- Mar 11, 2015
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HOLC’s race-based—or apparently racist—neighborhood ratings determined the property value, stability, and investment-worthiness of a community based on its racial composition. Both private and public actors advanced the HOLC’s racist ratings in determinations of which communities would receive investment in an effort to maintain or increase the property values in white communities. Accordingly, the HOLC’s ratings compelled racial covenants that excluded black-Americans from entry into “A” neighborhoods, steered public and private investment into “A” neighborhoods and to white homebuyers, and denied prospective black homebuyers from public and private funding. Thus, redlining and federal housing market discrimination resulted in the short-term effects of higher housing valuations for homes within white communities, discriminatory investment and development into these communities versus communities of color, and the exclusion of black-Americans and persons of color from purchasing housing within these communities. Over time, the immediate effects of redlining and federal housing market discrimination have multiplied exponentially. Wealth begets wealth. For example, higher property values for homes in white communities and greater investment into these homes over a some seventy-year period have contributed to increasing wealth gaps between white communities and communities of color. Significant differences in resources between communities have further affected, for instance: educational opportunities (where public school resources are often a product of property taxes), the continued exclusion of persons and communities of color from wealth and quality housing, variances in social benefits (including social capital and social stigma, based on your community and its real or perceived reputation), continued racial segregation, stability, and both the perceived desirability and subsequent real value of particular neighborhoods, among other things.
While the government used federal redlining practices in numerous ways, the remaining Sub-Sections of this Part discuss the particularly harmful effects the HOLC’s racist redlining ratings: (1) the exclusion from subsidized and insured government loans, investment, and homeownership; and (2) racial covenants and the creation of white suburbs and white wealth.
B. Racial Exclusion from Government-Subsidized and GovernmentInsured Loans, Investment, and Homeownership
1. Policy Overview
Ushering in unparalleled opportunities for prospective homeowners to purchase and invest in property, the New Deal era’s new federal housing policy profoundly impacted housing and wealth in the United States. Until the establishment of the HOLC and the FHA, in 1933 and 1934 respectively, “home mortgages were generally limited to less than 50 percent of the home’s appraised value, the loans were generally limited to short time periods of less than five years, and the loans generally ended with a large “balloon-payment” of the remaining principal.” Pre-New Deal home mortgages therefore made homeownership difficult, rare, and only obtainable if a potential homeowner saved a substantial sum. With the creation of the HOLC, FHA, and VA, for the first time in America’s history, prospective homeowners were eligible to obtain long-term, low-interest, fully amortized mortgage loans with uniform payments extending over a fixed period. FDR’s new federal housing program afforded younger—and white—families with the opportunity to purchase a home and “the assurance that they would not be forced out of those homes at the end of a short-term mortgage.” As a result, through property ownership, FDR’s federal housing program gave white-Americans the opportunity to build significant home equity, stability, and accumulated wealth over time.
The HOLC, FHA, and VA supported white homeownership in four primary ways: through property values and investment criteria constructed from racist rating systems, through HOLC and VA’s direct subsidized loans, through the FHA and VA’s insurance of private loans for both private homeownership and land development, and by encouraging and recommending racial covenants, segregated, white suburbs, and white wealth.69 The HOLC administered the first government-sponsored program to subsidize mortgage loans, allowing Americans to achieve the previously rare prospect of homeownership.70 Between July 1933 and June 1935 alone, the HOLC supplied over three billion dollars for over one million mortgages.71 Beginning in 1944, the VA also offered a loan program, reducing borrowing requirements even further and often permitting returning World War II veterans to purchase homes without any down payment.
Don't try the "that was in the past garbage." Because these programs created the homes people live in right now, or the equity eventually used as cash that funded things happening today.
While the government used federal redlining practices in numerous ways, the remaining Sub-Sections of this Part discuss the particularly harmful effects the HOLC’s racist redlining ratings: (1) the exclusion from subsidized and insured government loans, investment, and homeownership; and (2) racial covenants and the creation of white suburbs and white wealth.
B. Racial Exclusion from Government-Subsidized and GovernmentInsured Loans, Investment, and Homeownership
1. Policy Overview
Ushering in unparalleled opportunities for prospective homeowners to purchase and invest in property, the New Deal era’s new federal housing policy profoundly impacted housing and wealth in the United States. Until the establishment of the HOLC and the FHA, in 1933 and 1934 respectively, “home mortgages were generally limited to less than 50 percent of the home’s appraised value, the loans were generally limited to short time periods of less than five years, and the loans generally ended with a large “balloon-payment” of the remaining principal.” Pre-New Deal home mortgages therefore made homeownership difficult, rare, and only obtainable if a potential homeowner saved a substantial sum. With the creation of the HOLC, FHA, and VA, for the first time in America’s history, prospective homeowners were eligible to obtain long-term, low-interest, fully amortized mortgage loans with uniform payments extending over a fixed period. FDR’s new federal housing program afforded younger—and white—families with the opportunity to purchase a home and “the assurance that they would not be forced out of those homes at the end of a short-term mortgage.” As a result, through property ownership, FDR’s federal housing program gave white-Americans the opportunity to build significant home equity, stability, and accumulated wealth over time.
The HOLC, FHA, and VA supported white homeownership in four primary ways: through property values and investment criteria constructed from racist rating systems, through HOLC and VA’s direct subsidized loans, through the FHA and VA’s insurance of private loans for both private homeownership and land development, and by encouraging and recommending racial covenants, segregated, white suburbs, and white wealth.69 The HOLC administered the first government-sponsored program to subsidize mortgage loans, allowing Americans to achieve the previously rare prospect of homeownership.70 Between July 1933 and June 1935 alone, the HOLC supplied over three billion dollars for over one million mortgages.71 Beginning in 1944, the VA also offered a loan program, reducing borrowing requirements even further and often permitting returning World War II veterans to purchase homes without any down payment.
Black Reparations for Twentieth Century Federal Housing Discrimination: The Construction of White Wealth and the Effects of Denied Black Homeownership
This year marks the 400th anniversary of the first documented arrival of Africans to the United States, which resulted in the enslavement of approximately 4 mil
papers.ssrn.com
Don't try the "that was in the past garbage." Because these programs created the homes people live in right now, or the equity eventually used as cash that funded things happening today.
