June 2, 2020

National Housing Act (1934)

The Home Owners’ Loan Corporation (HOLC) created “residential security” maps like this one for cities across the country. The maps were used to indicate areas best suited for investment by banks. Areas marked in red were considered “hazardous” for investment.Mapping Inequality - University of Richmond

The National Housing Act of 1934 created the Federal Housing Administration which was responsible for two major policies that supported racial segregation at the national level. The long-standing impact of these policies is that in a country where most families gain wealth through homeownership, white families were given government-subsidized mortgages while African American families were denied a path to homeownership. As a result, the average accumulated wealth of an African American household is around 5 percent that of white families (NPR.org, 2020).

1. The first policy was the practice known today as Redlining, which is the practice of deeming low-income and African American neighborhoods to be a hazardous investment by banks and therefore preventing homeowners from securing mortgages in these areas. The FHA created maps of each metropolitan area of the country that color-coded neighborhoods where it was “safe” to invest and neighborhoods where the risk of declining property values was too high to risk lending money. In Seattle, the Central District was the largest redlined area, and the text of the underwriting map explicitly stated the race of the residents was the reasoning behind the hazardous designation.
2. Second, the FHA subsidized the development of white-only subdivisions in the suburbs, providing an affordable path to homeownership for white working-class families in the 1950s and 60s. Today, those homes have appreciated in value considerably and white families have built wealth from equity in those homes (NPR.org).

Resource: NPR.org. “A ‘Forgotten History’ Of How The U.S. Government Segregated America.” Accessed May 4, 2020. https://www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-government-segregated-america.