Persistence of Racist Loan Practices in Contemporary Landscape of Lexington, KY: An Exploration of 1930s Redlining

About

This map allows the user to explore the access (or denial of equitable access) of home ownership and its related benefits under varying gauges of wealth in the current locations of neighborhoods historically Redlined by the Home Owners Loan Corporation (HOLC) in Lexington, Kentucky. Aspects of wealth mapped include:

Race/Segregation

Median Household Income

Home Ownership

Median Reported Property Value

Race/Segregation may not initially be considered by all as an aspect of wealth, however, in this instance the HOLC Redlining practices ushered this category in as its inherently racist practices negatively impacted the of populations of color within these neighborhoods. To learn more about the history of HOLC click the Redlining Map Info button on the map.

Styling

For this map, the traditional 1930s HOLC Redlining Map is displayed side-by-side with a map containing the Census Bureau Data Layer of Interest (Race/Segregation, Median Household Income, Home Ownership, and Median Reported Property Value.) A side-by-side view was chosen because:

The two maps are using two different polygon outlines for data. Census Bureau Tract level data does not fall neatly into the HOLC Redlining neighborhoods and to lay them on top of one another reduces clarity.

Syncing of the maps when zooming in or panning maps allows the user to identify both HOLC level and Census Bureau level data for an area simultaneously.

Historical HOLC Redlining Maps were designed initially with a color scheme to signify a hazard or risk rating of loaning to a homeowner in specific neighborhoods of a city.

The author chose to divert from the traditional color scheme to a gradient level color scheme because:

The primary goal of this map and the primary goal of the traditional HOLC Redlining map are not the same and the previous color scheme no longer serves the purpose of this map.

The user is permiited to make clear connections between relationships of HOLC Grade assignments, the likelihood of a homeowner being approved for a loan through HOLC, and current aspects of denied wealth benefits.

The user no longer has to keep in their mind what Grade level (A-B-C-D) is associated with what hazard level (Best-Still Desirable-Declining-Hazardous) and corresponds to what color (Green-Blue-Yellow-Red).

Improves accessbility to those of varying vision abilities for whom red and green may not be identified clearly.

Removes the color associations of the western world of red/bad or green/good.

Prevents perpetuating the association of race with hazardous conditions as was foundational to the HOLC Redlining practices.

Inspiration

How Racial Capitalism Persists today in Lexington, KY: An exploration of 1930s Redlining Practices was authored by RC Ramsey as a part of a M.S. project at The University of Kentucky in the New Maps Plus graduate program. Ramsey was inspired by Mapping Inequality Redlining in New Deal America, and an Environmental Justice & Systemic Racism Speaker Series hosted by the U.S. Environmental Protection Agency.

Intentions

This map is intended to provide information to a user. It alone will not repair or return the wealth blocked from occupants in Redlined areas. Policy changes through voting are how we will begin the effort toward equity for the long term resident's access to benefits from revitalization programs they have been excluded from in the past. With information in hand, informed users can use their vote to promote equitable projects and grant funding to benefit the neighborhoods and occupants continuing to be impacted by Redlining practices implemented decades ago.

License

The mapping project is licensed under the GNU General Public License v3.0.

Home Owner's Loan Corporation

During the U.S. Great Depression of the 1930s, a drastic increase in unemployment reduced the ability of home owner's to continue making payments on their homes mortgages. President Roosevelt emplored Congress to pass legislation to:

• 1. Prevent foreclosure of small home owners (of which were millions)
• 2. Alleviate some of their financial burden of their home

President Roosevelt stated it was of National importance to safeguard home ownership. It was these declarations that paved the way for HOLC. This program only granted loans for a period of three years and ended in 1936 but it's influence remains.

"Home Owner's Loan Corporation was established during the summer of 1933 to help families prevent loss of their homes through mortgage foreclosure."

(Harriss 1951)

There was nothing gradual about the creation of HOLC. In short notice a nation wide corporation was cobbled together in attempts to open up the application process and reduce the loss of the National Treasury while providing aid to what families they could. The corporation needed appraisers on the ground, nationwide, with intimate local knowledge, as soon as possible. Initially program apprasiers were selected by state managers without any defined rules or regulation for their selection. It took 6 months before qualifications were outlined and drawn up limiting the selection pool to real estate brokers, experienced appraisers, or experienced builders/architects (Harriss 1951). Months passed before these rules were instituted and met in each region. It was the appraisers who were responsible, for building the ship while sailing it. In an effort to aid the appraisal process, appraisers outlined neighborhoods with Grades and color coding corresponding to a hazard rating.

This hazard rating was intended to indicate to a lending institution the potential foreclosure risk posed by a home within neighborhoods outlined. The lowest risk was indicated with green and labeled Grade A while the highest risk was colored Red and given Grade D for being considered extremely risky or hazardous to loan to. Applications from within the Grade D neighborhoods were refused loans based on the risk.

