How We Got Here: The Historical Roots of Housing Segregation
A report from the Civil Rights Fair Housing Reort -- During the last century, the residential segregation and isolation of most African Americans has been an almost permanent feature of housing patterns in the United States. No other ethnic group in America’s history has been isolated to a similar extent. Most immigrants to the United States live in ethnically diverse areas, and even areas considered "ethnic enclaves" contain a wide variety of nationalities and serve only as a fleeting, transitory stage in the process of assimilation. Our nation’s highly segregated housing patterns did not occur by accident; they are a product of a complex web of decisions made since the beginning of the 20th century.
Until the end of the Civil War, slavery dominated the landscape for African Americans. During that time, however, there were small pockets of African Americans living in "free" states in the North and increasingly moving to the new American West. Cities were relatively small and compact, with the bulk of the population still living in rural areas, with much more dispersed populations. Following the Civil War, Jim Crow and the Black Codes made economic, and thus residential, choice nearly impossible for Blacks in the South. In the North, the numbers of Black residents remained small.
However, the Industrial Revolution pushed the cities across America to grow and to become new, bigger and more powerful economic centers. The rise of industrialization was accompanied by a migration of African Americans from farms to cities.
The 20th century brought with it social, political, and economic forces that directly led to the highly segregated housing patterns visible today. Many smaller communities, particularly throughout the Midwest, but also in the West, had begun practices that systematically excluded people of color in overtly discriminatory ways. Dubbed "sundown towns" for their implicit — and sometimes explicit — rules that people of color were required to leave their borders before sunset, these communities posted signs warning African Americans to leave before sunset or not enter at all, enacted racial ordinances, encouraged racially restrictive covenants, conducted "freeze-out" and "buy-out" campaigns, and participated in overt intimidation often accompanied by violence. The effects of these exclusionary policies are still prevalent today, as nearly all of the Midwest’s sundown towns remain virtually all-White. 
The rise of industrialization was accompanied by a migration of African Americans from farms to cities to help meet the demand for labor. However, various "legal" measures were taken in response to the rising numbers of African Americans in cities. For example, a number of cities in the South adopted ordinances that established separate neighborhoods for White and African-American residents. After the Supreme Court held one city’s residential segregation law unconstitutional in 1917, "racial segregation in southern cities was accomplished by the same means as in the north: through violence, collective anti-Black action, racially restrictive covenants, and discriminatory real estate practices."
Prior to the New Deal, direct governmental support for segregation "consisted primarily of the judicial enforcement of privately drawn restrictive covenants." Frequently included in property deeds, racially restrictive covenants controlled how property could be developed or used, or who could live on the property. By the 1920s, deeds in nearly every new housing development in the North prevented the use or ownership of homes by anyone other than "the Caucasian race." Many new homes still recorded racially restrictive covenants even after the Supreme Court held them unenforceable in 1948. As a result, people of color were excluded from many communities, limiting where they could settle and beginning the trend toward increased segregation. During the 1920s, property values became tied to race "as a means to legitimize racial exclusion and protect racial boundaries."
By the 1930s, most cities had well-defined boundaries within which African Americans and other people of color were allowed to live. This discrimination was racial, not economic, and even middle class and upper-income African Americans were confined to segregated areas. To accommodate the growing population of African Americans in these increasingly overcrowded areas, single family homes were subdivided into multifamily homes with high cost rentals. By 1940, spatial isolation had become a permanent fixture of the residential structure of African-American community life, and that isolation only increased during the next 30 years.
Beginning in the 1930s, a number of government agencies were formed that affected housing patterns in the United States. The U.S. Housing Authority ("USHA") established a public housing program to improve housing conditions for low-income Americans, but nearly all of this affordable housing was in segregated public housing projects. Public housing programs were segregated by law in the south and nearly always segregated in the rest of the country in deference to local prejudice, with housing projects for African Americans usually adjoining segregated neighborhoods or built on marginal land near waterfronts, highways, industrial sites, or railroad tracks. As one historian noted, "The most distinguishing feature of post-World War II ghetto expansion is that it was carried out with government sanction and support."
Other federal agencies were developed during the New Deal to increase homeownership rates among Americans, but in practice these programs generally benefited Whites only. These agencies provided "crucial financial support to the housing industry" and facilitated the movement to the suburbs by making the purchase of suburban homes cheaper than renting in the cities. For example, to "assist" with lending decisions, the Federal Housing Authority prepared "neighborhood security maps" that were based largely on the racial, ethnic, and economic status of residents. Indeed, a national trade association explicitly stated that minorities caused adverse influences upon a neighborhood. The American Institute of Real Estate Appraisers began using a ranking system that assessed risk based on the racial composition of the community, with English, Germans, Scotch, Irish, Scandinavians ranked at the top of the list and "Negroes" and "Mexicans" ranked at the bottom of the list. Lending institutions and the federal government employed underwriting guidelines that favored racially White, homogenous neighborhoods and led to the creation of a separate and unequal lending and financial system.
