Learning From Our Past: The History of the Fair Housing Act

The New Deal helped millions of Americans survive the Great Depression. Under the leadership of President Franklin Roosevelt, the federal government rolled out program after program to help people find work, put food on the table and keep a roof over their heads.

But there was a dark side to one of those programs - the Home Owners Loan Corporation (HOLC). Between 1933 and 1936, it provided low-interest/long-term refinancing to one million homeowners on the verge of foreclosure, but allowed the socioeconomic makeup of neighborhoods — including race — to influence who received assistance.

The HOLC worked with local real estate professionals in 239 cities to create “residential security maps” to distinguish the least risky neighborhoods for lending — shaded in green for best and blue for still desirable — from the most risky neighborhoods — shaded in yellow for declining and red for hazardous.

Racially mixed and heavily minority neighborhoods were invariably branded yellow or red and thus viewed as poor choices for HOLC loans regardless of how creditworthy individual borrowers might be — the genesis for the term redlining as shorthand for lender discrimination against nonwhite neighborhoods.

The history of unfair housing practices in America doesn’t begin or end with redlining, but the HOLC’s residential security maps went a long way toward institutionalizing racial discrimination and segregation in a manner that is still felt today — especially among African Americans. This year marks the 50th anniversary of the signing of the Fair Housing Act by President Lyndon Johnson in 1968. By outlawing discrimination in the sale, lease or rental of housing because of race, color, religion or national origin (other protections were added later), the act blew the whistle on nearly 200 years of institutionalized segregation — from redlining to racial zoning to restrictive covenants — but did not end the struggle to overcome discrimination’s damaging legacy.

“It’s really important that we know the history of segregation,” said Fred Underwood, director of diversity and inclusion for NAR. “As an industry and an organization, we have to understand why these housing patterns still exist ... so that we can do a better job of addressing them.”

NAR is commemorating the 50th anniversary of the Fair Housing Act with a “Fair Housing Makes U.S. Stronger” campaign that highlights the importance of the act, the country’s journey to equal rights and NAR’s commitment to fair housing as the foundation of the American dream.

Today’s REALTOR® Code of Ethics requires REALTORS® to provide equal services regardless of race, color, religion, sex, handicap, familial status and national origin in accordance with the Fair Housing Act. The code even goes beyond the act by covering sexual orientation and gender identity. NAR also provides members with guidance and resources to understand and comply with the law through its Fair Housing Program.

But there’s a flip side to NAR’s record as a fair housing advocate. “For many years our industry was opposed to fair housing,” Underwood said.

Many factors played into NAR’s resistance: historic prejudice, the belief that property values were more stable if neighborhoods were occupied by the same racial/social classes and the argument that people should be free to refuse to sell or rent a home to anyone for any reason — even if the decision was based on race.

NAR actively fought passage of the Fair Housing Act. “The opposition coming from our industry was you’re forcing us to sell to people we don’t want to sell to,” Underwood said.

The Fair Housing Act faced resistance within the halls of Congress as well. After passing the Civil Rights Act in 1964, lawmakers could not reach agreement on fair housing legislation before being jolted by two shock waves in 1968 — the Kerner Commission Report and the assassination of Dr. Martin Luther King, Jr.

The Kerner Commission was established by President Johnson to investigate the race riots that swept many large cities in the mid-1960s. The commission’s sobering report pulled no punches, stating that the nation was “moving toward two societies, one black, one white — separate and unequal” — and that institutionalized segregation was a leading cause of racial tensions.

“What white Americans have never fully understood — but what the Negro can never forget — is that white society is deeply implicated in the ghetto,” the report stated. “White institutions created it, white institutions maintain it, and white society condones it.”

Five weeks after the report was released, King was assassinated, igniting more riots. President Johnson seized the moment to demand Congress pass the Fair Housing Act to show that King’s dream of equality and justice would live on. A week after King’s death the act became law.

Although a smattering of cities and states had already passed their own fair housing laws (led by the city of New York in 1957 and the state of Colorado in 1959), the Fair Housing Act was a huge milestone in a long journey that began with the country’s founding, when the Constitution gave ordinary citizens private property rights, but did not guarantee those rights equally.

“If you weren’t white and you weren’t male, you didn’t automatically have this right to property,” Underwood said. “Many states were explicit in that and others were implicit. It manifested itself in the Dred Scott decision (by the U.S. Supreme Court in 1857) that black people had no rights that white people were bound to respect.”

That changed — at least on paper — after the Civil War when Congress passed the Civil Rights Act of 1866 and later the adoption of the 14th Amendment in 1868. They declared that all persons born in the United States were citizens regardless of race or color and that all people had the same civil rights — including property rights.

“That was a first step, but it was a promise that wasn’t realized in almost any way,” Underwood said. A series of U.S. Supreme Court decisions ruled that the act and amendment applied only to states and not to the actions of private individuals and organizations. The capper came in 1896 when the court ruled that separate accommodations were legal as long as they were equal — the basis for the racist “Jim Crow” laws that underpinned segregation in the American South for more than 70 years.

