During the 1930s and 1940s, the federal government implemented new mortgage lending practices in an effort to increase the country’s homeownership rate. According to a new paper from scholars at New York University, the University of Virginia, and the University of California, Santa Barbara, these early lending programs were biased against Black borrowers.
“For the majority of American families, homeownership has been the primary engine for building wealth, and these federal programs set millions of families on that path,” said lead author Katherine Thomas, a doctoral student in sociology at NYU. “Our data show just how few Black households had access to the same opportunity to start building intergenerational wealth.”
For their study, the authors compared U.S. Census data to records from the Reconstruction Finance Corporation Mortgage Company regarding borrowers of Federal Housing Administration (FHA) and Veterans Affairs (VA) loans between 1935 and 1947. At this time, Black Americans represented about 10 percent of the country’s population and about 10 percent of veterans. However, only 2 percent of FHA loans and 5 percent of VA loans during the study period went to Black borrowers.
Notably, foreign-born U.S. residents appeared to have benefited significantly more from these early federal lending programs than native-born Black borrowers. During the study period, immigrants were about 9 percent of the country’s overall population, but about 10 percent of FHA borrowers. They also represented about 2.2 percent of VA borrowers, which is roughly on par with their share of World War II veterans.
“These historical inequities have real implications for our present time through the intergenerational transfers of wealth through housing,” said co-author Wenfei Xu, assistant professor of geography at UC Santa Barbara. “Any new housing policy should not only consider who it helps now, but what it sets in motion 50 years later.”
