New Research Reexamines HOLC's Role in Redlining

Redlining–the practice of denying mortgages in certain neighborhoods based on maps created by the Home Owners Loan Corporation (HOLC) in the 1930s–has long been associated with disinvestment in Black neighborhoods. But according to Jake Blumgart, new research "complicates our understanding" of the practice and shows that redlining "did not quite work in the way that it is popularly understood."

In the 1930s, HOLC "drew up color-coded maps that evaluated neighborhoods based on their presumed prospects, with those believed to have the worst outlooks drawn in red." Until now, historians have interpreted this as a root cause of discriminatory lending. "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."

As Blumgart writes, "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)." Based on a sample of 16,000 loans in three cities, the researchers "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."

This yields important lessons for today's policymakers, who can shape an agency's practices through the language of their legislation. "[T]he 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." Meanwhile, HOLC's legislation "is written to center struggling homeowners and to bail them out of a macroeconomic crisis they did not create," leading to different practices from the two agencies.

Amy Hillier, a researcher whose work showed that HOLC did, in fact, lend "heavily" in "redlined" areas, concludes that the new research validates her findings. "[H]ousing discrimination can happen in very subtle ways that are at least as insidious as very dramatic red maps with lines on them."