Redlining is a way America practiced racial discrimination through most of the twentieth century. Understanding redlining is the key to understanding why our cities are segregated and why it is so difficult for minorities to move out of poverty.
During the New Deal (1930’s), the federal government created maps of every metropolitan area in the country, including Omaha and Lincoln. The Underwriting Manual of the Federal Housing Administration said that “incompatible racial groups should not be permitted to live in the same communities.” These maps were color coded to ensure that minorities, especially blacks, stayed in certain neighborhoods, and whites would be given special financial incentives to move to better neighborhoods.
For each city, government assessors produced maps. Neighborhoods they deemed “best” and safe investments were given a grade of A and colored green. Blue areas, graded B, were still desirable. Yellow, C, areas were declining. Those that were deemed “hazardous” were given a grade of “D” and colored red.
If an area was deemed hazardous, people could not get home loans or insurance. It was simply “too risky” for banks to invest money in the part of town that had red lines drawn around it. Since these policies didn’t allow most people to own homes in red areas, they became crowded areas filled with public housing for minorities.
Wealthy minorities were forbidden from buying homes in areas graded A or B. The wealthy areas of a city and the suburbs were for whites.
This discrimination had always occurred in America because people tended to settle in ethnic groups. However, it didn’t become government policy until the 1900’s. The federal government began formally practicing segregation during World War I, when military housing was only for whites.
The government’s segregation policies continued long past the 1930’s. After World War II, white soldiers could get GI bills to go to college. They could get VA mortgages to buy houses. FHA loans were only available to whites. VA and FHA loans are guaranteed by the federal government, eliminating a bank’s risk. Home ownership was effectively denied to racial minorities.
Redlining was legal until 1968 and still affects most areas of our country, especially cities. It dramatically affected the relative wealth of different racial groups in America. Most middle-class families gain wealth from the equity they have in their homes. People can usually sell homes for much more than they originally paid. They can use homes to secure mortgages or home improvement loans and get low interest rates. This increase in equity allows families to send children to college and to have something to leave to future generations of their family.
This simply isn’t true for most minority families in our country. The Pew Research Center evaluated the median (average) wealth of U.S. households in December, 2021. For white households, the average wealth was $250,000. Hispanics, $48,700. Blacks, $27,100. Native American wealth was harder to find, but estimated to be about $22,000 per household. Remember that wealth is not the same as income. It is the value of cash and assets, or what we own, minus debts.
Wealth and income both have an effect on well-being. People in poverty live in less stable households. They are much more likely to suffer from hunger, poor nutrition, and health problems. They live in substandard housing in polluted areas. Their neighborhoods have fewer amenities like grocery stores, parks, and transportation. According to the National Institutes of Health, the gap in life expectancy is 14.6 years between the richest 1% and poorest 1% of individuals in the U.S.
If you are interested in reading a book about redlining, I’d strongly recommend The Color of Law: A Forgotten History of How Our Government Segregated America by Richard Rothstein.