Redlining set the stage for both private and governmental discrimination against would-be minority homebuyers. In the 1935, the Home Owners’ Loan Corporation (HOLC) teamed up with local lenders and realtors to draw residential security maps for 239 of the nation’s cities. The goal was to slow down a foreclosure crisis sparked by the Great Depression. The maps would help the HOLC know where to make low-interest loans to struggling homeowners, while minimizing the risk of further default. Predominantly African American and other minority neighborhoods were usually outlined in red (“redlined”) as areas where making loans would be most risky. In his book Crabgrass Frontier, Kenneth Jackson theorized that these maps formed the basis for African Americans’ systematic disadvantage in accessing stable homeownership.
The HOLC maps do not fully explain lenders’ behavior. Although interest rates were higher in redlined areas, lenders had been avoiding them even before the maps were published. The federal government later tried to correct lending discrimination through the Equal Credit Opportunity Act of 1974, the Home Mortgage Discrimination Act of 1975, and the Community Reinvestment Act of 1975. But in the 1930s and 40s, there was no obstacle to redlining, and by creating their own color-coded maps along racial lines, the federal government helped institutionalize the exclusion of certain groups from the American Dream of homeownership.