neighborhood they choose, including those who wanted to buy in wealthy Black communities. The piece also broke down a few institutional problems and loopholes not covered in either the Fair Housing Act or CRA, with many still felt residually today. Some highlights:

- Bankers were encouraged “not to lend $40,000 for a $50,000 house in a neighborhood where it might be worth $38,000 one day.” In other words, the lender’s faith in a neighborhood created a compounding effect on not only capital available, but the valuations established by mortgage companies and banks.

- Even renovating homes was difficult, taking almost a year to find a lender that evaluated an increased value due to the improvements.

- Lending offices were often located in white neighborhoods, as well as services like after-hours house calls from mortgage officers.

- Commercial lending was impacted by redlining just as badly, using the example of a Black-owned lettuce distributor who grossed over $3 million per year ($6,645,446.81 in 2020, adjusting for inflation) who was denied several loans to expand operations.

- Even establishing a financial history could be difficult, with the cost of a checking account with some banks in Atlanta charging a minimum balance of $400 (roughly $880 in 2020).

The positive changes Dedman noticed were protestors who eventually started a dialogue on community reinvestment. In Chicago, three banks made more than $85 million in loans to community groups that found no defaults in the four years since. And protestors have been active since the ’70s using strategies like bank-ins (disrupting tellers by asking to trade-in and trade-out pennies for dollars repeatedly). Finally, Dedman also notes the importance of Community Development Corporations, which are nonprofits that provide programs and other activities to help promote community development.

The impact of Dedman’s piece led to expanding disclosure of HMDA (Home Mortgage Disclosure Act) data, slight improvements in accountability of Atlanta lenders, and follow-up studies scoping the housing market since the expansion of HDMA’s accessibility.

Despite The Color of Money showcasing the deep-rooted financial disparity caused by redlining, these are only a fraction of the problems faced by HOLC-lined cities, including liquor-lining (defined as the excessive concentration of liquor stores in lower income and minority neighborhoods) and environmental racism, which is when lower income and minority neighborhoods are subjected to worse environmental conditions. Common examples of environmental racism include putting factories near lower income neighborhoods, as well as how the Interstate Highway System had a negative impact on urban communities (both in pollution as well as destroying property value).

The combination of both environmental factors and lack of nutritional options has left many poor and minority communities with overall decreased health. This has been especially apparent during Covid-19, where previously redlined neighborhoods are at a higher risk of contracting the virus, primarily due to surrounding health problems in these communities, such as diabetes, asthma, obesity, and heart disease.

Ways to Fix the Impact of Redlining

The problem with fixing the impact of redlining is that it’s often still highly-impacted by legislation today, such as the Trump administration changing requirements for urban development (for example, investing in a new sports stadium rather than community needs). Although these create challenges federally, there are certain strategies that can be used across the political spectrum to start reinvesting back into our communities. Some common examples:

Increase Funding For Community Development Corporations

Community Development Corporations are designed for each city or neighborhood's specific needs, prioritizing funds for reinvestment and revitalization projects. These projects are often supported by those who benefit long-term from the project, such as major employers who have a stake in a community's quality of life.

Restitution For Environmental Racism

Calls for municipalities and energy companies to financially fix the impact caused by environmental racism, including neighborhood improvements as well as direct payments in cases where energy companies have been found liable of physical harm.

Create Tax & Zoning Incentives For Community Redevelopment

Beyond practices like historic tax credits, this would be specific incentives that encourage developers to build necessary infrastructure such as grocery stores, medical facilities, or mixed-use/mixed-income housing. Additionally, fixing exclusionary zoning laws, which have prevented some communities from even being able to build what they need to survive autonomously without leaving zip codes.

Increase Accessible Public Transportation

Better public transportation helps increase accessibility to jobs, reduce commute times for lower to middle income users, and provide better access to resources like hospitals and more competitive banks.

Establish And Engage With More Minority-Owned Financial Institutions

Finally, issuing charters to interested minorities who have enough capital to start a bank could help increase investment in minority and lower income communities, as well as encouraging people to buy more financial products from the minority owned banks on the market today, such as OneUnited or Greenwood: Killer Mike's new project which is the first digital bank geared towards Black and Latinx people.

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