Racist Covenants and Redlining:
Bottom-Up vs. Top-Down Segregation
by Jacob S. Dorman
The widespread use of racist covenants between private parties selling and buying properties deserves to be better known and better understood because they were central to how racial segregation functioned in the United States and provided a template for exclusionary Federal policies. In other words, the American system of residential segregation worked primarily from the bottom-up, from millions of racist restrictions in property deeds and the judgements of hundreds of thousands of real estate professionals, mortgage lenders, and local planners that the presence of people of color was “undesirable” and would lead to declining property values.
These local actors used lending, zoning, “urban renewal,” and public housing policies to create housing opportunities for whites while constricting opportunities for people of color, in many locales boxing them into overcrowded neighborhoods that were “up-zoned” to allow multifamily housing and industrial uses. The National Association of Real Estate Boards declared in its ethics code that a “realtor should never be instrumental in introducing into a neighborhood a character of property or occupancy, members of any race or nationality, or any individuals whose presence will clearly be detrimental to property values in that neighborhood.”
When African Americans and other racial minorities did manage to move into majority-White neighborhoods they were often made to feel unwelcome and sometimes met with arson, vandalism, and violence. Thousands of “neighborhood associations” banded together to keep out people of color by both legal and illegal means. In other cases, unscrupulous individuals reaped windfall profits by spreading rumors that people of color were moving into a neighborhood or “block busting” by selling to one Black family, leading to discounted sales from panicked White sellers and reselling at vastly greater prices to people of color forced to pay significantly more for the same homes because racist practices constricted the supply of homes available to them.
The Federal Housing Authority (FHA) rubber-stamped and spread racist real estate practices already widespread at the local level. The FHA’s underwriting manual praised the existence of racist covenants and stated: “Areas surrounding a location are investigated to determine whether incompatible racial and social groups are present, for the purpose of making a prediction regarding the probability of the location being invaded by such groups. If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes. A change in social or racial occupancy generally contributes to instability and a decline in values.”
While the “redlining” decisions of the Home Owners Loan Corporation (HOLC) and the FHA and later the Veteran’s Administration (VA) barring Federal mortgage insurance in communities of color played important and unfortunate roles in steering public spending and lending guarantees towards White-only neighborhoods in cities and suburbs, these Federal decision makers were following discriminatory real estate practices that already existed at local levels.