Nelson et al. accessed January 25, 2022

Hazard ratings assigned to neighborhoods were typically paired with descriptions of the neighborhood written by the program appraisers. Descriptions were written and mapped in cities across the U.S. and for Grade D area descriptions usually included some form of not so subtle racist references to "infiltration" by an "undesirable" or "low grade" population. Populations included among these descriptions were "Colored", "Italian", "Jewish", "Negroes", "Asiatics", "Orientals", "Polish", "Hungarian", "Czech", "Greek", "Mexican", "Russian", "Slavic" or "Syrian".

Assistance afforded to White populations from 1933-1936 with this program was not granted equally among all races because of the inherent racist basis of the program. By denying Minority populations of color loans, they were denied equitable access to home ownership and the related benefits. Benefits to home ownership include:

1. Equity as a form of savings
2. Protecting investments against inflation
3. Avoidance of increased monthly payments when renting
4. Write offs on Taxes

Wainer and Zabel (2020) did conclude the timing of the purchase and sale of the home matters with regards to the wealth benefits, however, through time, it has been the general claim that homeownership provides one of the few ways a low-income household could accumulate wealth.

HOLC Redlining was not a pivot from the practices of the time. It fell in line with historically segregated blocks, racial restrictive zoning ordinances, and housing/land use ordinances. The environment of racial loan practices historically paved the way for HOLC to step into the same queue. The power of the HOLC map did not fade with time. Instead continued roadblocks were created between Black and Minority populations from obtaining home ownership.

From the 1920s to 1950s real estate agents swore to a code of ethics to not introduce races or nationalities that were deemed "detrimental" to property values based on their standards (FHA Underwriting Manual). I.e. they should maintain the current segregated neighborhood of Whites only because any race they deemed other was deemed detrimental to property values.

Not long after HOLC the Federal Housing Administration responsible for guaranteeing mortgage insurance made it near impossible for minorities to obtain a home loan from a bank based on their newly created guidelines. Guidelines very similar to the real estate code of ethics. If a builder wanted to guarantee to be paid for their investment they needed buyers who could get mortgage insurance, i.e. White buyers. After WW2 the Federal government supported suburbanization of metro areas, guaranteeing bank loans to mass-production builders with FHA insurance continuing to only support construction for Whites Only Projects or projects incorporating barriers between races including walls, parks, highways, cemetaries, forests or any other object not likely to be moved or relocated (Rothstein 2017).

The VA now enters to help support returning veterans in securing a home loan. FHA and VA together insured 50% of all new mortgages nationwide (FHA underwriting manual 1938). It became the FHA’s Policy that “no guarantees” would be made “for mortgages to African Americans, or to whites who might lease to African Americans, regardless of applicants’ creditworthiness". By 1959 less than 2% of FHA insured housing built was available to Minority or ethinic minorities. (FHA underwriting manual 1938; Taylor 2014)

With limited housing available, whenever a real estate speculator offers a home to a Minority family, even at higher costs, it’s one of their few opportunities during this time to purchase a home. Real estate speculators did this to accomplish blockbusting. They move one Minority family into a neighborhood which scared the White neighbors into selling at a loss to the speculators, then turn around and sell the home at inflated costs to other minorities. For Black populations the same home will cost significantly more than their White counterpart paid for it. This entire time, what housing Black populations did have available was often obtained on private agreement contracts with real estate speculators since no insurance, thanks to FHA guidelines, was being offered. Contracts required no down payment or closing costs from buyers as they were already owned by the speculator. These contract payments were however, much higher than what Whites were paying for their insured, home mortgage. The contracts also built no equity in the home, could have the rent raised at any time and upon missing one payment the owner would be evicted with no equity returned. The speculator could even terminate the contract at any time.

From 2000 up until 2008’s financial collapse “reverse Redlining” was prevalent where banks and lending institutions target their marketing to the 1930s Redlined neighborhoods for subprime home mortgages without disclosing consequences. These subprime mortgages were the twin of contract sales because again, no equity could be built, the payments were much higher and the foreclosure of a home could occur with a missed payment. This was only 14 years ago.

References

C. L. Harriss 1951, History and Policies of the Home Owners' Loan Corporation (New York: National Bureau of Economic Research, 1951), p. 1, p. 43.

R. K. Nelson, L. Winling, R. Marciano, N. Connolly, et al., “Mapping Inequality,” American Panorama, ed. Robert K. Nelson and Edward L. Ayers, accessed January 25, 2022, Mapping Inequality-Lexington

R. Rothstein. 2017. The Color of Law A forgotten History of How Our Government Segregated America. Liveright Publishing Corporation. 368 pages.

D. E. Taylor. 2014. Toxic Communities Environmental Racism, Industrial Pollution, and Residential Mobility. New York University Press. 342 pages.

A. Wainer & J. Zabel. 2020. Homeownership and Wealth Accumulation for Low-Income Households. Journal of Housing Economics. 2020. 47. 101624.