Rigging the Game

Redlining and its Effects in Northwest Philadelphia

The Great Depression had a profound and long-lasting effect on our nation’s economy, and on our neighborhoods. As a result of the arrival of the Depression at the end of 1929, many people lost their jobs, their investments became worthless, banks failed, and many homeowners defaulted on their mortgages.

As part of President Franklin D. Roosevelt’s New Deal legislation, formed to alleviate the Depression’s effects on American families and workers, the Home Owners’ Loan Corporation (HOLC) was founded in 1933. Part of the purpose of the HOLC was to identify neighborhoods with the potential for high rates of housing foreclosure, due to the inability of its residents to make payments on their mortgages, and offer homeowners lower-cost loans to help prevent additional waves of defaults.

While doing so, in a practice called redlining, the HOLC ranked neighborhoods using a grading system to identify different levels of risk, in part using the neighborhood’s income, ethnic, racial characteristics and property conditions (obtained by local realtors, banks and mortgage companies, and developers) to determine the level of risk for foreclosure. This ranking system consisted of four grades of residential areas ranked “A” through “D,” with “A” representing the highest and most stable grade of housing, “B” representing good, solid, stable housing, “C” representing areas in decline, and “D” representing areas deemed “hazardous” by the HOLC, which created a series of maps with this information, of urban areas all over the country. The grades as depicted on the maps were also color coded, represented with green (A), blue (B), yellow (C), and red (D), respectively. (The term “redlining” comes from this last category.)

While an initial purpose of the creation of these maps may have been positive – to identify vulnerable neighborhoods, those with homeowners particularly at risk for foreclosure – this was quickly “turned on its head” by members of the financial and real estate communities. They would use the information to discriminate against those in lower graded areas, particularly Blacks and foreign-born homeowners – when approving loans associated with home re-financing. Conversely, the data was also used to issue loans to white, native-born citizens in disproportionately large numbers.

Much of Germantown was ranked as “declining,” with several areas ranked as “hazardous,” including those centered around Queen Lane and Morris Street, those east of Germantown Avenue between Ashmead and Haines streets and adjacent to the railroad tracks of SEPTA’s Chestnut Hill East line, West Pomona Street, and much of Sharpnack Street in Mount Airy.

In East Falls, most of the residential areas built after the turn of the 20th century on the slope leading up to Henry Avenue were rated by the HOLC as “A” or “B” housing, with “C” being assigned to the older sections of East Falls located nearer to the railroad tracks of what is now SEPTA’s Regional Rail line to Norristown.

It’s no surprise that the designation by the HOLC of an area as being in decline or “hazardous” often became a self-fulfilling prophecy. Areas rated with C or D ratings were likely to see a drop in property values, as the associated area would be less attractive for investment.

However, there were some exceptions. Despite its receipt of a “D” rating, Manayunk has remained relatively stable through the last 9 decades. In a comment accompanying the rating for Manayunk, Francis E. McGill, a staff member of the HOLC, noted in June 1937 that “Old houses are being remodeled and new and modern improvements installed… Foreign born is definitely improving. Graded 4th grade because of age of property. Section is very unusual. Mills in section running to capacity.”

The last comment may hint at a reason for Manayunk’s stability: the presence of its mills. This stability of Manayunk suggests that a neighborhood’s receipt of a “D” rating did not always become a self-fulfilling prophecy in terms of the future stability of a neighborhood but rather, it suggests that the reasons are many and often nuanced.

Whatever the reasons may be, the HOLC map – and others with similar content – were a significant contributing factor in the rapid change of many neighborhoods in Philadelphia and around the country, often underscoring or helping to create patterns of private and public sector disinvestment.

After the end of World War II, these maps would be used as one of the tools for the practice of blockbusting – the systematic campaign used by much of the real estate industry post WWII to create and amplify white fears of Black families moving into a particular neighborhood, to then pressure whites to sell their houses at low prices and then turn around and sell them to Black families at exorbitantly high ones – a practice which we will discuss in a future “Time Machine” article.