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Rethinking the Policy Pie and Unintended Consequences

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Tanya Settles
February 3, 2023

Governments are often challenged by the broad concept of understanding structural or institutional exclusion in public policy, particularly when past policy decisions have contributed to social inequity.  Policymakers who tend to think of the benefits of policy decisions much like a pie (i.e., “there’s only so much pie to go around, so everyone gets an equal piece”) may unintentionally create pockets of inequity with consequences that can continue for generations. The housing policies that emerged in the early 1930s are an example of policy making with good intentions that contributed to long term social and economic inequity. 

The Cautionary Tale of Redlining

Housing policies originally designed to assess financial risk to mortgage companies and governmental loan guarantors still have an impact upon some neighborhoods, communities and populations today. The practice known as “redlining” originated with the Home Owners’ Loan Corporation (HOLC) in 1933 and continued for decades through HOLC and other federally funded programs that were state and government administered for decades until banned through the Fair Housing Act of 1968. Redlined areas are those communities that assessors determined to be “hazardous” or “fourth-grade”, and as such, were literally marked by red lines in maps created by HOLC. 

These New Deal policies were designed to alleviate financial hardship for homeowners emerging from the Great Depression through refinancing loans from private mortgage companies to federally backed loan guarantee programs to reduce mortgage default and foreclosure. The legislative intent was good; however, the long-term outcomes contributed to social and economic inequity spanning generations.  Criticism isn’t an indictment of the HOLC but more a cautionary tale about unintended consequences of policy making that may create pockets of inequity resulting in generational impacts. The communities of today in formerly redlined areas are demographically different than the original communities. Although HOLC did not assess every city or geographic region, the social, cultural and policy impacts are far-reaching.

Hindsight is 20/20

What we now know about the mosaic of social inequity is far more sophisticated than in the 1930s.  And there are success stories of refinanced mortgage loans for African Americans and other minorities in ways not connected to the redlining maps, thereby saving many families from the plight of economic hardship of failed mortgages. Further, HOLC is not the only federal housing program that implemented what we now recognize as discriminatory practices. What is striking about the HOLC maps, however, are the descriptions of communities that set the stage for how local governments and community members perceive diverse populations and neighborhoods. HOLC assessors used language that described neighborhoods through terms such as “infiltration”, “subversive”, “undesirable” or “lower grade” in a way that had a lot more to do with characteristics of race and culture than wealth or economic factors that influence home values. Consequently, descriptions of neighborhoods used by HOLC assessors contributed to setting the stage for segregated housing and created divides based on race, ethnicity, national origin and class inequity. What began as a well-intentioned effort to engage in aggressive economic recovery from the Depression contributed to generations of segregation for many cities across the United States. 

Time Heals All Wounds – or Does It? 

While it has been more than half a century since redlining last occurred, many previously redlined communities across the United States are still more likely to include higher concentrations of poverty, particularly for racially, ethnically and culturally diverse neighborhoods. For many residents of these neighborhoods home ownership remains out of reach, and consequently, so is the ability to create generational wealth. Moreover, formerly redlined neighborhoods in many cities throughout the United States still exhibit characteristics of distressed communities: vacant houses and property, greater unemployment, increased violent and property crime rates. The after effects of redlining contribute to the racial wealth gap which is detrimental to overall economic health because of a dampening effect on GDP. Closing the wealth gap may improve GDP by as much as 4-6 percent by the end of this decade.

Equity and Equality are Not the Same Thing

Solutions to the many challenges of current economic and social recovery depends upon recognizing and understanding the difference between equality and equity. Equality means treating all people the same; equity focuses on eliminating barriers and creating outcomes so all community members can thrive. Targeted interventions through policy making that allow governments to examine equality and equity at the same time, yet recognize them as different measures, can help reduce unintended consequences such as those resulting from redlining practices. Equality is not a zero-sum game, and it isn’t a pie. Investing in targeted policy interventions for some communities or populations does not mean that one group must give up its access to the pie so that others can have more. 

Author:  Tanya Settles is the founder and CEO of Paradigm Public Affairs, LLC.  Tanya’s areas of interest include relationship building between local governments and communities, restorative justice, and the impacts of natural and human-caused disasters on at-risk populations.  Tanya can be reached at [email protected]The opinions in this column and any mistakes are hers and hers alone. 

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