Managing your money

Redlining in Canada

10 min read

Daniel McIntosh

If you've ever tried to buy a house, you probably have an idea how complicated it is to land your dream home. Things like the mortgage rate you qualify for, bidding wars, and having enough credit to confidently bid against cash buyers are all par for the course.

In Canada, Black people typically face additional complexities before they even start to dream about that sweet corner lot. On top of the various criteria lenders use to figure out how much money and under what terms they might lend it, Black people are more likely to encounter white supremacy in all aspects of the housing market, meaning they are less likely to be able to rent or buy desirable property. The word for this particular mechanism of white supremacy, where Black families are less likely to be approved for credit with which to buy a home, is redlining.

What is redlining, exactly?

Simply put, redlining is when banks outright deny mortgages to people based on group characteristics, like race, for instance, or the geographical neighbourhood they live in.

Lenders and regulators rely on stereotyping such groups as carrying a bigger financial risk. Often, redlining as a practice co-exists with government failures, like the systemic denial of services in areas where disadvantaged groups live (think about trying to catch a bus in any one of Toronto’s heavily racialized suburbs). Or, in some cases, redlining is a product of the concentration of health hazards in specific regions, which often is the product of policy enacted to privilege the safety of certain communities over others. The term, which has come to define visible minorities’ interactions with healthcare, food access or even car insurance, takes its root from the National Housing Act in 1930s America.

Where did redlining come from?

During the Great Depression, United States President Franklin Roosevelt wanted to stimulate economic growth by making homes affordable for down-on-their-luck Americans. The initiative was part of the New Deal, a system of policies to try to stabilize the economy and help bring poor Americans into the middle class. Roosevelt’s Federal Housing Administration introduced low fixed interest rates, essentially ensuring low-income people could afford homes. But in order to determine mortgage lending risks, the Home Owners’ Loan Corporation created residential security maps of major American cities. The Federal Corporation would only insure loans that met a number of criteria, such as geographical location. On a map of any subdivision in America, green areas were populated by white businessmen, whereas red areas represented the places where foreign-born people, workers and Black people lived. People applying for loans in the red areas on the map were considered too ‘high risk’ for lending, and were denied mortgages. Hence the term redlining: The literal practice of lenders zoning off certain subdivisions in red to divide those who could get mortgages from those who could not.

"Simply put, redlining is when banks outright deny mortgages to people based on group characteristics, like race, for instance, or the geographical neighbourhood they live in."

Okay, but how does the history of redlining affect people today?

Redlining has had lasting effects on the wealth inequality in the original red-zoned American neighbourhoods. People who grew up in these areas had a more difficult time building intergenerational wealth. Think about it, if your grandparents had a home and your parents inherited the equity in that property, it makes sense that you would be better set up to pay for school and one day have your own home. To this day, there is a serious prosperity gap between people whose parents and grandparents were affected by redlining and those who were not.

A 2018 report by the National Community Reinvestment Coalition revealed that 74% of the neighbourhoods graded as “Hazardous” over eighty years ago remain low-to-moderate income today. The racist, Depression-era idea that Black neighbourhoods and communities with higher immigrant populations were too ‘high-risk’ to participate in federally subsidized home ownership has created an ongoing hypersegregation of Black and Hispanic residents, limiting the chances of the people who live there to share in the American dream of financial security and growth.

That’s awful! But surely it’s better in Canada?

Well… no, not really. While the American model of redlining has had a clear impact on generations of Americans, our own Canadian housing history is quite a bit more muddled. Compared with our neighbours to the south, Canada has a woeful lack of housing data related to race. Way back in 2002, a blockbuster report from University of Toronto’s Centre for Urban and Community Studies identified the absence of Canadian research on discrimination in mortgage lending, and even less data on discrimination in home ownership. Things have not improved. In an interview from June 2020, Joe T. Darden, one of the researchers of that report, told Global News that there was “no government agency that engaged in that.”

But just because there is less data being collected doesn’t mean it’s not happening. In many cases, the lack of data simply makes practices of race-based housing discrimination harder to identify and regulate against.

Is there an example of redlining in Canada?

There are many, and the practice is ongoing. But one prime, well-documented example of historical redlining in Canada is in the story of Africville.

Africville was a small but thriving Black community in Halifax that was forcefully displaced by order of the City. The area was razed to the ground by bulldozers in 1964. But while the overt destruction is well-known, not many are familiar with how the Black neighbourhood was segregated and disadvantaged by many levels of government, long before it was torn down.

