Updated on September 10, 2024
Redlining: The Race-Based Exclusion of Services and the DOJ’s Initiative to Combat It
Katie Deutsch
Comments Editor
Katie is a 3L at the University of Kansas School of Law. She earned her undergraduate degrees in Economics and Political Science from Wichita State University. Katie is interested in civil litigation, particularly surrounding employment law. Outside of law school, Katie enjoys traveling and sharing a good bowl of pasta with friends.
On October 22, 2021, the U.S. Department of Justice announced the launch of its “Combatting Redlining Initiative.”[1] The initiative’s enforcement efforts against redlining are being led by the DOJ’s Housing and Civil Enforcement Section in collaboration with U.S. Attorneys’ offices nationwide.[2] According to the DOJ, the initiative represents its most aggressive and coordinated effort to address redlining.[3]
Redlining is the illegal practice of denying services–financial and otherwise–based on race or national origin.[4] Today, redlining is prohibited under the Fair Housing Act and the Equal Credit Opportunity Act,[5] but redlining originated from and was institutionalized by the federal government.[6] In the 1930s New Deal era, the federal government created programs to offer government-insured mortgages to home buyers in an effort to prevent foreclosures after the Great Depression.[7] To determine who qualified for these mortgages, the government used color-coded maps to rank the “loan worthiness” of neighborhoods.[8] In these color-coded maps, the worst ranked neighborhoods––and thereby the least “loan worthy”––were those in which Black residents lived in or lived nearby.[9] Mainstream banks soon adopted the government’s color-coded maps, preventing Black home buyers from qualifying for secure mortgages altogether.[10]
Today, Black borrowers in the U.S. are still two to three times more likely to be denied a mortgage than white borrowers despite redlining having been outlawed since 1968.[11] Correspondingly, 46% of white families own their home compared to just 17% of Black families.”[12] Notably, this racial gap in homeownership is larger today than it was before the passage of the Fair Housing Act of 1968.[13] With homeownership remaining a key driver for wealth building, it is not surprising then that “the typical White family has eight times the wealth of the typical Black family and five times the wealth of the typical Hispanic family.”[14]
The DOJ’s new initiative to combat redlining aims to address these statistics by ensuring secure mortgages and homeownership are accessible regardless of race or national origin.[15] As evidence of this priority, the DOJ announced two multimillion-dollar settlements by federal regulatory agencies against financial institutions that engaged in race-based lending discrimination.[16] The DOJ has pledged to continue such intervention by monitoring and taking action against the redlining practices of non-bank lenders and the discriminatory algorithms that lenders typically rely on.[17] While it remains to be seen as to whether this initiative will be successful in effectively eradicating redlining, it is certainly a step in the right direction.
[1] Justice Department Announces New Initiative to Combat Redlining, U.S. Department of Justice (Oct. 22, 2021), https://www.justice.gov/opa/pr/justice-department-announces-new-initiative-combat-redlining.
[2] Id.
[3] Id.
[4] Candace Jackson, What is Redlining?, NY Times (Aug. 17, 2021), https://www.nytimes.com/2021/08/17/realestate/what-is-redlining.html.
[5] Justice Department Announces New Initiative to Combat Redlining, supra note 1.
[6] Id.
[7] Jackson, supra note 4.
[8] Id.
[9] Id. The Federal Housing Administration’s Underwriting Manual, which explained this ranking system, stated that “the presence of socially or racially inharmonious groups in a neighborhood tends to lessen or destroy owner-occupancy appeal.” See Underwriting Manual, Federal Housing Administration (Feb. 1938), https://www.huduser.gov/portal/sites/default/files/pdf/Federal-Housing-Administration-Underwriting-Manual.pdf.
[10] Jackson, supra note 4.
[11] Kristen Broady, Mac McComas, & Amine Ouazad, An analysis of financial institutions in Black-majority communities: Black borrowers and depositors face considerable challenges in accessing banking services, Brookings (Nov. 2, 2021), https://www.brookings.edu/research/an-analysis-of-financial-institutions-in-black-majority-communities-black-borrowers-and-depositors-face-considerable-challenges-in-accessing-banking-services/.
[12] Neil Bhutta, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu, & Julia Hewitt, Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances, Federal Reserve, (Sept. 28, 2020), https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm.
[13] Justice Department Announces New Initiative to Combat Redlining, supra note 1.
[14] Federal Reserve, supra note 12.
[15] Justice Department Announces New Initiative to Combat Redlining, supra note 1.
[16] Id.
[17] Id. See also Robert Henderson & Rebecca Marchiel, The keys to ensuring a new anti-redlining initiative succeeds, The Washington Post (Nov. 15, 2021), https://www.washingtonpost.com/outlook/2021/11/15/keys-ensuring-new-anti-redlining-initiative-succeeds/.
