Origins of the Red Line
How does the federal government influence where you live?
The American economy was in crisis in the 1930s. The Great Depression reached its lowest point just as Franklin Roosevelt took office in 1933. Scores of banks were failing and Roosevelt declared a bank holiday to help prevent bank runs. Home finance was a key factor in the economic crisis—approximately a third of all home mortgages were in default.
The U.S. Congress took action to rescue the housing sector in the Depression and restructure the mortgage market after the crisis. It created two agencies, the Home Owners’ Loan Corporation (HOLC) and the Federal Housing Administration (FHA), to do it. HOLC refinanced nearly a million mortgages and FHA created home ownership subsidies that exist to this day.
These agencies resuscitated home finance and, by extension, home construction, and reshaped the housing market for the rest of the century. In part, government officials used new economic research and social science thinking, and put resources behind enduring ideas about exclusion. Real estate leaders of the era prioritized the value of white-owned property and emphasized the financial value of separation between races, neighborhood by neighborhood.