During the 1930s Great Depression, the mortgage lending markets were a mess, with thousands of homeowners defaulting on their mortgages daily. In 1933 half of all mortgages in America were in arrears. President Roosevelt’s New Deal included the creation of the Home Owners’ Loan Corporation (HOLC) and the Federal Housing Administration (FHA) to provide federal insurance for mortgage loans to prop up the mortgage lending market by protecting lenders against defaults.
This policy, however, did not protect all mortgage loans. Instead of establishing a system based on the individual financial status of potential homebuyers, Roosevelt’s administration used race-based valuation policies and redlining maps. Government surveyors were sent to hundreds of cities nationwide to grade neighborhoods with an A, B, C, or D rating. Predominately Black and integrated neighborhoods were consistently rated D, were outlined on the maps in red, and consequently denied government assistance. Private lenders also used the government’s redlining policies to adopt similar policies, effectively icing any hopes a black family had of buying a property with financial assistance. In addition, many deeds included racial covenants that contractually prohibited homeowners from selling their property to Black homebuyers.
These policies continued to be lawful until the Fair Housing Act of 1968 was passed, which prohibited housing discrimination, and the Home Mortgage Disclosure Act of 1975, which required the release of lending data. Unfortunately for Black Americans, the damage had already been done. Redlined communities had been starved of infrastructure investments by governmental entities and economic investments by the private sector, leading to deteriorating infrastructure and widespread economic disparity. The long-term impact of these race-based disparities cannot be overstated.
The practice of redlining neighborhoods has set Black families back decades in creating and maintaining intergenerational wealth. Today, however, African Americans are steadily rebuilding these stolen legacies. We must build a foundation of wealth through homeownership for our families and the support of local entrepreneurs in our communities. At the Los Angeles Urban League, we are committed to bridging the wealth gap through our educational Black Wealth and Attainment programs and by working with partners to provide access to the capital and other resources necessary to increase homeownership and entrepreneurship in our community.
Our goal is to rebuild in Los Angeles what we had in Greenwood, Oklahoma, the district we know as “Black Wallstreet,” which was destroyed in three (3) days of rioting by a white mob in 1921. The past may still be a part of our present, but the part we play today will lead us to true economic prosperity.