The formal segregation of housing finance imposed by 20th century redlining was officially withdrawn decades ago. Yet, the lines of those old redlining maps remain etched into the landscape of many American cities.
Recently, we’ve been told by skeptics, like some academics and banks, that redlining is ancient history. That the federal and banking industry maps drawn in the 1930s to deny Black and low-income neighborhoods home mortgage loans are relics of discriminatory practices firmly in the past. Some argue that our country has moved on and that racial inequities in lending have faded, making regulation unnecessary.
But, new research tells us a different story. A recent study published in the urban planning and policy journal Cities shows that lines drawn on the redlining maps nearly a century ago continue to influence access to mortgage credit today.
At the core of the analysis conducted by researchers at the University of Michigan (U-M) and NCRC’s research team was an examination of 30 years of mortgage lending (1991 through 2020) using a newly released national home mortgage dataset (the HLD) that finally allows for an apples-to-apples comparison of lending patterns over time.
“Despite being more than 80 years old, the original maps still trace the patterns of racial disparities seen in modern mortgage lending,” said lead author and U-M researcher Dr. Liang Chen.
The study uses a new metric developed by Dr. Chen, the Mortgage Density Index (MDI) to determine how many loans a racial group receives compared to that group’s percentage makeup within a neighborhood. The study found that racial disparities in mortgage access for Black households hasn’t improved over the past three decades. For instance, if a neighborhood is 30% Black, you’d expect roughly 30% of its mortgages to go to Black borrowers. But, in reality, Black households receive far fewer loans than their population share would suggest. The median Black MDI actually declined decade after decade.
By contrast, White households received loans at levels proportional to their population. This racial gap in mortgage lending drives homeownership disparities and, ultimately, the racial wealth gap that persists today.
The chart below shows these outcomes by tracking a crucial measurement: who gets a mortgage compared to who lives in the neighborhood. The dashed line represents proportional access to a mortgage, or where the group’s share of mortgages matches their share of the neighborhood population. Here we can see that across the three decades, Black and Hispanic residents faced the worst outcomes, while outcomes held steady for White residents and improved for Asian residents.
Another notable finding from the study was that formerly redlined neighborhoods still face the steepest lending disadvantages. The infamous “D-graded” areas that were outlined in red on 1930s federal maps were given a “hazardous” designation for mortgage lending because they housed Black, immigrant and working-class families. The housing, and overall living, conditions in those neighborhoods were worse than in higher-graded “A” and “B” areas, shaping decades of neighborhood disinvestment.
The study finds these same “hazardous” areas still experience the lowest levels of mortgage lending to Black and Hispanic borrowers. It is a powerful confirmation that redlining was not simply a moment in time – it was a structure of exclusion whose consequences ripple through communities today.
Perhaps the most troubling finding from the study was that the worst disparities occur in neighborhoods that were redlined in the past and are predominantly Black today. In these communities, Black households face the largest gap in mortgage access relative to White households. The past and present operate together as the historic structure of redlining colludes with contemporary racial segregation to deepen economic disadvantage.
This should cause us to rethink the way we talk about discrimination. It isn’t only about individual bias or bad actors. It is a pattern of concentrated disadvantage that was embedded in neighborhoods by residential segregation, where some received access to generous mortgage capital while others are consistently starved of it.
Homeownership remains the primary way American families build wealth. Unequal access to mortgage credit means unequal access to economic stability, equity and opportunity. It affects school quality, neighborhood investment, health outcomes and intergenerational mobility. When entire neighborhoods, especially Black neighborhoods, are systematically denied credit, the consequences can last for years if not decades.
Despite progress being made on the fair housing law and policy front, the United States never completely dismantled the discriminatory lending architecture created by redlining.
To truly remedy these issues, we need continued enforcement of fair lending laws, more transparency in mortgage underwriting and targeted investment in neighborhoods harmed by generations of exclusion. The Community Reinvestment Act (CRA) and other community reinvestment strategies are crucial towards making progress in closing the racial wealth gap.
But it’s also important to acknowledge that the geography of discrimination still shapes the geography of opportunity. Only by confronting that reality can we begin to break down the structures that enable this inequitable reality.
Bruce C. Mitchell is the Principal Researcher with NCRC’s Research team.
Photo credit: David McBee via Pexels.
