Redlining, Segregation and the Fight for Fair Housing

Redlining is the practice of denying people credit because of where they live rather than whether they can repay. From the 1930s into the 1960s, it worked alongside racial covenants, zoning and federal mortgage rules to sort American neighborhoods by race. None of those practices is legal today. The Supreme Court stopped courts from enforcing racial covenants in 1948, and Congress banned housing discrimination in the Fair Housing Act of 1968.

Ending the legal practices did not erase their results. Later laws tried to reach lending patterns, policies with discriminatory effects, and the way governments spend federal housing money. How far those laws should go is still contested, and several federal rules were being rewritten as of October 2026.

How Segregation Was Built Into Housing

Local laws, private contracts, lenders and federal agencies each helped build residential segregation, and each reinforced the others.

Racial zoning

Early in the 20th century, some cities wrote race directly into their ordinances. Louisville, Kentucky, adopted an ordinance in 1914 that barred Black residents from moving onto blocks where most homes were occupied by white residents, and the reverse. In Buchanan v. Warley (1917), the Supreme Court struck it down under the Fourteenth Amendment. The ruling rested on the right to buy and sell property, not on a broader rejection of segregation.

Cities could still zone by building type. In Village of Euclid v. Ambler Realty Co. (1926), the Court upheld a zoning plan that separated single-family houses from apartments. Such rules do not mention race, but critics call the most restrictive versions exclusionary zoning because they keep lower-cost housing out.

Racially restrictive covenants

Private contracts filled the gap. A racially restrictive covenant was a clause in a deed, or an agreement among neighbors, that barred sale to or occupancy by people of named races. In Corrigan v. Buckley (1926), the Supreme Court dismissed a constitutional challenge to one such covenant in Washington, D.C., which left courts free to keep enforcing them. Federal Reserve historians note that covenants became increasingly common during the 1920s.

The HOLC maps

Congress created the Home Owners’ Loan Corporation (HOLC) in June 1933 to refinance troubled mortgages during the Great Depression. Starting in late 1935, the agency surveyed more than 200 cities and drew color-coded “residential security” maps. Neighborhoods were graded A (green), B (blue), C (yellow) or D (red). The red areas gave redlining its name.

Graders weighed the age and condition of housing, nearby amenities, residents’ economic status, and the neighborhood’s racial and ethnic makeup. Economists writing for the National Bureau of Economic Research (NBER) studied nine of the ten largest U.S. cities using 1930 census records. More than 95% of Black homeowners there lived in areas later rated D, yet about 92% of the homeowners in those red zones were white.

FHA underwriting

The Federal Housing Administration (FHA), created in 1934, insures private mortgages against default, as FHA-insured home loans still do. By 1949, according to the NBER authors, the FHA insured more than one-third of new U.S. residential construction.

Federal Reserve historians describe the FHA as the architect of federally sponsored redlining from 1934 until the 1960s. Agency staff concluded that a loan could not be sound if the neighborhood was, or might become, home to Black residents. The FHA’s 1938 Underwriting Manual warned of the “infiltration of inharmonious racial groups” and recommended covenants limiting occupancy to “the race for which they are intended.” The agency generally favored new suburban construction over older city neighborhoods.

HOLC vs. FHA

The HOLC maps are the best-known image of redlining, but recent research gives the two agencies different roles.

Source: Fishback, LaVoice, Shertzer and Walsh, NBER Working Paper 28146.

Public housing and urban renewal

Segregation shaped subsidized housing too. In Chicago, a federal court found in 1969 that the housing authority had chosen public housing sites and assigned tenants by race, a case that reached the Supreme Court as Hills v. Gautreaux (1976). Scholars also point to slum clearance under urban renewal and the routing of interstate highways. See public housing in America.

The Courts Act First: Shelley v. Kraemer

In 1945, the Shelleys, a Black family, bought a house in St. Louis. The street was covered by a 1911 covenant barring occupancy by “people of the Negro or Mongolian Race.” Neighbors sued to undo the sale.

On May 3, 1948, the Supreme Court ruled for the Shelleys, and for a Detroit family in a companion case, in Shelley v. Kraemer. Its reasoning was narrow. The Fourteenth Amendment restricts governments, not private parties, so the covenants standing alone did not violate it. But when a state court enforces one against a family, the state itself denies equal protection of the laws.

Two related rulings closed gaps:

• Hurd v. Hodge (1948), decided the same day, barred federal courts in Washington, D.C., from enforcing racial covenants.
• Barrows v. Jackson (1953) stopped neighbors from collecting money damages from an owner who broke one.

Shelley had limits. Covenants remained legal to write and to follow voluntarily. Sellers, landlords, agents and lenders could still turn away Black buyers and renters.

The Fair Housing Act of 1968

Federal policy shifted in stages. On November 20, 1962, President Kennedy signed Executive Order 11063, directing agencies to prevent discrimination in federally owned housing, federally assisted housing and federally insured home loans. For loans and grants, it applied only to assistance approved from then on.

In 1968, the Kerner Commission, which President Johnson had appointed to study the urban unrest of the mid-1960s, identified residential segregation and unequal housing as underlying causes and recommended a national open-housing law. The Senate passed a fair housing bill on March 11. Dr. Martin Luther King Jr. was assassinated on April 4. The House approved the bill on April 10, and the Fair Housing Act became law on April 11 as Title VIII of the Civil Rights Act of 1968.

The original act covered race, color, religion and national origin. Congress added sex in 1974 and disability and familial status, which protects families with children, in 1988. As amended, the law makes it illegal, because of a protected trait, to:

• Refuse to sell, rent or negotiate for a home, or otherwise make housing unavailable
• Set different terms, conditions or privileges
• Discriminate in mortgage lending, brokerage or appraisal

A person can file a complaint with HUD within one year or sue in court within two years. The Justice Department brings cases involving a pattern or practice of discrimination.

