How the New Deal Segregated America

We often think of segregation as a bad policy that ended long ago—a shameful part of our history put far behind us. In reality, segregation continues to shape, where we live, our politics, and even culture.

This week Mila was joined by journalist, author, and historian Richard Rothstein. He is the author of The Color of Law: A Forgotten History of How Our Government Segregated America. In it, he traces the rise of systematic state-sponsored segregation, which only became prevalent more than fifty years after the end of the Civil War. 

He argues that the segregation imposed on metropolitan areas of the US by the federal, state, and local governments is the primary reason for the racial wealth gap and the high levels of housing segregation we still see around the country.

“The reality is that the reason we are segregated is because of a set of racially explicit federal, state and local policies that were designed to ensure that African-Americans and whites could not live near one another in any metropolitan area of the country,” he explained to Mila. 

Moreover, this segregation was not merely an unjust remnant of a slave-holding America. It was purposefully instituted during the first half of the 20th century, thanks in part to FDR’s New Deal

When FDR took power in 1933, he immediately instituted a slate of new policies to pull America from the brink of ruin. These policies created millions of jobs, jumpstarted public works programs, promoted organized labor, and created new public housing programs. They also contributed significantly to codify segregation in America. 

The New Deal created two organizations dealing specifically with housing and home loans: the Federal Housing Authority (FHA) and the Home Owners’ Loan Corporation (HOLC). The Roosevelt Administration built the FHA to facilitate homeownership, and its job was to insure the bank loans that were given to prospective owners and developers. The FHA helped millions of American families own their own homes, but only if they were white.

The FHA categorically refused to insure the bank loans of African-Americans looking to buy a home. It upheld, and sometimes mandated, racial covenants dictating a house never be sold to a Black family. It refused to insure loans for real estate developers building integrated housing, or even all-white housing too near an African-American part of town. In one case, it forced a developer to build a wall between his new homes and a Black neighborhood before they agreed to provide insurance for his project. 

The Home Owner’s Loan Corporation invented ‘redlining’, a term which color-coded tracts in metropolitan areas based on how ‘safe’ it was to issue loans to those residents. All-Black neighborhoods were always coded red, as were integrated districts. All-white districts near all-Black districts were coded yellow, and only all-white districts at a remove from African-American communities were green. Eighty years after the institution of redlining, seventy-five percent of redlined districts still struggle economically. Redlined neighborhoods even feel more adverse effects from COVID-19, according to reports.  

The segregation enforced by the FHA and the HOLC has led to generations of inequality. The New Deal programs lifted millions of white Americans from poverty and made it possible for them to build property wealth to pass on to future generations. In addition to being excluded from being able to buy suburban homes, Black Americans also had to deal with a host of other issues like predatory lending, lower wages, less career mobility, and higher rents. Black Americans stayed behind in the inner-cities where the rents were so high – because they were deemed unsafe tenants – that they often had to double up. Plagued by overcrowding and purposefully fewer government services like sewage and garbage pick-up, these neighborhoods became ghettos.

The upshot, according to Rothstein, has been devastating.

“African-American family incomes are about sixty percent of white incomes. African-American household wealth is only about five percent of white household wealth,” he said. “That enormous disparity is the direct consequence of unconstitutional de jure segregation created by the federal government, and its effects endure to this day because that wealth gap is what creates much of the racial inequality that we have in this country.”

The segregation of the New Deal is still evident around the country today. African-Americans around the country still live in or near poverty because their families were denied the tools to build generational wealth that so many whites benefitted from. We may be more than fifty years past the official end of segregation in America, but the scars are still visible. 

The good news is that understanding this history of de jure segregation means that we can do a lot to redress the injustices created by the FHA and HOLC through public policy. It is our constitutional responsibility to engage in remediation.

WORKS CITED

“Analysis | America Is More Diverse than Ever – but Still Segregated.” The Washington Post, WP Company, www.washingtonpost.com/graphics/2018/national/segregation-us-cities/. 

Federal Housing Administration, fha.gov/. 

Godoy, Maria. “COVID-19 May Have A More Serious Impact On Formerly Redlined Communities.” NPR, NPR, 18 Sept. 2020, www.npr.org/2020/09/18/914281550/covid-19-may-have-a-more-serious-impact-on-formerly-redlined-communities. 

Jan, Tracy. “Analysis | Redlining Was Banned 50 Years Ago. It’s Still Hurting Minorities Today.” The Washington Post, WP Company, 27 Apr. 2019, www.washingtonpost.com/news/wonk/wp/2018/03/28/redlining-was-banned-50-years-ago-its-still-hurting-minorities-today/. 

Lane, Charles. “The New Deal as Raw Deal for Blacks in Segregated Communities.” The Washington Post, WP Company, 25 May 2017, www.washingtonpost.com/opinions/the-new-deal-as-raw-deal-for-blacks-in-segregated-communities/2017/05/25/07416bba-080a-11e7-a15f-a58d4a988474_story.html. 

Little, Becky. “How a New Deal Housing Program Enforced Segregation.” History.com, A&E Television Networks, 20 Oct. 2020, www.history.com/news/housing-segregation-new-deal-program. 

PhD., Bruce Mitchell. “HOLC ‘Redlining’ Maps: The Persistent Structure of Segregation and Economic Inequality ” NCRC.” NCRC, 18 Dec. 2018, ncrc.org/holc/. 

“President Franklin Delano Roosevelt and the New Deal  :  Great Depression and World War II, 1929-1945  :  U.S. History Primary Source Timeline  :  Classroom Materials at the Library of Congress  :  Library of Congress.” The Library of Congress, www.loc.gov/classroom-materials/united-states-history-primary-source-timeline/great-depression-and-world-war-ii-1929-1945/franklin-delano-roosevelt-and-the-new-deal/. 

Rothstein, Richard. The Color of Law: a Forgotten History of How Our Government Segregated America. Liveright Publishing Corporation, a Division of W.W. Norton & Company, 2018. 

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