On March 25, 1939, the front-page headline in the New York Amsterdam News accused the federal government of “systematic” racial discrimination. “Flagrant discrimination against the Negro in Queens by the Federal Housing Administration, acting under specific instructions from the Nation’s capital, was revealed this week after a painstaking investigation,” wrote reporter A. M. Wendell Malliet. In Jamaica, Queens, a middle-class neighborhood on the southeastern border of New York City, “Negro applicants for assistance from the F.H.A. were rejected as a matter of principle whenever an attempt was made to buy or build a home in so-called ‘cushion areas,’ situated adjacent to or in white neighborhoods” (click to view PDF).
Created during the Great Depression as part of the National Housing Act of 1934, the Federal Housing Administration (FHA) was designed to resuscitate the American housing market. The FHA did not build homes or lend money directly. Rather, it insured long-term mortgage loans made by private lenders for home construction and sale. Of all nonfarm dwellings constructed nationwide between 1935 and 1940, one in four was financed by the FHA. In the New York-Northeastern New Jersey Metropolitan District alone during that time, the FHA insured $249,987,955 of loans for 47,928 new homes. Taxpayers indemnified the lender in the event of a default, thereby lowering the risk and encouraging them to lend on more generous terms. Consequently, the interest rates and average monthly payments for the typical home mortgage fell precipitously, which brought home ownership within reach of more Americans than ever before. Between 1934 and 1972, the FHA insured eleven million mortgages, helping increase the national home ownership rate from 44 to 63 percent.
Federal intervention in the housing market understandably raised expectations among potential African-American homebuyers. Many assumed that, under the direction of the federal government—ostensibly bound by the property and civil rights requirements outlined in the Fifth and Fourteenth Amendments—mortgage financing would be made available on a nondiscriminatory basis. In 1934, the Chicago Defender encouraged prospective black homebuyers to “take advantage of this opportunity afforded by the Federal Housing Administration in securing homes and property.” “It is believed that there will be no discrimination in local communities,” the editorial continued, “and if such should be found to be the case you are advised to take up the matter with the officials at Washington through the congressman in your district” (click to view PDF).
But when William Brandon, Elizabeth Wardell, George Briggs, and Major Peterson applied for FHA-insured loans during the fall of 1938, all of their applications were denied without explanation. In each case, the applicant was steadily employed, had a solid credit rating, yet was still rejected. George Briggs, for instance, was the owner of a beauty shop with an annual income of $2,400, meaning the $3,700 house he attempted to purchase was well within his price range. Nonetheless, his application was turned down. Or take Elizabeth Wardell, a schoolteacher who sought to build a new house on a vacant lot. Although Wardell had “a substantial bank account,” she, too, was rejected. As the Amsterdam News article recounted, “The policy of discrimination remained a mystery until Joseph A. Singleton, president of the Jamaica branch of the N.A.A.C.P. went gunning for the reason for the rejections.” After a months-long investigation, the NAACP obtained a copy of the FHA Underwriting Manual, after which “the truth leaked out.”
The FHA’s Underwriting Manual, first published in 1936, quickly standardized appraisal practices nationwide and became the blueprint for metropolitan growth for a generation. In addition to requiring segregation by race, the FHA marked out entire neighborhoods as ineligible for federal insurance, thus denying loans to most African-American communities—a practice that came to be known as redlining. The Amsterdam News quoted extensively from Section 233 of the Manual, which was especially egregious:
In other words, federal underwriters assumed that mixed-race neighborhoods were economically unstable. Racial integration, they believed, would lead inexorably to diminishing property values. Thus, William Brandon, Elizabeth Wardell, George Briggs, and Major Peterson were all denied mortgage insurance because the location where they sought to purchase or build homes had been marked out as a “cushion” area—a “no man’s land” designed as a bulwark against racial integration. Those locked out of the generous federal subsidies were forced to take out more expensive—and more treacherous—forms of credit in order to buy a home.
The Valuator should investigate areas surrounding the location to determine whether or not incompatible racial and social groups are present, to the end that an intelligent prediction may be made regarding the possibility or 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 leads to instability and a reduction in values. The protection offered against adverse changes should be found adequate before a high rating is given to this feature. Once the character of a neighborhood has been established it is usually impossible to induce a higher social class than those already in the neighborhood to purchase and occupy properties in its various locations.
All across the country, the black press lambasted the revelations from the Manual. Three thousand miles away, the Los Angeles Sentinel published a searing editorial titled, “Ghettos, American Style.” Before the full horror of the Nazi regime became widely known, the Sentinel editors emphasized parallels between Nazism and race prejudice in the United States: “Fair minded Americans who have been protesting Hitler’s despicable plan to herd German Jews into ghettos will be surprised to learn that their own government has been busy planning ghettos for American Negroes through the Federal Housing Authority [sic].” “The American plan lacks the forthright and brutal frankness of Hitler’s plan,” they alleged, “but in the long run it is calculated to be as effective” (click to view PDF).
Notwithstanding their persistent efforts, the NAACP’s campaign against federal redlining only began to yield results after the Second World War. In 1947, the FHA finally acquiesced to the demands of civil rights lobbyists and removed all explicit references to race from the Underwriting Manual. Explicit racial segregation was not made illegal, though, until the Civil Rights Act of 1968 (also known as the Fair Housing Act).
The questions raised at the end of the Sentinel editorial are worth reflecting upon today: “Here is an issue that ought to call forth a vehement protest from every person who has condemned Hitler. But will it?”
For more on the racial proscriptions built into home mortgage programs, see David M. P. Freund, Colored Property: State Policy and White Racial Politics in Suburban America (Chicago: University of Chicago Press, 2007) and Ira Katznelson, When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America (New York: W.W. Norton, 2005).
On the NAACP’s campaign against residential segregation, see Arnold R. Hirsch, “‘Containment’ on the Home Front: Race and Federal Housing Policy from the New Deal to the Cold War,” Journal of Urban History 26.2 (2000): 158-189 and Louis Lee Woods, “Almost ‘no Negro Veteran … Could Get a Loan’: African Americans, the GI bill, and the NAACP Campaign against Residential Segregation, 1917–1960,” Journal of African American History 98.3 (2013): 392-417.