Tom Gallagher: How bigotry has restructured our cities
Chances are, in the past year or so, you’ve seen redlining appear in news feeds and headlines. As the term has become a substitute for all types of discrimination in real estate and credit, it is important to understand its origin and the indelible mark it has left in the fabric of American cities.
The Federal Home Loan Bank Board and its operating arm, the Home Owners’ Loan Corp., were created in the early 1930s to stabilize the housing market at the end of the Great Depression. They can be credited with, as the University of Richmond’s Mapping Inequality Project notes, “protecting and expanding homeownership, standardizing lending practices, and encouraging residential and commercial real estate investment. in a declining economy ”.
They are also responsible for creating the cards that ultimately gave the discriminatory practice of highlighting its name.
To encourage “responsible” lending practices, working with local real estate professionals, financiers and appraisers in communities of over 40,000 people across the country, Home Owners’ Loan Corp. created color-coded reference cards that investors could use as a standard to determine the “safety” of their investments. Based on their ratings, the “best” neighborhoods were rated “A” (green). “B” (in blue) were “still desirable” and those assigned a “C” were considered “certainly in decline” (in yellow). Neighborhoods with the lowest “D” rating were considered “dangerous” and were, of course, colored red.
The idea of a local, data-driven basis for decision making was good. The problem arose in the values applied to the evaluations. There was a clear trend towards newer and more spacious development, for example. Most shocking was that residents were valued, perhaps more than real estate itself, not by their credit worth or economic viability, but by the “kind of people” they were. . The Mapping Inequality Project points out that “HOLC assumed and insisted that the residency of African Americans and immigrants, as well as working-class whites, compromised the value of homes and the security of mortgages. Of course, the cards did not create a prejudice, but they codified and standardized it.
Redlining, which influenced lending practices until the Fair Housing Act of 1968 made its precepts illegal, had far more profound consequences than any bad appraisal or loan denial. It has resulted in a systematic and fundamental restructuring of our cities to favor the privileged and divert opportunities for wealth from those deemed unworthy.
City centers were no longer seen as the heart of the community or as mixed-use neighborhoods. The system favored the suburbs because they were seen as places where a better quality of people lived.
It is essential that we recognize that redlining is not just a part of our past and that it has a profound effect on Black, Indigenous and Colored communities.
According to a report released last summer by the IUPUI Polis Center, the redlining can be attributed to the degradation of the health, environmental quality and economic opportunities of these neighborhoods today. Of particular interest, the report states that “neighborhood highlighting contributes to violent crime, accounting for 62% of the difference in crime rates between neighborhoods.”
While security maps are no longer in use, the increasing use of algorithmic decision making in real estate matters deserves to be watched. While it’s designed to be data-driven and less susceptible to human biases, there is still an underlying value system that guides the calculations.
Standard lenders today seem to correspond to those defined by Fannie Mae and implemented in an algorithmic program known as “Desktop Underwriter”. With house prices hitting unusual highs and sellers getting, on average, almost 2% above asking price, the market is clearly warm. A responsible buyer or investor would want to be sure that the price is legitimate.
Yet in homogeneous suburban areas, the algorithm, based on its years of data, often suggests that an assessment is not needed while an assessment is always needed in urban neighborhoods with their mix of types and densities. of housing.
The Brookings Institution explains the systemic mechanism in what it calls the three destructive “D’s”. “First, black places are denied the ability to create wealth through the system devaluation their existing assets, including residential properties and businesses; banks and investors pull out, reinforcing credit cycles divestment that inhibit the creation or development of local businesses and undermine efforts to halt and reverse decline. Finally, once asset devaluation drives prices down, outside investors step in to buy assets at low prices and leverage their ownership in economic development programs that benefit investors while at the same time. to move long-term residents and harm existing small businesses.
Shunning traditional ways they have lacked, formerly demarcated neighborhoods increasingly place their value in their neighbors through community ownership, community investment, and community wealth models as a way to better determine their own. destiny.•
Gallagher is Director and Urban Designer at Ratio and Professor of Urban Design Practice at Ball State University. Send correspondence to [email protected]