Between 1935 and 1940, the Home Owners’ Loan Corporation, a federal agency, legitimized racial discrimination by creating color-coded maps for cities across the country to indicate risk levels for long-term real estate investment. Neighborhoods that received the highest grade of A, colored green on the maps, were considered “best.” Those that received the lowest grade of D, colored red, were regarded as “hazardous,” the practice known as redlining.
Urban areas with a large share of Black families were most likely to be redlined, while neighborhoods made up mostly of white families were most likely to be deemed “best” and colored green. In redlined neighborhoods, it was virtually impossible to get a loan.
Redlining was outlawed in the 1960s, and in 1977, Congress passed the Community Reinvestment Act (CRA) to combat its effects by requiring banks to meet the credit needs of people where they do business, especially low- and moderate-income neighborhoods.
Yet redlining remains a major factor in the country’s already substantial wealth gap between Black and White families.