Redlining: The Racist Housing Policy That Created the Racial Wealth Gap

When people talk about the racial wealth gap, they often focus on jobs and education. But one of the biggest factors keeping Black families from building generational wealth isn’t just income—it’s homeownership.

For decades, Black Americans were systematically locked out of homeownership through a practice known as redlining. This government-backed policy denied Black families access to mortgages and forced them into housing segregation, ensuring that wealth stayed in white hands.

Even though redlining was officially banned in 1968, its impact still shapes racial inequality today.

What Was Redlining?

In the 1930s, during the Great Depression, the U.S. government created the Home Owners’ Loan Corporation (HOLC) and the Federal Housing Administration (FHA) to help Americans buy homes and rebuild the economy.

But instead of offering fair opportunities to all, the government:

🔴 Mapped out “desirable” and “undesirable” neighborhoods based on race

🔴 Marked Black and minority communities in red, labeling them “high risk” for loans

🔴 Refused to insure home loans for Black families in these areas

🔴 Encouraged banks and real estate agents to keep neighborhoods segregated

This practice, known as redlining, meant that Black families were denied home loans—even if they could afford them—while white families received government-backed mortgages to build wealth.

How Redlining Hurt Black Communities

Redlining wasn’t just about housing—it was about creating an economic divide that still exists today.

🏡 Denied Homeownership – White families could buy homes and pass wealth down, while Black families were stuck renting or paying higher interest rates through predatory lenders.

🏚️ Underfunded Black Neighborhoods – Since home values determined tax revenue, redlined areas received less funding for schools, roads, and public services.

🚫 Segregation Was Reinforced – Black families weren’t allowed to move into white neighborhoods, keeping them in areas with fewer job opportunities and poor infrastructure.

📉 Generational Wealth Gap – While white families built home equity and generational wealth, Black families were left with fewer assets and financial security.

Redlining Didn’t End in 1968

In 1968, the Fair Housing Act made redlining illegal—but the damage had already been done. And in many ways, the practice never really ended.

🔹 Modern-day lending discrimination – Studies show that Black and Latino applicants still face higher loan denial rates and worse mortgage terms than white borrowers—even with similar financial profiles.

🔹 Property values in Black neighborhoods remain lower – Homes in formerly redlined areas still appreciate in value at much lower rates, keeping Black homeowners at a disadvantage.

🔹 Gentrification displaces Black communities – In many cities, Black families are pushed out of historic neighborhoods as property values rise, while new (often white) residents reap the benefits.

Why This Still Matters Today

🏡 The racial wealth gap in America is directly tied to redlining. Today, the median white family has nearly 10 times the wealth of the median Black family—and homeownership (or the lack of it) is a major reason why.

📍 Housing segregation still exists – Even today, many U.S. cities remain deeply segregated because of policies that originated with redlining.

💰 Predatory lending continues – Black and Brown borrowers are still targeted for subprime loans, leading to higher foreclosure rates and financial instability.

Redlining may not be legal anymore, but its effects are still shaping Black communities, homeownership, and generational wealth today.

What Can Be Done?

To address the lasting harm of redlining, communities and policymakers have pushed for:

✅ Stronger fair housing protections – Enforcing laws against lending discrimination.

✅ Down payment assistance for Black homebuyers – Programs to close the homeownership gap.

✅ Investments in historically redlined communities – Ensuring Black neighborhoods receive funding for schools, infrastructure, and housing.

We Can’t Talk About the Wealth Gap Without Talking About Housing

If we want to understand racial economic inequality in America, we have to talk about redlining. It wasn’t just an unfair policy—it was a government-backed system that made it nearly impossible for Black families to build wealth.

And until those systemic barriers are addressed, the racial wealth gap will remain.

💬 Let’s Talk:

Did you know about redlining before today? How do you think housing discrimination still affects Black communities? Drop your thoughts in the comments!