This article traces the history of federal policies that shaped residential racial segregation in the United States from the New Deal era through the late twentieth century. For broader context, see Federal Housing Segregation and New Deal Race History.

Before the 1930s, residential segregation in American cities was enforced primarily through private mechanisms: racially restrictive covenants written into deeds, real estate industry norms, and informal neighborhood pressure. Some municipalities enacted explicit racial zoning ordinances, though the Supreme Court struck down the Louisville, Kentucky ordinance in Buchanan v. Warley (1917), ruling it an unconstitutional interference with property rights. Private covenants, however, were left untouched.

The real estate industry, organized through the National Association of Real Estate Boards (NAREB), formalized segregationist practice in its 1924 code of ethics, which instructed members, in substance, not to introduce into a neighborhood members of any race or nationality whose presence would damage property values. This framing - segregation as a property value proposition - would carry forward into federal policy.

The Home Owners' Loan Corporation (HOLC), established in 1933 under the National Industrial Recovery Act, was created to refinance mortgages for homeowners facing foreclosure during the Depression. To assess lending risk, HOLC developed residential security maps for cities across the country. Neighborhoods were graded A through D and color-coded green, blue, yellow, and red respectively.

Grade D - red - was assigned to neighborhoods deemed highest risk. HOLC assessors consistently assigned lower grades to neighborhoods with significant black, immigrant, or mixed populations, regardless of the physical condition of housing stock. Assessors' notes recorded the racial and ethnic composition of neighborhoods as explicit factors in grading. The maps were used internally by HOLC and later shared with private lenders and the Federal Housing Administration.

The practice of denying or discouraging loans in lower-graded areas came to be called “redlining,” a term that entered common usage decades later.

The Federal Housing Administration (FHA), created by the National Housing Act of 1934, provided federal insurance for private mortgage loans, dramatically reducing lender risk and enabling longer-term, lower-down-payment mortgages. This mechanism is widely credited with expanding homeownership among white working- and middle-class Americans during the postwar decades.

The FHA's Underwriting Manual, first issued in 1935 and revised through the 1950s, incorporated racial homogeneity as a criterion for insuring loans. The 1938 manual stated, in substance, that if a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes, and recommended the use of deed restrictions to prevent the occupancy of properties by inharmonious racial groups. The FHA also explicitly favored new suburban construction over urban renovation, and would not insure loans in or near black neighborhoods.

The FHA actively encouraged restrictive covenants in subdivisions it insured. Developer William Levitt, whose Levittown projects in New York and Pennsylvania were among the largest FHA-backed developments of the postwar era, included lease and deed clauses barring non-white residents as a condition of FHA financing.

The Public Works Administration (PWA), under Harold Ickes, constructed public housing projects beginning in 1933. PWA policy generally followed the “neighborhood composition rule,” placing black residents in projects in or adjacent to existing black neighborhoods and white residents similarly. Ickes, despite a personal record of supporting civil rights organizations, administered a program that institutionalized spatial separation. Some projects displaced existing black neighborhoods to make way for construction.

The Servicemen's Readjustment Act of 1944 (the GI Bill) provided veterans with access to low-interest, federally guaranteed home loans administered through the Veterans Administration (VA). The VA followed underwriting standards similar to the FHA, including deference to local segregationist norms and refusal to guarantee loans in racially mixed or black neighborhoods. Black veterans were largely excluded from the suburban homeownership boom financed by GI Bill loans, not by explicit statutory language but by administrative practice and the private market infrastructure the federal system supported.

The Housing Act of 1949 launched urban renewal programs that authorized the federal government to fund the clearance of areas designated as “slums” and their redevelopment. Local authorities determined which areas qualified. In practice, areas with high concentrations of black residents were disproportionately targeted. Displaced residents were rarely relocated to equivalent housing; they were often pushed into other overcrowded black neighborhoods or into newly constructed public housing towers.

Critics at the time, including journalist Charles Abrams and later urbanist Jane Jacobs, noted the racially disparate effects. Black communities and civil rights organizations coined the phrase “Negro removal” as a description of urban renewal's on-the-ground impact.

The Housing Act of 1949 also funded construction of large public housing projects. The Chicago Housing Authority, under political pressure from white aldermen, concentrated new high-rise projects in black neighborhoods on the South and West Sides, a pattern documented by sociologists and later by the U.S. Civil Rights Commission. Projects such as the Robert Taylor Homes and Cabrini-Green became densely concentrated sites of poverty. Similar patterns appeared in St. Louis (Pruitt-Igoe), Baltimore, and other major cities.

