But new research shows that the maps very probably did not guide private lenders or the Federal Housing Administration (FHA), which clearly engaged in racist lending practices all on their own. The HOLC, however, actually loaned widely in Black neighborhoods and other red-shaded areas.
“If you’re trying to use the HOLC maps to tell us how federal policy influenced things, then that’s the wrong set of maps,” says Price Fishback, professor of economics at the University of Arizona.“Some people have been doing these long-range studies and saying this was all FHA policy using the HOLC maps. They’ve been using various techniques that require you to explicitly look at these boundaries. But they’re using the wrong boundaries.”
Although the two agencies were set up at a similar time, HOLC was a temporary program (it ceased operating by 1951) meant to help homeowners who were in danger through no fault of their own. The FHA didn’t interact with existing loans, but was tasked to build a new insurance program backing “economically sound” loans with lower interest rates and longer duration periods than was traditional at that time.
Fishback and his co-authors are not arguing that racist mortgage practices did not occur. But they are trying to disentangle the policy of the two New Deal-era mortgage institutions, one of which engaged in heavily anti-Black practices (the FHA) and the other of which did not (HOLC). This also means that the famous redlining maps issued by the latter agency do not reflect how discriminatory lending was put into practice.
The researchers studied over 16,000 loans in three cities: Baltimore, Md.; Peoria, Ill.; and Greensboro, N.C. This unique data set includes every loan made by HOLC between 1933 and 1936 and every loan insured by the FHA from 1935 to 1940 in these three jurisdictions.
They found that in all three cities the HOLC refinanced many loans in neighborhoods coded red, with no evidence of discrimination against Black homeowners. The FHA, on the other hand, did not ensure mortgages in the neighborhoods where Black homeowners lived and chiefly targeted newly constructed homes, which almost exclusively catered to whites, and those in wealthier neighborhoods.
“People have been treating the HOLC like they’re evil or highly discriminatory,” says Fishback. “But the share of their loans that were held by Blacks is larger than the share of loans by any group of private lenders you can find during this time frame. HOLC has this really bad reputation, despite the fact that they were actually doing more for Blacks than anybody else at the time.”
While HOLC embarked on its now famous analysis of urban neighborhoods, it kept its maps secret and does not appear to have shared them with private lenders. Although it shared them with the FHA, that agency enacted its own discriminatory policies on a block-by-block basis instead.
Even if the general story of redlining and racism in housing doesn’t change, it’s important to get better detail so we can place the blame where it belongs rather than rely on a broad-based charge.