Wait, EVERYONE should have fair access to housing??

By Celia Olson

One cannot hold an intelligent, comprehensive conversation about the Civil Rights Movement without discussing the impact of the Fair Housing Act.  The Fair Housing Act (FHA) was enacted in 1968 to ensure that every person in the United States has access to fair housing.[1]   The right to fair housing essentially means that every person has an equal opportunity to buy or lease a home.  Specifically, the FHA makes it unlawful to engage in any of the following practices based on race, color, national origin, religion, sex, familial status, or handicap:

  • Refuse to rent, sell, or negotiate housing
  • Deny a dwelling
  • Set different terms, conditions or privileges for sale or rental of a dwelling
  • Provide different housing services or facilities
  • For profit, persuade owners to sell or rent
  • Deny anyone access to or membership in a facility or service related to the sale or rental of housing[2]

Generally, the FHA is first enforced by the U.S. Department of Housing and Urban Development (HUD) by investigating the complaint.  Then, if the complaint has merit, there are two choices for the plaintiff: (1) HUD attorneys will litigate the case on a person’s behalf in an administrative hearing, or (2) either the state or federal Attorney General will litigate the case in federal or state court.  Many of these suits are brought by showing that a class of persons was disparately impacted by a housing practice.

The disparate impact standard allows for a claim to succeed if the protected group can show that they, as a class of people, were negatively affected by a housing practice.  This standard does not require that the action was performed with intent to discriminate, just that a class of persons was negatively impacted.  These practices can include exclusionary zoning ordinances, discrimination in the administration of Section 8 vouchers, lending practices (redlining), mortgage insurance policies, landlord reference policies, occupancy restrictions, and placement and demolition of subsidized housing.  Arguably the worst of these practices is redlining.

Redlining and Reverse Redlining

The term “redlining” can be traced back to the late 1920s when the Federal Housing Administration would use a red pen to mark off areas of a map where granting loans was deemed “too risky.”  The term is now used mainly to describe discriminatory practices of lenders, specifically banks.  The modern practice of redlining occurs when a financial institution eliminates typically poor, inner-city neighborhoods from their lending outreach efforts.  Reverse redlining is a similar practice where lenders charge disproportionately higher rates for loans to minority borrowers in those areas.

In the 1930s, Durham, NC, was one extreme example of redlining.  In 1933 the federal government created the Home Owner’s Loan Corporation (HOLC) to make low-interest mortgages to homeowners struggling against the looming threat of foreclosure.   As part of their appraisal process, HOLC created a map of Durham that assigned four specific grades to residential areas:

  • First Grade (A): New areas where mortgage lenders will make maximum loans. These areas are homogeneous.
  • Second Grade (B): Completely developed. “Like a 1935 automobile—still good, but not what the people are buying today when [they] can afford a new one.”  Lenders still will make maximum loans.
  • Third Grade (C): Areas are aged. “Infiltration of lower grade population . . . as well as neighborhoods lacking homogeneity.”  Lenders make loans under the lending ratio for the A and B areas.
  • Fourth Grade (D): “Undesirable population or an infiltration of it.” Some lenders will refuse to make loans in these neighborhoods and others will lend on a conservative basis.[3]


The HOLC did not even attempt to mask that they were drawing lines that cut out minority populations.  Grades A and B both mentioned that the areas are “homogeneous” while C and D were “lacking homogeneity” or “undesirable.”

Redlining and reverse redlining were supposedly banned from lenders’ practice in 1968 when Congress passed the FHA.  The Community Reinvestment Act (CRA) of 1977 was later passed to encourage lenders to extend credit in those areas historically redlined.[4]  The CRA is still active today, though a “relatively hands-off law,” providing a tool for lenders and community organizations to promote credit in low and moderate-income communities.[5]  However, since the illegal practice of redlining has been removed from the public eye for so long, some banks have resumed questionable practices in the hopes of not getting caught.

New York v. Evans Bancorp

One such bank is Evans Bank, located in Buffalo, New York.  Evans Bank is a regional bank that services western New York.  The bank offers typical banking services: checking accounts, credit cards, home equity lines of credit, and mortgages.  Evans Bank proclaims “community mindedness” as one of its mission pillars, and purports to make all decisions locally, with the ability to tailor mortgage programs to meet the needs of its clients.[6]

While no one is questioning Evans Bank’s focus on local banking, New York Attorney General Eric T. Schneiderman is questioning its discriminatory lending practices in the Buffalo area.  On September 2, 2014, Schneiderman filed suit in New York state court alleging that since 2009, Evans Bank has used a map defining its “trade area” to deliberately exclude Buffalo’s East Side, where more than 75% of Buffalo’s African-American population lives.  According to the Home Mortgage Disclosure Act, Evans Bank received 1,114 applications for residential mortgages from 2009-2012.  Of these, only four came from African American applications.  Furthermore, other banks in the Buffalo area lent to residents of the East Side at a much higher rate than Evans Bank, which only bolsters Schneiderman’s argument.

This map by itself does not show discrimination sufficient to find that Evans Bank violated the FHA.  Schneiderman will have to show that Evans Bank’s lending practices resulted in the disparate impact of African-Americans, as a class.

The Huffington Post reported:

“Redlining is illegal, discriminatory, and must be made a thing of the past, once and for all,” Schneiderman said in a statement on Tuesday. “It is crucial that all New Yorkers, regardless of the color of their skin or the racial composition of their neighborhood, be afforded an equal opportunity to obtain credit.”

It is unclear whether Evans Bank will be able to successfully defend against this lawsuit.  However, regardless of the outcome it is obvious that reform is needed in the way financial institutions are regulated.  Even if Evans Bank’s practices are found to be lawful, they will still have a negative impact on Buffalo’s African-American community.

While Schneiderman’s investigation into discriminatory banking practices in New York has so far only found one target, Evans Bank, the investigation will continue.  It is very likely that more banks could be implicated in the process.

To read more: http://dealbook.nytimes.com/2014/09/02/new-york-set-to-accuse-evans-bank-of-redlining/?_php=true&_type=blogs&_r=0

[1] 42 U.S.C. § 3601-19.

[2] U.S. Dept. of Housing and Urban Development, Fair Housing – It’s Your Right portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/FHLaws/yourrights.

[3] Dividing Durham: HOLC’s Survey of the Bull City, Kelly Smith and John Weis http://mainstreet.lib.unc.edu/projects/hayti_durham/index.php/.

[4] 12 U.S.C. § 2901.

[5] Here’s How The Community Reinvestment Act Led To The Housing Bubble’s Lax Lending, John Carney, The Business Insider (June 27, 2009) http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6.

[6] http://www.evansbank.com/category/Evans_Core_Values/220.html

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