In Shelley v. Kraemer (1948), the Supreme Court ruled that state courts could not enforce racially restrictive covenants, as such enforcement constituted state action in violation of the Fourteenth Amendment. Private parties remained free to write covenants; government could not compel compliance. The FHA quietly dropped explicit covenant language from its manuals following the ruling but continued to favor racially homogeneous neighborhoods in its insurance decisions.

Title VI of the Civil Rights Act of 1964 prohibited discrimination in programs receiving federal financial assistance. Application to FHA and VA lending was contested, and enforcement was limited during the Johnson administration.

Following the assassination of Martin Luther King Jr. in April 1968, Congress passed the Fair Housing Act (Title VIII of the Civil Rights Act of 1968). The act prohibited discrimination in the sale, rental, and financing of housing on the basis of race, color, national origin, and religion (sex was added in 1974; disability and familial status in 1988).

Enforcement mechanisms were initially weak. The Department of Housing and Urban Development (HUD) could investigate complaints and attempt conciliation but lacked authority to issue cease-and-desist orders. Aggrieved parties could sue in federal court, but litigation was expensive and slow. The act did not require affirmative steps to reverse prior segregation.

President Kennedy issued Executive Order 11063 in 1962, prohibiting discrimination in federally assisted housing. The order applied only to new construction financed after its issuance and excluded the large existing inventory of FHA- and VA-financed housing built since the 1930s, limiting its practical reach.

In Gautreaux v. Chicago Housing Authority (N.D. Ill. 1969), a federal court found the Chicago Housing Authority and HUD had deliberately placed public housing in black neighborhoods to maintain segregation. The subsequent Hills v. Gautreaux (1976) ruling by the Supreme Court allowed remedies that crossed jurisdictional lines, resulting in a program that eventually moved thousands of black families from Chicago public housing to suburban locations using Section 8 vouchers.

Congress passed the Community Reinvestment Act (CRA) in 1977, requiring federally insured banks to serve the credit needs of all communities in their service areas, including low- and moderate-income neighborhoods. The act was intended partly to counteract ongoing redlining by private lenders. Enforcement was handled through bank examination; the act created no private right of action.

The Fair Housing Act included language requiring HUD and its grantees to affirmatively further fair housing, not merely refrain from discrimination. For decades, HUD issued minimal guidance on this requirement. Successive administrations interpreted the obligation narrowly.

Some historians argue that HOLC's residential security maps were the primary cause of postwar residential segregation, while others contend that FHA policy, private market discrimination, and local political decisions were equally or more causally significant; see Federal Housing Segregation Debate.

The degree to which urban renewal programs were designed to displace black communities as a policy goal, as opposed to producing that outcome through facially neutral criteria, is disputed among urban historians; see Urban Renewal Race Viewpoint Debate-viewpoint.

Whether the Fair Housing Act's “affirmatively furthering” provision imposed an obligation to actively integrate neighborhoods or only to remove discriminatory barriers is a contested legal and policy question; see Fair Housing Act Debate.

The extent to which GI Bill disparities resulted from federal design versus state administration and private lender behavior is debated; see GI Bill Race History.

1. Kenneth T. Jackson, Crabgrass Frontier: The Suburbanization of the United States (Oxford University Press, 1985).
2. Richard Rothstein, The Color of Law: A Forgotten History of How Our Government Segregated America (Liveright, 2017).
3. Robert K. Nelson et al., “Mapping Inequality,” American Panorama, University of Richmond Digital Scholarship Lab, https://dsl.richmond.edu/panorama/redlining/.
4. Federal Housing Administration, Underwriting Manual (Washington, D.C.: FHA, 1938), Part II, Section 9, paras. 909-935.
5. Buchanan v. Warley, 245 U.S. 60 (1917).
6. Shelley v. Kraemer, 334 U.S. 1 (1948).
7. Hills v. Gautreaux, 425 U.S. 284 (1976).
8. Arnold R. Hirsch, Making the Second Ghetto: Race and Housing in Chicago, 1940-1960 (Cambridge University Press, 1983).
9. Charles Abrams, Forbidden Neighbors: A Study of Prejudice in Housing (Harper, 1955).
10. U.S. Commission on Civil Rights, Understanding Fair Housing (1973).
11. National Association of Real Estate Boards, Code of Ethics (1924), Article 34.
12. Ira Katznelson, When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America (Norton, 2005).