Access to credit – the stuff that fuels home mortgages and small business loans – has long underpinned the pursuit of the American dream.
However, if you live on the wrong side of town, the American dream can become a nightmare as access to that all-important credit becomes much harder to come by.
Here in Louisville, credit access depends not just on individual worthiness, but also on place-based factors. In a word: redlining.
Beginning in the 1920s, Louisville was one of many American cities to practice redlining – a series of measures preventing certain groups from buying property in particular neighborhoods, obtaining a bank loan or purchasing insurance. Many of these practices extended to African Americans and Jews. Although redlining is not an official policy any more, bank safety and soundness requirements and lack of bank branches in low-income communities of color continue to prevent widespread access to affordable loans.
Redlining refers to the color outlined on maps of areas deemed riskiest for mortgages. While overt redlining is illegal today – prohibited under the Fair Housing Act of 1968 – its enduring effect is still evident in the structure of U.S. cities. Part of the evidence of this enduring structure can be seen in the Home Owners’ Loan Corporation (HOLC) maps created 80 years ago, and the neighborhood economic and racial/ethnic composition today.
The maps were created by the HOLC as part of its City Survey Program in the late 1930s. The HOLC deployed examiners across the country to classify neighborhoods by their perceived level of lending risk.
When looking at the original redlined maps, it is common to find restrictive covenants preventing certain groups of people from purchasing homes in particular neighborhoods. Such key words usually refer to race. In cities with large numbers of Jews, it was common for a property deed to state: that the property “shall not be sold to any person of the Semitic race, blood or origin which racial description can be deemed to include Jews, Hebrews, Armenians, Persians and Syrians.”
In Louisville, redlining primarily impacted communities of color, largely in West Louisville. Experiences shared by residents have underscored the need to eliminate systematic barriers for wealth creation in underserved areas.
Another lesson learned is that we can’t ignore or undo the damage from lost time and opportunity. Urban renewal shut down thriving minority businesses and successful entrepreneurs on Old Walnut Street (now Muhammad Ali Boulevard) in Louisville’s historic Russell neighborhood in the late 1960s, impeding the potential for inter-generational wealth building.
To right past wrongs, Louisville must first acknowledge that systemic devaluation and disinvestment in urban-multicultural communities was based on race and class. Most important, though, it is well past time to act.
Public and private entities should facilitate a concentrated effort toward reinvestment in these areas. Strategic, mission-based, equitable investments can become a remedy for violence and a catalyst for hope in resilient neighborhoods.
That’s where LHOME comes in.
A mission-driven nonprofit community development financial institution (CDFI), LHOME, the Louisville Housing Opportunities and Micro-Enterprise Community Development Loan Fund, Inc., is certified by the U.S. Treasury, charged with making at least 60 percent of its loans to residents and small business owners in low-income parts of Jefferson County. LHOME also must provide support services like financial coaching and budget counseling.
An entity with strong Jewish roots, LHOME was co-founded in early 2012 by Judy Tiell, then-executive director of Jewish Family & Career Service, and Cathy Hinko, executive director of the Metropolitan Housing Coalition. At the time, Louisville was (and still is) underserved by CDFIs.
JFCS incubated LHOME until January 2017 when the LHOME board was reconstituted to include affordable housing organizations The Housing Partnership, Inc. and New Directions Housing Corporation.
LHOME maintains a close relationship with JFCS. Several loans are made along with JFCS’ Navigate Enterprise Center.
LHOME boasts many success stories: Farhan Abdi, director of the Somali Community Center, used his financing to purchase lift-equipped vans for his Medicaid-reimbursed medical transportation business called Easy Transportation.
Marcus Harrus, owner of Pride Consulting, secured an LHOME loan to rehab a house donated to the community organization Black Lives Matter for a formerly homeless African American family in West Louisville.
All told, LHOME has made 29 loans totaling almost $175,000, primarily to African American clients. LHOME also offers small business loans, to help low-income elderly homeowners pay their property taxes.
As a consequence of enormous community need, LHOME plans to increase its operating and loan funds to triple its loan volume in 2019.
(Amy Shir is the executive director of LHOME.)
Want to help?
To learn more about LHOME and to invest or volunteer, visit lhomeky.org or like it on Facebook at LHOME CDFI.