9.5a Racially Segregated Neighborhoods

Most people in the United States live in racially segregated neighborhoods. Close to half or more of the residents are of the same race in these neighborhoods. Figure 9.6 shows the racial diversity of the 100 largest metro areas in the United States. The average White person in these areas live in a neighborhood where 71% of their neighbors are White (Loh et al., 2020). In contrast, the average Black person lives in a neighborhood where 45% of their neighbors are Black, and the average Latino or Hispanic person lives in a neighborhood where 47% of their neighbors are Latino or Hispanic.

Lending and realty practices also kept neighborhoods segregated by race. This occurred through New Deal legislation, for example. The federal government passed this legislation to stimulate the U.S. economy in response to the Great Depression (1929-1939). It included the provision of government-insured mortgages for homeowners (Jackson, 2021). The Federal Housing Administration created color-coded maps and ranked neighborhoods according to their lending risk for these mortgages.

The color-coded maps used red to outline the neighborhoods where banks would not issue loans, giving rise to the term “redlining” (see Figure 9.7). The Federal Housing Administration “concluded that no loan could be economically sound if the property was located in a neighborhood that was or could become populated by Black people” (Federal Reserve History, 2023). As a result, lenders would not extend mortgages to Black homebuyers, or if they did, would offer them worse terms than those given to White homebuyers.

Further, real estate agents used racial steering to keep neighborhoods racially segregated. Racial steering was a practice that encouraged homebuyers to look toward or away from neighborhoods based on their race. Real estate agents would simply not show Black homebuyers available housing in White neighborhoods.

Moreover, many cities, counties, and homeowners’ associations set up rules that prohibited specific racial groups from living in their community. These communities are called sundown towns because people of color could work and shop in the town but they could not to spend the night or live there. Figure 9.8 shows a map of the locations of current known and probable sundown towns.

In 1948, the U.S. Supreme Court ruled that these rules were unconstitutional. Twenty years later, the Fair Housing Act of 1968 formally prohibited redlining, racial steering, and sundown towns. Recent experimental research, however, confirms that racial steering still occurs (Hall et al., 2023) along with lending practices that put Black and Latina/o/x households at higher risk of foreclosure than White homebuyers (Hwang et al., 2019; Massey & Rugh, 2018).