When Delores Kennedy Williams moved to Indianapolis with her late husband 53 years ago, she was well aware of the city’s redlining past. Despite the difficulties, the couple put down roots and purchased a home in 1990. What she didn’t know at the time was how long that system would last.
Over the ensuing decades, the now 88-year-old Black woman has watched the lasting effects of redlining play out in her neighborhood: a decline in Black homeownership, unequal lending, ongoing disinvestment, gentrification, and an increase in institutional investors who buy homes and turn them into rentals.
“I’ve seen communities decline, recover, decline, and recover. I’ve seen neighborhoods change before my eyes.”
— Delores Kennedy Williams
indianapolis homeowners
Kennedy Williams witnessed more than just a housing move. This is a story of economic freedom and impediment to progress.
To fully understand this, we need to go back to the 1930s. During the Great Depression, the Home Owner Loan Corporation (HOLC) ranked 239 cities based on lending risk. The agency labeled mostly white areas as “safe” and highlighted them in green. Black and minority communities were circled in red and labeled “at risk.” Redlining, as the practice is known, cuts off entire communities from credit, investment, and opportunity.
According to 2020 Census data, well over 8 million people in the United States now live in areas where the lines were drawn 90 years ago. But it’s not just about who lives where. Redlining continues to shape who can achieve and maintain homeownership in America. Not only does it drive property values, access to capital, and levels of neighborhood investment, but it also determines who can build equity, create wealth, and pass on opportunity—and therefore inequity—from generation to generation.
The red line didn’t disappear. It has evolved.
Growth of lost capital
Home equity, or ownership of your home, is one of the biggest ways people build wealth.
But Redfin’s latest analysis of redlining in 2020 shows that between 1980 and 2017, the typical homeowner in a former redlining area earned 53% less equity, or $212,023 less, than a homeowner in a greenlining area. That gap likely widened as home equity rose 142% nationally from 2020 to 2025, according to Bankrate Best & Research. Worst state for home equity research. This dramatic capital disparity creates additional hurdles beyond the general home affordability crisis in the United States for homeowners in red-light areas looking to access capital for their next home purchase.
“Even though these historic policies are no longer legal, they continue to have economic consequences,” said Redfin Chief Economist Darryl Fairweather.
The result is a housing market in which black and Hispanic households, already less likely to own homes, are less able to extract wealth from the homes they do own. And since these households tend to have fewer liquid assets, securing housing equity becomes even more important.
“If black families have lower home ownership rates, they will have less home equity,” Fairweather said. “Redlining policies have reduced home values in these areas. When people can’t get loans to buy homes, it reduces the demand for housing, the value of homes, and investment in the area as a whole. Homes in black neighborhoods tend to be less expensive than homes in white neighborhoods, so that also reduces property values.”
Apart from the housing itself, the difference in stock growth has a deeper meaning.
“Business ownership is low because most people use the equity in their home to start a business. They use that equity to send their kids to college. If they had equity, they would be less dependent on student loan debt. That’s money that people would use to move to a better area. There’s an economic cost to the individual consumer as well as the individual consumer,” says Andre Perry. And denying people their true worth has associated social costs. ”
Difficult to get a mortgage
The Fair Housing Act of 1968 made redlining illegal, but old redlining still affects who can and cannot get a mortgage today.
The National Community Reinvestment Coalition (NCRC), a nonprofit organization focused on underserved communities, analyzed Mortgage Disclosure Act (HMDA) data from 1991 and 2021. Areas that were once marked as “dangerous” on HOLC’s maps received 2.5 times fewer loans than areas that were once rated as “best.” This disparity still exists even when considering vacancy rates, homeownership occupancy rates, and age of housing.
“Formerly redlined areas have been experiencing declines in mortgage investment for more than a century,” said Bruce Mitchell, a senior researcher at NCRC. “The impact has been particularly severe in redlined black neighborhoods, where access to mortgages was further suppressed until the recent decade.”
Homeownership rates in formerly “dangerous” areas are still about half the rate in green-lined areas, according to the latest data from the Federal Reserve Bank of St. Louis.
