Redlining in Chicago

An analysis of the long lasting impacts of discriminatory mortgage policies

What's the problem?

Redlining was a commonly used practice that denied Black homeownership and racially segregated the population.

Background Information

The historical practice of redlining has exacerbated racial inequalities and continues to do so today, reinforcing wealth gaps and unofficial segregation (Mitchell, 2018). Redlining was perpetrated by the Home Owners’ Loan Corporation (HOLC), a government agency created as part of the New Deal in the 1930s. The HOLC subsidized mortgages in order to make homeownership more accessible for Americans, but did so in a way that disadvantaged predominantly minority communities, specifically Black communities. When the HOLC was assessing the creditworthiness of neighborhoods, the racial makeup of areas strongly informed these assessments. Areas were placed into one of four categories: Best, Desirable, Definitely Declining, and Hazardous. The areas that were deemed “Hazardous” were disproportionately made up of minority communities and seen by mortgage lenders as risky investments. This, in turn, made it very difficult for people to purchase housing there, as credit was either made very expensive or completely unavailable by risk-aversive banks (Moser, 2017).

Effects

Even though discriminatory practices such as redlining have now been made illegal, their effects continue to persist today. This makes redlining not just a historical incident but a modern-day problem. Most notably, redlining has shaped the current racial makeup of certain areas by limiting housing options for minorities. This has led to the creation of non-diverse communities that face large disparities when it comes to the amount of available resources. Through the use of maps and geospatial data, this unofficial segregation can be clearly demonstrated and hopefully used to spark the creation of potential solutions. Additionally, redlining also shaped the socioeconomic status of these areas by preventing homeownership. Homeownership has been seen as one of the largest contributing factors to generational wealth, as people can use some of their property’s equity to invest in other wealth-generating opportunities such as funding an education or business ventures. Currently, there is an incredibly large racial wealth gap in this country, with “African-American wealth [amounting to only] about 5 percent of white wealth” (Gross, 2017). Therefore, this is clearly a large problem and efforts must be taken to reverse the damage that redlining has caused for so many generations of black families.

Our Research Questions

  • How has historical redlining affected the demographics of Chicago?
  • What are the most effective solutions that can be implemented to address redlining?

Redlining Map

In this map of Chicago, the colorful polygonal layer shows the creditworthiness ratings of the HOLC from the 1930s. The blue areas are grade A (best), the green areas are B (still desirable), the yellow areas are C (declining) and the red areas are D (hazardous). This map clearly shows that the red areas are concentrated in particular areas, mostly the East and South areas of Chicago. Meanwhile, the more “desirable” blue and green areas appear to be mostly concentrated in the Northern section of the city, with a few additional ones also on the South side.

Data source: ESRI's Living Atlas - Home Owner's Loan Corporation Neighborhood Redlining Grade


African American Population Map

This second map uses the same data from the HOLC, but is also overlaid with a map of demographic data from 2010 Census. The orange circles represent the density of the African-American population throughout Chicago. Upon looking at the map, it is very apparent that the African American population is much more heavily concentrated in certain areas of the city, mostly the South and West sides.  When comparing these population levels with the different redlining categories, a pattern appears to emerge: the African American population is overwhelmingly concentrated in areas which received C or D grades from the HOLC. This shows that despite the fact that many decades have passed since the historical practice of redlining was first introduced, its impacts are still incredibly present and have shaped the racial demographics that make up present-day Chicago.

Data source: ESRI's Living Atlas - 2010 Census


White Population Map

For this map, the African American population data from the 2010 Census is replaced with the White population data from the 2010 Census. In comparison to the other map, the population locations appear to be almost completely flipped. While the African American population tends to be concentrated in the South and West sides of the city, the White population is much more heavily based on the North side, where there also happens to be more areas marked as “desirable” (green and blue). While there are some small pockets of the White population on the South side, they are still located nearby the few areas there that are designated as green and blue, most notably the very Southwest point. These disparities reveal how redlining targeted certain racial groups and again, shows how the impacts of this policy are still very much present today.

Data source: ESRI's Living Atlas - 2010 Census


Possible Solutions

In order to combat the effects of redlining, many different housing-related solutions have been proposed. Here, we will give a basic overview of some of these options.

Affordable Housing

Investment in affordable housing is a hugely important step in ameliorating the disparities stemming from discriminatory housing practices. The segregation that has been created by such practices, including redlining, manifests in certain areas being more inaccessible to low-income or marginalized groups. In order to increase the accessibility of homeownership in more “desirable” areas, affordable housing must be part of the solution. Investing in affordable housing allows more people to access the resources that come along with well-off areas: high-quality education, expanded job opportunities, better transportation, and more. These “communities of opportunity” can be made accessible to more people through government incentivization of mixed-income housing and making public land available for intentionally low-cost housing (Habitat for Humanity, 2020).

