Black History Month: A Reflection on Redlining and the Housing Credit’s Positive Impact on Economic Mobility

Blog post authored by Nafissatou Seck, Tax Policy Intern at Enterprise Community Partners, and Krista D’Alessandro, Senior Tax Policy Analyst at Enterprise Community Partners

Each February, the nation honors Black History Month and the many contributions of Black Americans throughout history. During this important time of reflection, there is much we as housing advocates should consider – both victories to celebrate, but also enduring problems to consider – including our nation’s history of redlining and the challenges that remain to improve access to affordable, stable, and decent housing for all, including for Black Americans.

There is a long and pervasive history of discriminatory and racist private-sector practices and public policies that limited or excluded access to better housing for the Black, Indigenous, and People of Color (BIPOC) community. In recent years, legislative and regulatory efforts have been undertaken to address this insidious problem and the socioeconomic consequences of our nation’s past. In addition to the passage of fair housing laws, the Housing Credit has expanded access to affordable housing for low-income communities impacted by the residential segregation and wealth disparities that stemmed from redlining.

The racial and economic implications of redlining

During the Great Depression era, lenders made housing decisions based on redlining maps created by the Home Owners’ Loan Corporation (a federal agency that existed from 1933 to 1954) to document areas that were low- and high-risk for federal loans. This practice allowed private lenders and real estate agents to deny BIPOC communities federally insured mortgages, preventing their access to capital investments. Black communities in particular were redlined as “high-risk” and denied mortgages, consequently restricting many Black residents to public housing developments in segregated communities. So, while Black Americans were often forced into urban public housing projects, white Americans received loans to become homeowners in the suburbs.

The legality of this practice effectively racialized poverty in the United States, denying Black Americans one of the most important forms of capital investments and generational wealth available in the country: homeownership. Although no longer legal in practice, redlining has played a significant role in the wealth disparities we see today. Black homeowners are almost five times more likely to own a home in a formerly redlined neighborhood, and in the last 40 years, the typical homeowner in a redlined neighborhood has gained $212,023 less in personal wealth than the average homeowner in a greenlined neighborhood, exacerbating racial economic disparities.

The Housing Credit creates opportunities for economic mobility

Since its enactment in 1986, the Housing Credit has financed approximately 3.6 million affordable rental units, providing affordable homes to over 8 million low-income households. The program’s success is an important tool in addressing the pervasive residential and economic disparities that exist today, many of which stemmed from redlining, which hindered the generational wealth building and upward mobility often gained through housing stability.

As housing advocates, we know how critical safe and affordable housing is to the success of individuals and families, as it provides a strong foundation for achieving success outside of the home. By obtaining affordable rent, families can spend money on other necessities like education, health care, and food. In addition, studies indicate that for every year spent in Housing Credit financed unit as a child, individuals are 3.5 percent more likely to obtain a degree in higher education and go on to earn 3.2 percent more as adults. Housing is also a key social determinant of health, and by providing families access to quality, affordable housing, their exposure to allergens, neurotoxins, and other health hazards associated with poor quality housing are reduced. Housing Credit properties in particular are built to durable, high-quality standards, as the program’s successful public-private partnership model incents strong oversight and quality control from private-sector investors.

The Housing Credit’s history of success has served as a model for other tax credit programs that complement the economic ripple effects created by stable, decent housing. The New Markets Tax Credit, for example, incentivizes investments in businesses and other community amenities like grocery stores and health care facilities in distressed communities, and the proposed Neighborhood Homes Investment Tax Credit aims to spur homeownership opportunities by financing renovation and construction in low-income and blighted communities.

How the Housing Credit helps create choice in where residents live

Housing Credit projects are developed in all types of communities across the country with access to varied resources, and given the states’ role in determining where Housing Credit projects are built, there is a strong and specific focus on unique, local needs. As advocates continue to reflect on the ways in which affordable housing helps facilitate access to opportunity for Black Americans, it is important to think about where Housing Credit properties are located. This is one area that requires additional consideration, as there is often a false assumption that residents of low-income neighborhoods wish to move from their homes to more affluent, often majority white communities.

The notion of areas of “high opportunity” can contribute to the idea that white neighborhoods are the only source of opportunity and economic mobility, stigmatizing Black and low-income neighborhoods as “deficient” and further hindering the flow of critical investments to preserve these communities. Although residents’ preference on where they want to live will vary, it is important to ensure that residents have a choice in where they call home.

How the ACTION Campaign and its members are part of the solution

The Housing Credit is successfully driving private investment to many communities suffering from the historic consequences of redlining. Each year, the program continues to produce quality housing and initiate economic mobility; however, there is still more work to be done, and demand for affordable rental housing is currently on the rise with rising inflation exacerbating the housing crisis.

The Affordable Housing Credit Improvement Act (AHCIA), is bipartisan, bicameral legislation introduced in the past three Congresses that would make great strides in meeting our affordable rental housing needs across the nation. In fact, the major production provisions of the 2021 AHCIA legislation would finance an estimated two million additional affordable rental homes over 10 years. Several of the AHCIA provisions to expand the Housing Credit were also included in the Build Back Better Act that passed the House of Representatives in November, providing a legislative vehicle to advance several of ACTION’s top policy priorities should the bill continue to advance toward enactment.  

As affordable housing needs continue to escalate across the country, the ACTION Campaign will continue our advocacy efforts to expand and strengthen the Housing Credit, with the goal of making sure all Americans have equitable access to safe and affordable places to call home.

Krista D'Alessandro is the tax policy analyst at Enterprise Community Partners. The ACTION Campaign is co-chaired by Enterprise and the National Council of State Housing Agencies.

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