Two months later, the Supreme Court went further on race. In Jones v. Alfred H. Mayer Co. (June 17, 1968), it held that the Civil Rights Act of 1866 “bars all racial discrimination, private as well as public, in the sale or rental of property.”

Following the Money: HMDA and the Community Reinvestment Act

Banning discrimination did not by itself bring credit back to neighborhoods that lenders had avoided. Congress took three more steps in the 1970s:

• Equal Credit Opportunity Act (1974). It first barred credit discrimination based on sex and marital status. A 1976 amendment added race, color, religion, national origin and age.
• Home Mortgage Disclosure Act (1975). It gave the public information to judge whether lenders were serving the housing needs of their communities. Community groups used the data to document continued redlining.
• Community Reinvestment Act (1977). Congress found that banks have a “continuing and affirmative obligation” to help meet the credit needs of the communities where they are chartered. Regulators assess each bank’s record.

Federal Reserve historians conclude that these reforms helped end redlining as a widespread legal practice. The CRA’s current rules generally date to 1995, and in August 2026 two of the three bank regulators proposed changes, with comments due October 13, 2026.

Disparate Impact and Inclusive Communities

The practices described so far were open and intentional. Disparate impact is a different theory. It asks whether a neutral-looking policy falls more heavily on a protected group without a sufficient justification, whatever its motive.

The Supreme Court took up the question in Texas Department of Housing and Community Affairs v. Inclusive Communities Project. A nonprofit argued that Texas awarded too many Low-Income Housing Tax Credits in predominantly Black inner-city areas and too few in predominantly white suburbs. On June 25, 2015, the Court held 5–4 that disparate-impact claims are available under the Fair Housing Act.

The Court also set limits. A statistical disparity is not enough on its own; a plaintiff must point to a specific policy that caused it. Liability targets “artificial, arbitrary, and unnecessary barriers,” not valid government policies. The Court called zoning that unfairly excludes minorities without sufficient justification the “heartland” of the doctrine.

HUD’s own rule, 24 CFR 100.500, sets out a three-step test for these claims. HUD issued it in 2013, replaced it in 2020 with a version a federal court blocked, and reinstated it in 2023. In January 2026, HUD proposed removing the rule and leaving the standard to the courts. A supplemental proposal in August 2026 would also remove disparate-impact provisions from HUD’s Title VI rules for recipients of federal funds, and it reopened comments through October 9, 2026. Neither was final as of October 1, 2026, and the 2015 decision remains binding either way.

Affirmatively Furthering Fair Housing

The Fair Housing Act does more than prohibit. Section 808 requires HUD and other federal agencies to run their housing programs “in a manner affirmatively to further” the law’s purposes. This duty is known as affirmatively furthering fair housing (AFFH). States, cities and public housing agencies that receive HUD funds, such as Community Development Block Grants, certify that they will meet it.

The statute does not define the phrase, and HUD’s rules have swung back and forth:

• 1995: A planning rule HUD proposed in 1994 takes effect. Grantees must prepare an Analysis of Impediments to fair housing choice.
• 2015: A final rule replaces that analysis with a data-driven Assessment of Fair Housing.
• 2020: HUD repeals the 2015 rule.
• 2021: An interim rule restores parts of it, without the assessment.
• 2025: An interim final rule, effective April 2, treats a certification as sufficient if the grantee took any action rationally related to promoting fair housing.

HUD’s 2015 rule said the older analysis had not worked as well as intended and that grantees needed data and a more structured process. HUD’s 2025 rule calls the earlier requirements burdensome overreach and says removing them gives local communities more flexibility.

What Research Says About the Legacy

Researchers agree that formerly redlined neighborhoods tend to be worse off today. They disagree about why.

A Federal Reserve Bank of Chicago study, revised in 2020, compared areas on either side of HOLC map boundaries. It concluded that lower grades led to lower homeownership, home values and rents and more racial segregation in later decades, through reduced access to credit and later disinvestment.

The NBER authors read the evidence differently. They note that the HOLC lent heavily in areas it later graded D and that gaps in home values, rents and racial makeup across the map boundaries were already in place by 1930, years before the maps were drawn. In their view, the maps mostly recorded disparities that earlier discrimination had already created. They agree that the FHA largely avoided insuring loans for Black borrowers.

In the second quarter of 2026, the Census Bureau estimated a homeownership rate of 74.5% for non-Hispanic white householders and 45.4% for Black householders. The release does not analyze causes.

Why This History Matters for Affordable and Workforce Housing

Three present-day consequences stand out:

• Where subsidized housing goes. Inclusive Communities began as a dispute about whether tax-credit housing should be built in the inner city or the suburbs. The Court said the act does not force agencies to reorder their priorities, but siting policies can still be challenged for unjustified discriminatory effects.
• Zoning. Rules that block apartments or small homes affect teachers, nurses and service workers as well as the lowest-income renters. New Jersey’s Mount Laurel doctrine, which dates to 1975, requires towns to make room for a fair share of regional low- and moderate-income housing. See zoning reform and the YIMBY movement.
• Gaps in coverage. The federal act does not protect a tenant’s source of income, so source-of-income discrimination against voucher holders is governed by state and local law.

For current enforcement and complaint procedures, see Fair Housing Today.

The Bottom Line

Segregated neighborhoods were produced by law and policy as well as private choices: racial zoning, court-enforced covenants, and federal underwriting that treated race as a credit risk. The Fair Housing Act and the lending laws of the 1970s outlawed those practices, and the Supreme Court confirmed in 2015 that policies with unjustified discriminatory effects can be challenged too. How much more government must do to undo the damage is still being decided.