A discriminatory 1930s-era housing policy created something called “redlining” which has had long-lasting effects on American society and the economic health of minority households, in particular.

Let’s take a closer look at this policy and its impact on the Lansing community today.

The history
Many people trace the origins of redlining back to the National Housing Act of 1934, which established the Federal Housing Administration (FHA) as well as the Federal Home Loan Bank Board (FHLBB). In 1935, the FHLBB asked the Home Owners’ Loan Corporation to create “residential security maps” for hundreds of cities to determine the safety of real estate investments in selected areas.

Areas considered desirable for lending purposes were outlined in green (Type A). These were typically affluent suburbs on the outskirts of cities. Neighborhoods in blue (Type B) were considered “still desirable,” while older neighborhoods (Type C) were labeled "declining" and outlined in yellow. 

Neighborhoods outlined in red (Type D) were considered the most. These were typically older, minority neighborhoods near city centers. Residents in these areas were ineligible for FHA mortgages and either had to pay cash for a home or suffer high-interest, private lending, and that’s if they were able to obtain a mortgage or find adequate housing,

On top of the practice of redlining, exclusionary zoning laws and racially restrictive covenants prohibited the sale of certain properties to minorities. And by 1949, mixed-use development loans were not available for developers in “less-desirable” or redlined zones, which essentially sealed the fate of urban areas. 

Brent Forsberg, president of T.A. Forsberg Inc. and broker with Forsberg Real Estate Company, says as a result of these discriminatory practices, redlined neighborhoods never received the help that many others did during the greatest period of growth in the U.S. 

“This was a time when many Americans were building generational wealth through homeownership,” he said. “As the homeownership gap between white and black Americans grew, so did the wealth gap.” 

The aftermath
The Fair Housing Act of 1968 explicitly prohibited discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, or sex. This essentially put an end to legally sanctioned redlining policies. However, these practices left a permanent mark on many communities throughout the country.  

“The National Community Reinvestment Coalition found that 74 percent of the original redlined districts are still heavily segregated and at a severe economic disadvantage today,” said Forsberg. “Lansing is no exception. In our former redlined areas, there is still a large concentration of minority families with a high poverty rate.” 

As an example, Forsberg broke down the demographics of two adjacent neighborhoods in Lansing. 

The first neighborhood was previously labeled as a “green zone,” which historically received the most favorable loan terms. Today, the median income here is $56,597, well above the current city average of $40,000. The percentage of residents below the poverty line is 3.98 — well below the 26 percent average.

Traveling to the second neighborhood — one of the original redline areas — there’s quite a shift in the numbers. The current median household income here is $20,433 — almost half the city average — and 36.9 percent of residents fall below the poverty line. Much like in the 1930s and 40s, most of the residents in this neighborhood today are minorities.  

The path ahead
So, how do we turn things around? On a larger scale, Forsberg says there needs to be a systems-based approach to the issue, including reworking the current risk mitigation model. 

“We need to show that the risk in these areas is actually less than what people inherently thought, and we have to come up with funding programs that allow for more inclusive access to the money,” he said. “We then need to collaborate with small and mid-sized developers on ideas like a neighborhood ecosystem approach, which has been successful in Tier 1 markets, like Manhattan and Chicago.” 

On a micro level, Forsberg says there needs to be an open dialogue with local banks about ways for smaller developers and investors to get funding for projects in these areas. But he says there must also be awareness, education, and a lot of planning for a turnaround to be successful. 

“Once we have the right pieces in place, we can start a positive feedback loop that creates social equities for the people in these neighborhoods now,” he said. “This will take a lot of work and it involves crossing many policies that are currently siloed.” 

Forsberg has been active in real estate sales, investing, and development for more than 22 years in the Greater Lansing area, and he is passionate about seeing his community succeed. He has been called the “poster child for urban revival,” and lives by Journalist Herb Caen’s quote, “A city is not gauged by its length and width, but by the broadness of its vision and the height of its dreams.”

Forsberg is also one of three principals of a group called Urban Systems, which is working to enhance the built environment through initiatives like sustainable development, smart growth, diverse housing, and community engagement.  

“To really build an inclusive, exceptional city, we need to help people feel connected to where they live, through things like arts and culture, education, entrepreneurship, etc.,” he said. “Through focused efforts, we can create greater long-term stability of our neighborhoods and Lansing’s reputation as a great place to live will continue to improve.”

For more information on local real estate, follow the Greater Lansing Association of REALTORS® on Facebook.