In the early 1900s, many cities began using zoning ordinances to keep blacks, whites and certain ethnicities — including immigrants from southern and eastern Europe — in their own neighborhoods.

In 1917, the tide of housing discrimination finally appeared to turn when the Supreme Court declared a Louisville, Ky., racial zoning ordinance unconstitutional. But ending racial zoning didn’t come close to ending housing discrimination. Restrictive covenants became an equally unfair alternative. The covenants, which popped up all over the country, were contracts among property owners prohibiting sales of homes to blacks or other minorities. As private agreements, they were considered exempt from laws preventing government discrimination.

Restrictive covenants frequently served as “the blueprints” for the HOLC’s residential security maps, said Nathan Connolly, an urban historian at Johns Hopkins University. “The HOLC was literally codifying already existing boundaries and restrictions that were created by developers and homeowner associations.”

The Federal Housing Administration (FHA) picked up where the HOLC left off. Established in 1934 to provide government-insured loans for home purchases, the FHA included the residential security maps in its underwriting manual and recommended including restrictive covenants in the deeds of homes it insured.

“If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes,” explained the underwriting manual, which was widely used throughout the mortgage industry.

It all added up to “a very clear case of structured discrimination,” said Connolly, who helped create a website called Mapping Inequality where visitors can search maps as well as notes from the HOLC. “Respectable people but homes too near a negro area,” read the notes for a neighborhood in Richmond, Va.

While the easy terms of FHA loans opened the door to homeownership for more Americans than ever before, most African Americans were caught in a Catch-22. Redlining stymied lending in the inner-city where many of them lived, but restrictive covenants blocked them from moving to new suburbs where loans were readily available.

The result was a spiral of disinvestment in black communities and a lack of opportunity to build wealth through homeownership that rippled through generations of African Americans — adding affordability to the list of factors sustaining segregation. “All of these things feed each other,” Connolly said.

The real estate industry and the National Association of Real Estate Boards (the forerunner of NAR) were complicit in sustaining that crippling cycle. “A REALTOR® should never be instrumental in introducing into a neighborhood ... members of any race or nationality ... whose presence will clearly be detrimental to property values in that neighborhood,” stated the association’s 1924 code of ethics. The reference to “race or nationality” was not removed until 1950.

However, strong voices for fair housing began emerging within the real estate industry. In 1947, African American real estate brokers formed the National Association of Real Estate Brokers (NAREB). With a clear fair housing mission, Democracy in Housing, NAREB worked hand in hand with Dr. Martin Luther King, Jr. to advocate for open housing laws and the Fair Housing Act.

Civil rights lawyers challenged restrictive covenants with little success until 1948, when the Supreme Court ruled that racially restrictive covenants were not enforceable in court. Yet even then nothing stopped private parties from maintaining the restrictions through gentlemen’s agreements, steering minority buyers away from white neighborhoods and other dubious tactics — all of which allowed redlining and segregation to persist until the Fair Housing Act explicitly outlawed such practices in 1968.

The Fair Housing Act continued to evolve after passage. Protection against discrimination based on sex — which wasn’t included in the original law — was added in 1974.

Amendments enacted in 1988 extended protected status to the disabled and to families with children while also settling a long dispute over the act’s enforcement mechanism — which proved to be a tipping point for NAR.

“That was the beginning of our association being more on the supportive side of fair housing rather than the opposing side,” Underwood said.

Fifty years after passage, the statement made by the Fair Housing Act about equal rights cannot be overstated. “It was important for the government to say certain things happened under our watch and this has to stop,” said. Anna Maria Farias, assistant secretary for fair housing and equal opportunity with the Department of Housing and Urban Development.

The challenge ahead is to make fair housing not just the law of the land, but the reality in every community. “There is always more work to be done,” Farias said.

Cities are still segregated, white and black homeownership rates are still far apart (73 percent for whites versus 42 percent for blacks), lack of affordability restricts opportunity and the LGBT community is still not a protected class — an omission NAR wants Congress to correct, Underwood said.

“The victory has not been won,” he said. “Fair housing is an issue we need to keep moving forward on.”

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NAR Commemorates 50 Years of the Fair Housing Act

NATIONAL ASSOCIATION OF REALTORS® (NAR) is commemorating the 50th anniversary of the Fair Housing Act by helping the REALTOR® community tell the story of the importance of fair housing.

Under the theme “Fair Housing Makes U.S. Stronger,” NAR has created customizable ads, flyers, posters, videos and other content that show the value fair housing brings to the housing industry and the community. NAR has also developed new training materials to help members gain a deeper understanding of fair housing law and the need for compliance.

In May, NAR highlighted the anniversary of the Fair Housing Act throughout its week-long legislative meetings in Washington, D.C.

To learn more, visit www.fairhousing.realtor