Because federally-backed mortgages were rarely available to residents of "transitional," racially mixed, or minority neighborhoods, lenders began "redlining" those neighborhoods, circling on a map the areas where people of color lived to denote that mortgage lending would not be available. Redlining significantly contributed to segregation by encouraging White Americans to purchase homes in stable White communities and discouraging any investment in communities where people of color resided.
In addition, federal agencies "endorsed the use of race-restrictive covenants until 1950" and explicitly refused to underwrite loans that would introduce "‘incompatible’ racial groups into White residential enclaves." These government policies were also adopted by the private sector. For example, from the 1930s to the 1960s the National Association of Real Estate Boards issued ethical guidelines that specified that a realtor "should never be instrumental in introducing to a neighborhood a character or property or occupancy, members of any race or nationality, or any individual whose presence will be clearly detrimental to property values in a neighborhood."
Together, these federal agencies financed almost half of all suburban homes in the 1950s and 1960s, helping the American homeownership rate to increase from 30 percent in 1930 to more than 60 percent by 1960. However, these discriminatory lending policies resulted in the widespread use of race to determine eligibility for housing credit. Consequently, Whites received essentially all (98 percent) of the loans approved by the federal government between 1934 and 1968.
The 1950s and 1960s saw the migration of three million African Americans from the South. With the large-scale departure of White Americans from cities to the suburbs came an unprecedented increase in the physical size of the areas in which African Americans lived. This expansion was also facilitated by individuals looking to make a profit, who brought about rapid racial transitions in neighborhoods through the practice of "blockbusting." These individuals sold one or two houses on a block to carefully selected African Americans and then capitalized on the other residents’ fear of declining property values, inducing them to sell their homes at low prices. These homes were then sold to African Americans at higher prices, effectively resulting in a block-by-block expansion of African-American residential areas.
Housing patterns for low-income Americans also changed during the period. By the mid-twentieth century, federal housing legislation was focused on eliminating substandard living conditions through the clearance of "blighted" areas and provided federal subsidies for cities attempting to fix the serious housing shortage in American cities. However, federally-assisted urban renewal projects demolished 20 percent of central city housing units occupied by African Americans during the 1950s and 1960s, and 90 percent of the low-income housing units destroyed by urban renewal were never replaced. People of color made up more than 60 percent of those displaced by urban renewal.
For many of the displaced, public housing became the only option. But as Commission Co-Chair Henry Cisneros testified before Congress in 1995, HUD had been "complicit in creating isolated, segregated, large-scale public housing" and "HUD has traditionally been part of the problem." Most of the public housing built from the 1950s to the 1970s was comprised of large, densely populated "projects," often consisting of high-rise buildings located in poor, racially segregated communities. Public housing became, in effect, a "second ghetto" subsidized by the federal government, where "government took an active hand not merely in reinforcing prevailing patterns of segregation, but in lending them a permanence never seen before." Over time, the extent of segregation in public housing has only increased as the demographics of cities and public housing have changed, with fewer Whites and more African Americans living in public housing.
All this activity resulted in intensified residential segregation of African Americans. Between 1950 and 1970, the African-American population doubled in most large Northern cities, but residential segregation was maintained as White Americans put into effect a "policy of containment and tactical retreat before an advancing color line." After the urban riots in the 1960s, the Kerner Commission Report famously noted that the United States was becoming "two nations — one White, one Black — separate and unequal."
The Fair Housing Act was passed in 1968 to address this continued segregation and prohibit discrimination in housing. It prohibited discrimination based on race, color, religion, and national origin. Importantly, Congress declared that "it is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States." The Fair Housing Act is rooted in both the 13th and 14th Amendments to the Constitution. It prohibits not only intentional discrimination, but also policies and practices that have a discriminatory effect or perpetuate segregation. It also includes a provision that is unique in civil rights laws – a requirement that HUD and other federal agencies and their grantees "affirmatively further" fair housing to assess and address the racial impacts of official actions and to affirmatively promote residential integration in federal policy.
In 1988, Congress amended the Fair Housing Act to add persons with disabilities and families with children to the list of protected classes. In addition, the enforcement mechanism of the Act was greatly strengthened by providing an administrative enforcement process at HUD in which HUD findings of reasonable cause and charges of discrimination could be heard by a HUD administrative law judge or in federal court. In addition, HUD and the Department of Justice were authorized for the first time to seek monetary damages for victims of discrimination and civil penalties.[source: http://www.civilrights.org/publications/reports/fairhousing/historical.html ]