Redlining is the racial, ethnic, and socioeconomic status place-based financial and institutional exclusionary practices used to exploit targeted groups. Traditional redlining denies or limits access to essential public and private sector goods and services, and capital especially mortgages to targeted groups based on race, socioeconomic status, and place of residency while making public and private sector goods and services, and capital especially mortgages more available in more racially homogeneous, White neighborhoods (Aalbers, 2011; Squires & Kubrin, 2005). Thus, redlining causes the disinvestment of targeted areas often having disproportionate concentrations of poverty and racial and ethnic minorities (Aalbers, 2011; Squires & Kubrin, 2005). Redlining undermines local housing markets lowering property values and erodes tax bases causing the more affluent and mobile residents to leave. Redlining often culminates in neighborhood abandonment that ultimately deteriorates communities.
The Home Owners Loan Corporation (HOLC) was created to refinance urban mortgages and make low interest loans to owners of foreclosed real estate. HOLC is often blamed for the institutionalization of redlining through its creation of a loan risk rating system that used residential maps to indicate the risk of providing capital especially mortgages and making real estate investments by neighborhood. The rating system had four categories of risk assigned the colors green, blue, yellow, and red. Map areas ranged from those colored green, contained within green lines, or “greenlined” with low to negligible risk and high profit potential compared to areas colored red, contained within red lines, or “redlined” with high risk and low profit potential (Aalbers, 2011; Jackson, 1985; Sharp, 2008; Squires & Kubrin, 2005). Thus, HOLC’s rating system established a legacy of neighborhood property values, housing, and residential compositional patterns.
HOLC’s rating system especially its appraisal process had racial, ethnic, and religious components. These components restricted greenlining to homogenous, affluent, White Christian areas, and bluelining applied to stable neighborhoods often including Jewish communities with relatively high socioeconomic status (Aalbers, 2011; Jackson, 1985; Sharp, 2008; Squires & Kubrin, 2005). Yellowlining applied to economically declining areas with relatively poor quality housing, deteriorating infrastructure, low socioeconomic status, and concentrations of racial and ethnic minorities while redlined area residents, who were disproportionately members of high poverty and minority groups especially African Americans living in poor quality houses, were denied access to financial services and mortgages (Aalbers, 2011; Carr & Kutty, 2008; Freund, 2010; Sharp, 2008; Squires, 2003; Squires & Kubrin, 2005).
Although traditional redlining involves denying, limiting access to, or arbitrarily increasing the cost of capital particularly mortgages to residents within targeted geographic areas, educational redlining applies to public school funding. Educational redlining applies traditional redlining’s practices to public school finance without traditional redlining’s four color geographic coding scheme. Educational redlining is the school finance exclusionary practices that result in the disinvestment of traditionally underserved and under-resourced traditional public schools (TPSs) and districts.
Educational redlining occurs when state funding formulae are not based on the total cost of educating each student. Current state funding formulae do not provide funding in formulaic coordination with local and federal funding. Thus, economically challenged districts lack the funding necessary to provide a quality education commensurate with the most affluent districts. State funding formulae do not fully account for the property wealth and income gap among affluent and poor districts; therefore, do not provide the funding necessary to close the fiscal capacity gap among affluent and poor districts. Instead, state formulae typically provide minimally adequate funding levels that maintain inequitable resource gaps.
Educational redlining denies students living in redlined (i.e., poor) districts equal access to an education commensurate with the quality of education provided by greenlined (i.e., affluent) districts. Redlined districts’ lower educational quality is negatively capitalized in housing values undermining housing markets, property values, and tax bases. This leads to a self-perpetuating adverse cycle in which redlined neighborhoods’ do not have the tax base necessary to properly fund education locally which increases reliance on state and federal aid. However, state and federal funding typically does not fund the full cost to educate all students because of inequitable state and federal formulae. Instead, state funding typically aims to achieve adequacy in funding levels rather than an equitable educational resource allocation among schools and districts.
Like traditional redlining, educational redlining is place-based and adversely affects many of the same communities suffering traditional redlining’s legacy. Educational redlining typically affects urban districts with large concentrations of poverty and racial and ethnic minorities. High poverty districts require more per pupil resources than low poverty districts to provide the same quality education. Thus, educational redlining results in the disinvestment of traditionally under-resourced districts lowering the educational quality provided.
To stop educational redlining, each district should receive the combined local, state, and federal funding to fully cover district educational costs, and account for the district’s fiscal capacity and cumulative educational redlining legacy. State formulaic aid that under funds redlined districts lacking fiscal capacity perpetuates the decline or stagnation of property values, tax bases, and local economies. An equitable state funding formula should account for differences in student education costs and different districts’ differential ability to provide and pay for a quality education.
Current state funding formulae and legislative approaches do not significantly improve educational equity and equal opportunity. Supporting this lack of educational equity and equal opportunity, Metzler (2003) found “no connection can be made between a state’s basic approach to education finance and the equality of educational opportunity provided to students” (p. 564). Although flat grants, foundation grants, percent equalization aid, guaranteed tax base, guaranteed tax yield, and full state funding provide some degree of wealth equalization, these funding approaches make little difference in the equity of their outcomes (Metzler, 2003). Metzler (2003) draws this conclusion despite Coons, Clune, and Sugarman (1970) designing the guaranteed tax base and guaranteed tax yield to achieve wealth neutrality. Metzler (2003) concludes that “almost no characteristic of a state’s school finance program—not even the basic funding approach—was significantly correlated with equity measures” (p. 586). Thus, inequities result from disparities in state school finance formulae especially among affluent and poor schools and districts.
Aalbers, M. B. (2011). Place, exclusion, and mortgage markets. Malden, MA: Wiley-Blackwell.
Carr, J. H., & Kutty, N. K. (2008). Segregation. New York, NY: Routledge, Taylor & Francis Group.
Coons, J. E., Sugarman, S. D., & Clune, W. H. (1970). Private wealth and public education. Cambridge, MA: Belknap Press of Harvard University Press.
Freund, D. M. P. (2010). Colored property. Chicago, IL: University of Chicago Press.
Jackson, K. T. (1985). Crabgrass frontier: The suburbanization of the United States. New York, NY: Oxford University Press.
Metzler, J. (2003). Inequitable equilibrium: School finance in the United States. Indiana Law Review, (36)3, 561-608.
Squires, G. D. (2003). Racial profiling, insurance style: Insurance redlining and the uneven development of metropolitan areas. Journal of Urban Affairs, 25(4), 391-410.
Squires, G. D., & Kubrin, C. E. (2005). Privileged places: Race, uneven development, and the geography of opportunity in urban America. Urban Studies, 42(1), 47-68.