Redlining is a term used to describe the practice of mortgage lenders denying loans or charging higher interest rates to individuals based on their race or ethnicity. It’s a form of discrimination that has been prevalent in many cities, including Boston.
What is Redlining?
Redlining first became prevalent in the 1930s when the Federal Housing Administration (FHA) was created. The FHA was tasked with insuring mortgages, but they only insured mortgages in certain areas, which they deemed to be “safe” investments. These areas were typically white, affluent neighborhoods, and neighborhoods with high numbers of minority residents were excluded from the program.
The term “redlining” comes from the practice of drawing red lines on maps to indicate the areas that were excluded from the FHA program. This practice was later adopted by private lenders, who also refused to lend money to people in these areas.
Redlining in Boston
Boston has a long history of redlining. In the 1930s, the FHA designated many neighborhoods in Boston, including Roxbury and Dorchester, as “hazardous” and refused to insure mortgages in those areas. Banks and other private lenders followed suit and refused to lend money to people in these neighborhoods.
Redlining had a significant impact on these neighborhoods. Without access to affordable mortgages, many residents were unable to buy homes, and those who did often paid higher interest rates than their white counterparts. This led to a cycle of poverty and disinvestment in these neighborhoods that persists to this day.
Is Redlining Still Happening?
While redlining is now illegal, there is evidence that it still happens in more subtle ways. For example, a study by the National Bureau of Economic Research found that Black and Hispanic borrowers are still more likely to be denied mortgages than white borrowers with similar credit profiles.
There is also evidence that Black and Hispanic borrowers are more likely to be given higher interest rates than white borrowers. This is known as “reverse redlining,” and it happens when lenders target minority neighborhoods with high-interest loans.
What Can be Done?
The first step in addressing redlining is to acknowledge that it exists and to work to undo its effects. This can include investing in underserved neighborhoods, providing financial education and counseling, and creating policies that promote fair lending practices.
It’s also important to hold lenders accountable for discriminatory practices. This can include filing complaints with regulatory agencies, such as the Consumer Financial Protection Bureau (CFPB), and pursuing legal action when appropriate.
Conclusion
Redlining is a form of discrimination that has had a significant impact on many communities, including those in Boston. While it’s now illegal, evidence suggests that it still happens in more subtle ways. Addressing redlining requires a concerted effort from policymakers, lenders, and the community at large. By working together, we can create a more equitable and just lending system for all.