Tom Gallagher: How redlining bigotry restructured our cities

Tom GallagherIt is likely that, over the course of the past year, you have seen “redlining” appear in news feeds and headlines. While the term has come to be a stand-in for naming all types of discrimination in real estate and lending, it is important to understand its origin and the indelible mark it has made on the fabric of American cities.

The Federal Home Loan Bank Board and its operational arm, the Home Owners’ Loan Corp., were created in the early 1930s as a means to stabilize the real estate market at the end of the Great Depression. They can be credited, as the University of Richmond’s Mapping Inequality project notes, with “protecting and expanding home ownership, standardizing lending practices, and encouraging residential and commercial real estate investment in a flagging economy.”

They are also responsible for creating the maps that ultimately gave the discriminatory practice of redlining its name.

To encourage “responsible” lending practices, working with local real estate professionals, financiers and appraisers in communities across the nation of more than 40,000 people, Home Owners’ Loan Corp. created color-coded reference maps investors could use as a standard to determine the “security” of their investments. Based on their assessments, the “best” neighborhoods were graded “A” (in green). “B” (in blue) were “still desirable” and those given a “C” were considered “definitely declining” (in yellow). The neighborhoods given the lowest grade of “D” were regarded as “hazardous” and were, of course, colored in red.

The idea of a locally based, data-informed basis for decision-making was a good one. The problem arose in the values applied to the assessments. There was a clear bias toward newer and more spacious development, for example. Most shocking was that the residents were being graded, perhaps more than the real estate itself, not in terms of their credit value or economic viability but in terms of the “kind of people” they were. The Mapping Inequality project points out, “HOLC assumed and insisted that the residency of African Americans and immigrants, as well as working-class whites, compromised the values of homes and the security of mortgages.” To be sure, the maps didn’t create prejudice, but they did codify and normalize it.

Redlining, which influenced lending practices until the 1968 Fair Housing Act made its precepts illegal, had far deeper consequences than any single bad appraisal or refused loan. It resulted in a systematic and fundamental restructuring of our cities to favor the privileged and divert opportunities for wealth from those deemed unworthy.

Downtowns were no longer considered the heart of the community or as mixed-use neighborhoods. The system favored suburbs because they were seen as places where a better grade of people lived.

It is vital that we recognize that redlining is not just a part of our past, and it has a profound effect on Black, Indigenous and people-of-color communities.

According to a report released last summer by the Polis Center at IUPUI, redlining can be traced to the degraded health, environmental quality and economic opportunity of those neighborhoods today. Of particular note, the report said “redlining in a neighborhood contributes to violent crime, explaining 62 percent of the difference in crime rates between neighborhoods.”

While the “security maps” are no longer used, the increasing use of algorithmic decision-making in real estate matters is worthy of a watchful eye. Though intended to be data-driven and less susceptible to human prejudice, there is still an underlying value system that drives the calculations.

The standard lenders look to match today is that set by Fannie Mae and operationalized in an algorithmic program known as “Desktop Underwriter.” As housing prices have been rising to unusual heights and sellers are getting, on average, nearly 2% above the asking price, the market is clearly hot. A responsible buyer or investor would want to be sure the price is legitimate.

Yet, in the homogeneous suburban areas, the algorithm, based on its years of data, often suggests an appraisal is not needed while one is consistently necessary in urban neighborhoods with their mix of housing types and densities.

The Brookings Institution explains the systemic mechanism in what it calls the destructive three “D’s.” “First, Black places are denied opportunity to build wealth through the systemic devaluation of their existing assets, including residential property and businesses; banks and investors pull away, leading to reinforcing cycles of disinvestment that inhibit the creation or scaling up of local businesses and undermine efforts to arrest and reverse decline. Finally, once asset devaluation leads to a drop in prices, outside investors step in to cheaply buy assets and leverage their ownership into economic development schemes that benefit the investors while ultimately displacing long-term residents and hurting existing small businesses.”

Shunning the traditional methods that have failed them, formerly redlined neighborhoods are increasingly placing their value in their neighbors through community ownership, community investment and community wealth models as a way to better determine their own fates.•


Gallagher is a principal and urban designer with Ratio and a professor-in-practice of urban design at Ball State University. Send correspondence to

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5 thoughts on “Tom Gallagher: How redlining bigotry restructured our cities

  1. 85% of the people who lived in redlined neighborhoods when this practice was legal were white, a fact that often goes unmentioned in pieces like this. If there is a direct link to criminal violence and redlining, the demographics of offenders would be far different than what we observe today.

    1. Further, those neighborhoods were mostly “worker housing” built near/within walking distance of (big, noisy, dirty, polluting) factories to begin with.

      The sinister “polluted places”/environmental justice correlation cited here is often overblown and has a perfectly logical explanation: neighborhoods grew up around polluting factories where jobs were. No one went out and built houses on top of polluted places for any reason other than convenience to jobs in the pre-auto era…not to force working class people and people of color to live in bad conditions.

  2. In my downtown neighborhood, the house next-door to me recently sold for nearly a million dollars. It is a 4500sq ft Victorian. In 1972 my former next-door neighbor bought his house for $4500. He had to use his credit card because a bank would not give him a mortgage. At the time he bought it, it had already been a rental for almost 50 years with three apartments, owned not by somebody living there, but somebody with capital. The house was not near a factory. Unfortunately it is now only blocks from an Interstate highway, made possible by bulldozing houses in previously red-lined areas of the city.

    So 21 R, and Chris B, and feel smug with their comments, but the truth is red-lining nearly destroyed the core of the city, and only 50 years after the 1968 fair housing act, are some neighborhoods rebounding.

    Unfortunately the effects of red-lining linger on, in that the people that should benefit from rising home prices, the people living in up and coming areas, had already been forced out of the opportunities of home ownership and are now just renters. The name we give to this phenomenon is not structural racism, because too many people likes those that commented above might not believe it exists, but we call it “gentrification” now days.

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