Redlining & Racism in Housing Policies During the New Deal Era

Instructor: Christopher Muscato

Chris has a master's degree in history and teaches at the University of Northern Colorado.

The New Deal is generally remembered for the way it benefited American society, but did everyone benefit equally? In this lesson, we're going to see how some policies actually helped expand segregation across the United States.

Racism and the New Deal

The Great Depression was rough for everyone. That's true regardless of race, creed, or sex. When we picture lines of people waiting for food, millions without work, and miserable living conditions, those images are largely accurate.

The federal government, largely under the leadership of President Franklin D. Roosevelt, tried to resolve these issues using a sweeping series of reforms and policies collectively called the New Deal.

New Deal policies were meant to deal with the unemployment and insecurity of the Great Depression

The New Deal was meant stabilize the economy, create jobs, and protect people from economic catastrophes in the future. In many ways it was successful, but was it successful for everyone?

History has often ignored the fact that many New Deal policies were implemented unevenly. This was particularly true in the South, where Southern Democrats held a lot of power, power which rested upon racial segregation. FDR needed Southern Democrat support, and so racist policies of segregation found their ways into the New Deal. This was especially evident in housing.

Housing Policies of the New Deal

FDR had a lot of ideas about creating a secure future for Americans. He oversaw the development of the American welfare system, social security, and federal unemployment insurance. However, one area that was always of extreme importance to him was home ownership. FDR believed that owning a home was the single greatest thing Americans could do to ensure lasting economic security.

To that end, FDR made housing issues a top priority within his New Deal programs. Like other parts of the New Deal, he authorized the creation of a series of bureaucratic agencies to oversee housing reform.

One agency was the Home Owners' Loan Corporation (HOLC), created in 1933 to reform the home refinancing process and prevent foreclosures. The other big agency was the Federal Housing Administration, created in 1934 to standardize quality construction and insure loans for home building.

Together, these agencies streamlined the processes of homebuilding and home buying, standardized lending practices and worked to make homeownership a reality for millions of Americans.

Housing and Segregation

So far, these programs sound pretty nice, and to many Americans they were very beneficial. However, the same agencies that promoted homeownership for some actually worked to deny it to others.

Housing policies were designed to disproportionately benefit white American families
white family

Infused with segregationist mentalities from Southern Democrats, these New Deal housing agencies were built around the concept that homeownership was something designed to protect white Americans, not all Americans. Therefore, the top priority of the HOLC and FHA was to secure and safeguard white homeownership.

In the racist attitudes of segregation, racially mixed neighborhoods were seen as a direct threat to the stability of white homeownership. The belief was that the property value of a neighborhood would drop precipitously once African Americans or people of other non-white ethnicities began moving in.

Since the goal was to use homeownership as a way to protect white families, the HOLC and FHA actually increased racial segregation in terms of living patterns, and institutionalized it within federal standards.

It is worth noting that no research was actually conducted by the government on the link between black residents and a decrease in property value. It was just assumed that having integrated neighborhoods would devalue property.

Private studies, however, actually found the exact opposite. Black families tended to be willing to pay more to get into a nice neighborhood, which actually increased property values throughout that community.


So, how did agencies like the HOLC and FHA promote segregation through homeownership? To put it simply, they just didn't offer the same loans, mortgages, or payment plans to people of different ethnicities.

In essence, a white man and black man of the same age and earning potential could apply for a house in the same neighborhood, but only the white man was likely to be approved. The black man was forced to take a house in a community with more black people, or more likely, to stay confined to inner-city apartments and housing.

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