“The mortgage market is backward-looking and relies on past sales to determine current values,” says Jason Richardson, NCRC’s senior director of research.
If you run out of loans in one year, the value will fall, making it even more difficult to get a loan the following year. In this way, lending discrimination became self-reinforcing.
— Jason Richardson
NCRC Senior Director of Research
Kennedy-Williams said that in her experience, discrimination in Indianapolis was not about color or race, but what she called economic racism.
“If you’re just an everyday worker, a blue-collar worker, I don’t care how good your credit rating is, it’s going to be harder to get a loan from a bank than someone who is a professional,” she says. “Even if they managed to save and get a lot of money, it would be very difficult for them to get a loan from a bank. And I think that’s still true.”
A big part of that is awareness. While lenders may view white-collar salaried workers as lower risk in mortgage applications, blue-collar or hourly workers may be viewed as less predictable, even if the borrower is financially responsible.
…But what happens to your credit score?
A major challenge in studying the mortgage gap is that detailed credit score data is not publicly accessible, Mitchell said. This makes it difficult to grasp the overall picture of lending discrimination. While it’s true that black and Hispanic borrowers tend to have lower credit scores and incomes on average than white borrowers, research shows that these differences do not fully explain mortgage denial rates.
Outside of the redlining context, a 2024 study from the Federal Reserve Bank of Minneapolis found that applicants of color are more likely to be denied a mortgage. This disparity occurred even though their financial profiles (income, credit scores, loan details) closely matched those of white applicants.
Today’s lenders aren’t literally following the red line map, but the problem is still there. Modern technologies like artificial intelligence can still reproduce historical inequalities known as digital redlining. Lenders use these automated systems to extract factors such as credit history and zip code to determine whether someone is a good credit risk. Colin Munsterman, a professor at the University of North Texas (UNT) Dallas School of Law, explains that even if the goal is to make things fair, past inequalities can shape current decisions.
“Predictive analytics tools, like determining whether someone is a good credit risk, look for patterns in the data,” she says. “But you can’t do that with technology if it can only learn from historical data. One of the big problems is if the historical data doesn’t include Black people getting mortgages and paying on time because they weren’t allowed into the market, then you don’t see that pattern.”
Real estate appraisal value is low
Data from the St. Louis Federal Reserve Board continues to show persistent disparities in home prices in historically red-lined and green-lined neighborhoods, even decades after redlining became illegal.
“No one is saying there are red lines in these areas, but these areas are less desirable and ultimately these lower ratings have the effect of reducing the amount of equity that families and communities have to develop,” Perry says.
While home prices in both areas have generally increased over the past few decades, formerly red-line areas are now worth half as much as traditionally green-line areas.
“Once redlining was called out and made illegal, real estate values didn’t magically increase,” said Brian K. Seymour II, founder and CEO of Georgia-based financial planning firm Prosperage Wealth. “The values in the previously redlined areas are still decreasing.”
Generally low appraised values are largely due to the fact that the older housing stock in rezoned communities was not considered to be of sufficient value to be rehabilitated or upgraded. According to Mitchell, this cycle is difficult to break. “This means that unless there is a special case where a neighborhood suddenly becomes very attractive for investment, it will continue to fall behind year after year.”
Key areas for redevelopment and gentrification
Decades of disinvestment have not only deterred these regions. It reshaped communities and left many overlooked and under-resourced.
“These are areas that are often devalued,” Mitchell says. “Those may be areas where there are higher levels of abandonment and vacancies.”
This long period of currency devaluation sets the stage for what happens next. Home prices in these areas have long been depressed, which often attracts developers. This makes it a prime area for redevelopment and, in some cases, gentrification.
“Lower values can be attractive in economically dynamic regions or cities with rapid population growth and dynamic economies,” Mitchell says. “Other cities where those dynamics aren’t happening may continue to have neighborhoods that are abandoned, vacant, and distressed.”
What had been overlooked was now an opportunity. On the surface, new buildings, stores, home renovations, improved services, and new businesses breathe new life into neighborhoods and increase home values. This looks like progress. But gentrification often acts as a bitter pill. Communities that were once excluded from investment are now at risk of being excluded from its benefits.
