A policy outlined in the FHA’s 1939 Underwriting Manual and practiced by the FHA through which neighborhoods were considered “risky” for investment based solely on race and ethnicity. FHA loans as well as other financial assistance was denied to people in these areas. Redlining literally refers to using red lines on a map to mark where financial institutions would not invest. The color-coded maps that resulted from redlining were developed by the Home Owner’s Loan Coalition. Green and blue areas were neighborhoods in demand and were safe investments because they were primarily homogeneous, reducing the threat of racial tension. Yellow and red areas were neighborhoods that were on the verge of declining or had already declined and were occupied by black and low income families.
The Community Reinvestment Act of 1977 attempted to remove redlining by giving financial assistance to homebuyers and small business owners in underprivileged areas, but it continued to be practiced indirectly through the banks’ actions. Redlining was essentially a crucial factor in amplifying the segregation and discrimination already prevalent in the U.S. The racial economic gap widened as blacks were excluded from home ownership and this eventually set the stage for urban renewal.
For Further Reading