The Wealth Gap Hangover: Redlining

fiscalsis — Mon, 10 Aug 2020 02:53:17 +0000

In this current climate of advocacy, social unrest and outcries for reform around systemic practices specially designed to advance select members of society while exploiting others, more and more people have become willing to acknowledge (and begin the work of dismantling) the types of systems created during this country’s founding—and maintained in the hundreds of years beyond that—in an effort to finally come to terms with the very real disparities that exists between dominant culture (the America that is decidedly white) and minority culture (the America whose black and brown children have enjoyed citizenship primarily in name only).

One such practice (though now illegal) that many people have been refocusing on lately due to its devastating effects in furthering the wealth gap in an already disparate society is the practice of redlining. During the 1930’s, the United States Government (through a former agency known as the Home Owners’ Loan Corporation), worked with real estate agents and lending institutions to create maps of large cities with high concentrations of residents of color to identify neighborhoods that they deemed more likely to default on home loans. These maps also indicated desirable neighborhoods where loans would be more likely to be approved.

As the name suggests, these maps were then marked up with red ink, effectively labeling areas around many of the nation’s largest metropolises that essentially prevented people of color from obtaining loans to buy homes in certain (read: white) neighborhoods.

Think about that…

As a legal, commonplace, best practice, the United States Government backed an exercise that allowed financial institutions and real estate agencies to make certain areas around the country geographically off-limits for minorities to not only live in, but to establish the very American Dream of home ownership. Now, although the practice was banned thanks in part to the 1968 Fair Housing Act, it is believed that redlining further expanded the chasm of wealth disparity between whites and people of color.

How, you might ask?

Well, for most people, home ownership has been the fastest way to build wealth in America. Real Estate for the most part is an appreciable asset that builds equity over time. Many have used that equity to pay for a child’s college education or to fund a business endeavor. In Estate Planning, a home is a safety net for a family that often becomes an investment into their future. For many black and brown communities across the United States between the 1930’s to almost the 1970’s, it is believed that at least $200K in personal wealth per household was deemed unattainable due to redlining.

It would seem that in playing an active part in discriminating against American citizens and significantly and adversely impacting the likelihood of those citizens achieving financial freedom through home ownership, the U.S. Government would have worked to stridently implement some sort of corrective measure to rectify such malicious financial wrongs, wouldn’t it? Sadly, aside from determinations under the Community Reinvestment Act of 1977 where lenders are rated outstanding, satisfactory, needs improvement or substantial noncompliance when approving or denying loans to people (in low-income households), I’d say much is still left to be desired (I mean, how can we forget the predatory lending and subprime mortgage crisis that lead to the 2008 Great Recession).

In actuality, this realization coupled with the ramifications of other restrictive regulations and open acts of historic racial injustices levied against this nation’s minority population for no other reason than the color of their skin, has made it more and more evident that rectifying these racial and financial disparities has to begin with sweeping, corrective and fair legislation. Until there are politicians in office who acknowledge and are willing to help legislate change for the many socioeconomic conditions that have plagued people of color for hundreds of years, gaps like this one will continue to broaden and practices like redlining may find a subtle, and more nuanced resurgence.

BLM – Fiscal Sis

The Wealth Gap Hangover: Redlining