Tampa Among Cities Under Scrutiny For Mortgage Violations That Deny Homes To Minorities

TAMPA, FL — A new effort to combat redlining, an illegal practice in which lenders deny loans to people based on their race or nationality, has launched in Tampa.

The U.S. Justice Department's new Combating Redlining Initiative, announced Friday, represents the department’s most aggressive and coordinated enforcement effort to address redlining, according to officials.

The term "redlining" dates back to the 1933 national housing shortage, when the federal government began what amounted to state-sponsored segregation under the New Deal.

Zillow chief economist Svenja Gudell singled out Tampa and Atlanta as examples where the impacts of redlining have lingered.

"The lasting impact of redlining is a striking example of how the kind of discrimination – financial and racial — codified nearly a century ago continues to affect homeowners and whole communities today," said Gudell. "Redlining and other forms of systemic discrimination, from Jim Crow laws to racial covenants, contributed to a serious divide in homeownership rates between whites and other groups that has had devastating consequences for both the financial wealth and social health of non-white Americans."

While urban renewal and the gentrification of once-impoverished neighborhoods are reviving urban areas, homes in once-redlined areas are still worth less. In Tampa, a home in a once-redlined area is valued at $219,991 while a comparable home in another neighborhood is worth $482,141, Gudell said.

Redlining Began In 1930s

In his book, "The Color of Law," author Richard Rothstein documents how the Federal Housing Administration, founded in 1934, furthered segregation by refusing to insure mortgages in and near Black neighborhoods, a policy that became known as "redlining."

The term refers to the practice by lenders of outlining areas on a map in red ink that they considered at high risk of defaulting on loans. The University of Richmond has digital versions of about 200 maps from across the country with areas outlined in red ink.

At the same time redlining was taking place, the FHA subsidized builders who mass-produced housing subdivisions with the requirement that none of the homes be sold to Blacks.

The result was the creation of government-funded substandard urban housing projects, or ghettos, which became the primary housing for minorities around the country.

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According to Attorney General Merrick B. Garland, although the 1968 Fair Housing Act and the Equal Credit Opportunity Act outlawed this practice, he said redlining continues today.

It's Still Happening Today

"People are still being deliberately denied economic and housing opportunities based on their race, ethnicity or nationality," he said.

According to the National Consumer Law Center, which filed a lawsuit in 2018 against Liberty Bank, alleging the company was redlining Black and Latino neighborhoods in Hartford and New Haven, Connecticut, there's plenty of evidence that redlining is still occurring.

There are many cases of applicants being denied a home loan because of their race, said Nikitra Bailey, executive vice president at the Center for Responsible Lending. A 2018 investigation by the advocacy group Reveal found that Black, Latino and Asian applicants were turned away for loans at a higher rate than whites in many U.S. cities.

That same year, Zillow conducted an analysis of Mapping Inequality and found that there was a nearly $50,000 difference between homes located in what were once considered redlined areas and those located in nearby neighborhoods. Zillow said, even today, long after redlining was outlawed, homes in these areas are worth 85 percent of the value of homes in surrounding areas.

“Lending discrimination runs counter to fundamental promises of our economic system,” said Garland. “When people are denied credit simply because of their race or national origin, their ability to share in our nation’s prosperity is all but eliminated."

Garland said the Department of Justice plans to use its authority under the Fair Housing Act to rout out and prosecute those who participate in modern-day redlining.

"We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit," he said.

“Enforcement of our fair lending laws is critical to ensure that banks and lenders are providing communities of color equal access to lending opportunities. Equal and fair access to mortgage lending opportunities is the cornerstone on which families and communities can build wealth in our country,” said Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division. “We know well that redlining is not a problem from a bygone era but a practice that remains pervasive in the lending industry today. Our new initiative should send a strong message to banks and lenders that we will hold them accountable as we work to combat discriminatory race and national origin-based lending practices.”

“Discriminatory practices such as redlining rend the fabric of our society by destroying one of our nation’s foundational principles – equal opportunity for all,” said Acting U.S. Attorney Karin Hoppmann for the Middle District of Florida in Tampa.

Housing Competition May Aggravate Problem

As American enters the post-pandemic era, it's an issue that become all the more troubling due to Tampa Bay's increasing attractiveness as a preferred location to live and work.

According to the Florida Office of Economic and Demographic Research, an estimated 329,717 new residents settled in Florida between April 2020 and April 2021. The EDR estimates that an average of 845 new residents will move to Florida each day until 2025.

As a result, Tampa Bay is facing a critical housing shortage, causing home values to increase and pricing many lower-income families out of the market, according to the National Low Income Housing Coalition.

At the same time, the cost of renting is escalating at a time when residents are struggling to recover following the business closures during the pandemic.

For American families, homeownership remains the principal means of building wealth, and the deprivation of investment in and access to mortgage lending services for communities of color have contributed to families of color persistently lagging behind in homeownership rates and net worth compared to white families, Garland said.

"The gap in homeownership rates between white and Black families is larger today than it was in 1960, before the passage of the Fair Housing Act of 1968," he said.

The Combating Redlining Initiative will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with U.S. Attorney’s Offices.

Among its objectives, the U.S. Attorney's offices will expand its analysis of lending practices to include both depository and non-depository institutions. Non-depository lenders are not traditional banks and do not provide typical banking services, but engage in mortgage lending and provide the majority of mortgages in the country.

The initiative also plans to strengthen its partnerships with financial regulatory agencies to identify fair lending violations.

Residents who feel they are victims of lending discrimination should call the Justice Department’s Housing Discrimination Tip Line at 1-833-591-0291 or submit a report online.