1933: The New Deal and the Home Owner's Loan Corporation (HOLC)
The New Deal
Eleanor Roosevelt talking with a project superintendent in Des Moines, Iowa. June 8, 1936 about a Works Progress Administration project.
Source: Franklin D. Roosevelt Presidential Library and Museum
In response to the Depression, President Franklin D. Roosevelt, his administration, and the U.S. Congress developed the New Deal to reinvigorate the U.S. economy, put people to work, and provide assistance to those who could not work. The Works Progress Administration, the Civilian Conservation Corps, and the Social Security Administration were three of the many organizations launched by the U.S. federal government as part of the New Deal.
Despite New Deal rhetoric that these program would lift all, the racialized system within the United States meant that whites gained from these programs more than Black people did. Feagin (2014) found that
Black workers continued to suffer much discrimination from the whites who administered the New Deal agencies…in most federal relief programs [B]lack workers got lower wages than whites, were employed only as unskilled laborers, and were employed only after whites were. (p. 58)
Housing Programs
Map of Baltimore showing Residential Segregation
Source: Baltimore Sun
Housing continued to be a problem for African Americans, and in fact, grew worse during the Depression. Feagin (2014) wrote that “New Deal housing programs increased residential segregation areas by restricting the new federally guaranteed home loans to homes in segregated areas and by locating public housing so that it would be segregated” (p. 58).
To help address the housing shortage, the federal government created two organizations as part of the New Deal. The Home Owner’s Loan Corporation (HOLC), created in 1933, was designed to reduce bank foreclosures by helping owners refinance their loans. The Federal Housing Administration (FHA), created as part of the National Housing Act of 1934, was also designed to decrease home foreclosures caused by the Depression. Working within the existing racist mindset, however, the FHA supported segregationist policies already dividing many cities. They refused to provide funding to developers unless they committed to exclude African Americans from specific communities. Not only did they manipulate developers, but the FHA
[R]efused to insure mortgages for black families in neighborhoods—a policy that came to be known as ‘redlining,’ because neighborhoods were colored red on government maps to indicate that these neighborhoods should be considered poor credit risks as a consequence of African Americans living in (or near) them. (Rothstein, 2015, p. 207)
Reinforcing the Racial Divide
African Americans suffered disproportionately under the Great Depression. The programs created to ameliorate some of the effects of the economic crash benefited poor whites but blocked poor Black Americans. Housing remained one of the key mechanisms for enforcing the racial divide in the United States, but the programs created to help poor Americans move up became the means of keeping African Americans segregated and restricted.