Rent-to-own Programs

Rent-to-own programs are a critical step in addressing the gaps in homeownership and wealth that are created by practices such as redlining. Rent-to-own programs create a path to homeownership, where organizations or companies purchase a home that an individual/family/couple can then rent. Over time, this rent will go toward the eventual purchase of the home by the residents. Some programs also provide financial coaching to further assist that purchase. Ultimately, these programs are important in addressing the impacts of redlining because, if targeted properly, they can reverse the discrimination enacted against minorities. They also are useful in establishing generational wealth, which is a major determinant of someone’s socioeconomic status and something that was frequently denied to minority groups in the past (Urban Displacement Project, 2018).

Down Payment Assistance

Down payment assistance can help reverse the effects of redlining by increasing homeownership rates for people who otherwise could not afford it. Typically, when buying a home, one must put down a certain amount of money at the time of sale. However, for many people, saving such a large amount of money is incredibly hard to do. Therefore, by providing housing subsidies, down payment assistance programs can help people overcome this upfront financial barrier. Then, once the person is able to secure the home and work towards paying off their mortgage, they can then enjoy the same financial and social benefits as other homeowners (Allison, 2012).  


Our Recommendation

After reviewing the many different solutions that we have detailed above, we believe that affordable housing is the best option for mitigating the effects of redlining in Chicago.

Affordable housing addresses many different aspects of redlining. It diversifies communities, creating neighborhoods that are less homogenous in terms of socioeconomic status. This is mutually beneficial for everyone in the area. Furthermore, it reduces the risk of future policies which could reinforce the effects of redlining, as it mitigates the possibility that an area can uniformly be perceived as risky. This diversification means that such strict boundaries cannot be drawn between areas, as they were in the HOLC’s assessments from the 1930s. Additionally, affordable housing is unique in that it can be directly targeted to those who need it: it can be made available to people based on socioeconomic status, tax bracket, etc. This characteristic makes affordable housing extremely effective in ameliorating the atrocities inflicted by redlining. This solution is also beneficial to local communities and economies for multiple reasons. It creates local jobs in the process of development and construction; there is more money spent in local economies because people don’t have to devote as much of their income to rent; there are fewer evictions, which creates stability and continuity in communities; and it mitigates childhood poverty, which is costly and detrimental to the overall population. Because of all of these reasons, affordable housing is clearly the most effective policy solution to historically discriminatory housing practices (Dolan, 2021).

Current Map of Affordable Housing in Chicago

Using data from the City of Chicago’s GIS database, we have layered the different locations of affordable rental housing developments with the different HOLC redlined areas. When looking at the map, it is apparent that many of these affordable housing units are located within the more centrally located “Hazardous” areas (red). In the surrounding yellow areas, there are less affordable housing units, especially as you move towards the Western side of the city. Then, finally, when looking at the most desirable blue and green areas, there are very few affordable housing units present. This shows that while there is a large overall number of affordable housing units located within the city, many disparities still exist, especially in the more well-off areas where there is a clear lack of affordable housing units in comparison to other areas. Initiatives should therefore be made so that these areas can build more affordable housing, allowing people who have traditionally been discriminated against to have equal access to resources that may not be present in the underserved communities that they have previously been limited to.  

Data source: City of Chicago - Affordable Rental Housing Developments

Proposed Additional Affordable Housing Developments

Here, we address the issue that there are not enough affordable housing units currently available in the city’s more well-off areas. Using purple stars, we have indicated certain areas that we believe would be good places to build new affordable housing developments. By doing this, these areas will become more diversified, offering housing options to new types of people that were previously excluded from the area. Additionally, new tenants will be able to benefit from the area’s abundant resources, like good education and employment opportunities, at a price that they can realistically afford. 


Bibliography

Allison, C. (2012, April 3). Filling the Home Purchase Financing Gap. Retrieved from  https://core.ac.uk/download/pdf/210605282.pdf  

Dolan, A. C. (2021, March 23). 6 Ways Affordable Housing Can Boost Local Economies. Retrieved from https://commonbond.org/economic-benefits-of-affordable-housing/

Gross, T. (2017, May 03). A 'Forgotten History' Of How The U.S. Government Segregated America. Retrieved from  https://www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-government-segregated-america 

Habitat for Humanity. (2020, August). The Role of Housing Policy in Causing Our Nation's Racial Disparities. Retrieved from https://www.habitat.org/sites/default/files/documents/Racial-Disparities-and-Housing-Policy-.pdf

Mitchell, B. C. (2018, March 27). Reversing the red lines: Disinvestment in America's cities " NCRC. Retrieved from https://ncrc.org/reversing-the-red-lines-disinvestment-in-americas-cities/

Moser, W. (2017, August 22). How Redlining Segregated Chicago, and America. Retrieved from  https://www.chicagomag.com/city-life/august-2017/how-redlining-segregated-chicago-and-america/ 

Urban Displacement Project. (2018, April). Redlining and Gentrification. Retrieved from https://www.urbandisplacement.org/redlining