“People who live there often face financial hardship and end up having to leave the area and go to other areas that are more affordable,” Mitchell said. “So low-income people have virtually no access. Unfortunately, in countries like the United States, there are areas with high majority-minority correlations that tend to skew toward low-income people.”
sauce: Mapping inequality: Redlining in the American New Deal
Along with Chicago, Detroit, and New York, Indianapolis is one of 239 cities redlined on 1930s HOLC maps that are now experiencing the effects of gentrification.
When Kennedy-Williams moved to Indianapolis in 1973, she remembers the Butler-Tarkington neighborhood as a thriving community filled with local businesses. However, by the 1980s, the area began to decline, with stores closing and vacant buildings increasing.
“So many homes are gone, demolished or rebuilt, but many of the new homes are being purchased or developed by people from out of state,” she says. “There’s gentrification and buildings are being built everywhere. People like me get older and can’t afford to live in their homes anymore, so they end up selling their homes.”
Gentrification is increasingly associated with institutional investors buying up housing in historically undervalued, low-income, majority-minority neighborhoods, shaped in part by redlining.
“These are areas that have struggled to get out of the foreclosure crisis,” says Amy Nelson, executive director of the Fair Housing Center of Central Indiana. “We are now dealing with a new problem. It’s not just a lack of bank branches and mortgage opportunities. It’s also the role of institutional investors who come in and buy up the housing there and turn it into expensive rentals. This takes away the opportunity to buy a home in these areas from the homes that were occupied by their previous owners. It’s not just the traditional and modern forms of redlining that we’re still fighting.”
Top-ranked metropolitan areas for degree of gentrification (1970-2010)
According to the NCRC, upscale urban neighborhoods grew by more than 635% from the 1970s to the 2010s. Historically redlined neighborhoods are prime areas for modern gentrification. In fact, historically delineated cities such as Denver, Atlanta, and Miami have ranked among the top gentrifying areas for more than two decades, according to 2010 and 2020 census data.
Efforts to break the cycle
Efforts have been made to fix the damage to the red line left behind, but progress has been uneven.
The Community Reinvestment Act (CRA) of 1977 requires financial institutions to make banking services available to people in underserved areas. Unfortunately, not only is the CRA not always enforced as strongly as possible, but the law has not evolved with the times.
“The vast majority of mortgage lending today is no longer done by banks; it’s done by mortgage companies,” Mitchell says. “We’re seeing this shift in dynamics within the industry. Banks are operating at a much lower level than loan and mortgage companies that don’t have the same CRA obligations as before. Banks are moving into these areas and making more and more loans, but they don’t have the same responsibilities under the law.”
The Special Purpose Credit Program (SPCP) is designed to go a step further, allowing lenders to provide additional support to people from historically disadvantaged communities with lower interest rates, reduced fees, or more flexible lending requirements. However, in 2025, the Federal Housing Finance Agency moved to end Fannie Mae and Freddie Mac’s participation in the SPCP. It is not something that can be scaled up nationally and is likely to be limited to individual financial institutions or small local programs.
Down payment assistance and first-time homebuyer grants can also help people achieve homeownership, especially in historically redlined areas. Some cities are pouring money into affordable housing and eviction protection programs so that longtime residents can benefit from new development rather than being forced out by rising prices.
“We don’t have redlining anymore, but we still have single-family neighborhoods and multi-family neighborhoods, which in itself is a form of racism,” Fairweather said. “By eliminating discrimination and allowing all kinds of housing to be built in all neighborhoods, we can accelerate desegregation and create more equal outcomes.”
Officially, redlining may be gone, but without legal, lending and zoning reforms, the same pattern risks repeating itself in new forms. Will future generations be able to build wealth and stability without overtaking the systems that once excluded them? Kennedy Williams has hope.
“I have five children, and four of them live here (Indianapolis),” she says. “Two of the four have their own homes, both inside the red line, but in nice neighborhoods. Hopefully they can pass that home on to their kids and we don’t have to leave the neighborhood to have a good environment. That’s my hope, that we don’t have to keep chasing our dreams and can make it happen where we are.”