So, where did redlining originate? Technically, the term redlining came from the red marks on maps that homeowners and incorporations would use to outline the African American and mixed races neighborhoods. More specifically, in the 1930s, there was a program that was called the Home Owners' Loan Corporation and the Federal Housing Administration that was involved with redlining. They were created to help spread more homeownership in more suburban areas and make more home loans and mortgages affordable to the common person. However, that was not true for people of color because they did not benefit from those specific programs for two reasons. One was their skin color, and there was still segregation and the second one was their credit was considered high risk. Before redlining became a thing, there was racial homogeneity to protect all suburban communities by making zoning laws that did not allow the construction of any small and affordable living spaces. Going back to the idea of racial homogeneity, it was "preserving through residential segregation as whites tended not to sell or rent to nonwhite persons, often by placing racially restrictive covenants in property deeds." (cite) So, due to redlining and racial homogeneity, African Americans who were looking for houses and tried to work around the policies would often find themselves in suburban neighborhoods with hostile environments. Another purpose of redlining was to help prevent further financial disasters because of the Great Depression. This later led to the federal government lenders wanting to create and more safe and stable environment, which causes blockage off specific neighborhoods. And that was where the borrowers were more likely to default their loans. An example of this would be a variety of financial services that did not only include mortgages but also insurance, credit, and loans.
The way mapping was used in the neighborhoods was that usually in neighborhoods in more affluent areas were called the most worthy of loans and were outlined in blue or green. Then in the communities that were outlined in yellow were also considered for lending but not the top. Lastly, there was the red which no one would go to.
Additionally, there were three events that helped play into redlining. The first one was in 1948 the U.S Supreme Court with the case Shelly v Kraemer. The ruling was that the courts could not enforce racially restrictive practices. The second event was in 1968, involving the Federal Fair Housing Act that forbade discrimination against any minority involving real estate brokers, property owners, and landlords. The last event was the Home Mortgage Disclosure Act (HMDA) of 1975, which required lending institutions to report public loan data. While in 1977 there was the Community Reinvestment Act was helped encourage banks to help meet the credit needs of the communities.
Even though redlining was deemed illegal, there are still minor effects that are still present in today's society. Did you know that in 2017 a there was a study that was done by a Federal Reserve Bank of Chicago economist?! It was brought to attention that redlining has occurred, with banks discriminating against the inhabitants of certain neighborhoods. The impact was that it affected homeownership rates, home values, and credit scores in 2010. Additionally, there is still some minor redlining in real estate when selling houses to nonwhite people. Even though it still remains there is significant work to overcome these practices.
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