New-deal mortgage programmes benefited white borrowers disproportionately

Area of Science:

• Economic History
• Urban Studies
• Sociology

Background:

• Scholars have long suspected that early Federal Housing Administration (FHA) and Veterans' Administration (VA) mortgage programs disproportionately benefited white Americans.
• Empirical evidence on the racial and nativity demographics of early beneficiaries of these foundational US homeownership policies was previously limited.
• Understanding early lending patterns is crucial for analyzing long-term racial disparities in wealth and neighborhood attainment.

Purpose of the Study:

• To quantify the racial and nativity composition of borrowers in early FHA-insured and VA-guaranteed mortgage programs.
• To assess the extent of racial inequality in access to these key homeownership policies.
• To provide data for future research on the role of housing policy in shaping socioeconomic disparities.

Main Methods:

• Linked Reconstruction Finance Corporation Mortgage Company (RFCMC) loan records (1935-1947) with Census data.
• Analyzed 29,921 FHA-insured and VA-guaranteed loans for borrower race and nativity.
• Compared borrower demographics to the general US population and relevant veteran populations.

Main Results:

• Black borrowers received only 2.1% of FHA loans and 5.1% of VA loans, despite comprising 9.9% of the US population in 1940.
• Immigrants were proportionally represented in FHA lending (10.0%) and VA lending (2.2%) relative to their respective population shares.
• These findings reveal significant racial disparities in early federal housing policies.

Conclusions:

• The early FHA and VA mortgage programs exhibited substantial racial inequality, with limited access for Black borrowers.
• Immigrants were proportionally represented, highlighting race as a key differentiator in access.
• These results underscore the historical role of housing policy in perpetuating racial disparities in homeownership and wealth accumulation.