"To this day, there is a serious prosperity gap between people whose parents and grandparents were affected by redlining and those who were not."

How Africville was redlined

The story of Africville goes back quite a ways. It involves generations of Black settlers getting nickel-and-dimed by Canadian policymakers and city building. Africville, a Black community settled on a rocky coast of Nova Scotia, had been a vital, albeit barely recognized town for at least 50 years before the nearest city, Halifax, was officially incorporated in 1842.

After the American revolution in the early 1780s, Britain provided Black soldiers and formerly enslaved people with freedom certificates, and Black settlers migrated to British colonies across Europe, Quebec and, notably, Nova Scotia. After the war of 1812, about 2000 Black refugees arrived in the Maritime province, settling in small communities.

Although Black loyalists arrived in Nova Scotia under the promise of land and freedom, the local policy made sure they came second to the housing needs of the 30,000 white loyalists who also emigrated. By the time land was registered for Black settlers, the only lots left were small pockets of infertile land. Africville, near Halifax on the rocky upper coast, was one such spot.

By 1848 a mix of formerly enslaved people, indentured workers and refugees were buying up settled land in Africville. Although the residents paid municipal taxes, they had to fight for the same basic necessities other Haligonians got. They built their own church and paved their own roads. A common adage goes, “where the pavement ends, Africville begins.” They had to petition to get a city school opened in 1883. Nearly a hundred years later, in the 1960s, many residents of Africville still didn’t have running water or even a sewage system.

Instead, the city saddled Africville with a prison, a dump and an infectious disease hospital. While paltry land allotments already put the people of Africville at a disadvantage, the health hazards brought forth by the undesirable living conditions devalued houses in the area even more, limiting Africvillians’ ability to build wealth through housing. In January 1964, Halifax City Council authorized their relocation. Those who had deeds were offered payment for their houses. Those without deeds — the families who built their own homes and lived in them for generations — were offered $500. In January 1970, the last remaining home in Africville was destroyed.

The history of Africville represents a 200 years long case study in Canadian redlining.

Is redlining a thing that still happens here?

Unfortunately, yes. Today’s U.S. government closely monitors redlining, including identifying the affected communities, but Canada collects very little race-based data when it comes to tracking housing policy and trends.

Carlos Teixeira is a researcher of urban and social geography at the University of British Columbia. In 2006, he studied the housing experiences of recent immigrant groups in Toronto. “We have good literature dealing with redlining in the U.S. In Canada, the literature is vague. We don’t have too many studies.” But in practice, discrimination appears the same way. Teixeira’s report determined that most immigrants face discrimination from bank managers, but also from landlords, and developers, builders and planners. They all make up a diverse set of what Teixeira refers to as urban social gatekeepers.

“Their practices can result in social exclusion and housing segregation of visible minorities,” Teixeira explains. It all makes it harder for new Canadians to integrate. Teixeira thinks future analysis of the issue should expand the view to look at developers and builders. “All of those involved in the production and location of housing, including banks, we need to study them to know who gets what in terms of housing, and where in the city they are located.”

The simple fact of the matter is that these “urban social gatekeepers” — from mortgage lenders in banks to developers surveying construction sites — impact housing, education and the social mobility of a city and its residents. A 2019 report from the OECD examined housing by income level in various countries. In Canada, where 15% of us are income-poor, only 3% of us actually own homes, so the vast majority are renters.

A 2016 analysis of Black rental and homeownership concentration in Toronto by the Neighbourhood Change Research Partnership shows that Black communities are largely concentrated to the city’s suburban ends, to the west in Etobicoke and to the east in Scarborough. By contrast, Black people only represent 2% of the homeowners in the city’s downtown core. In major cities like Toronto, where jobs are concentrated, quality, affordable rental housing is scarce.

The systemic effects of redlining make it harder for Black folks to build wealth in tandem with other Canadians. And the lack of proper race-based data collection makes it harder to see the effects in order to better legislate against such extreme disadvantages

"The systemic effects of redlining make it harder for Black folks to build wealth in tandem with other Canadians."

Is there a version of redlining for renters?

Yes, though you might just call it racism outright. Geographer Joe Darden’s 2002 University of Toronto study looked at “paired testing,” a method of measuring housing discrimination. To test for discrimination, researchers would send candidates with similar characteristics—for example, two university educated women with similar incomes, but one of them is Black and the other is not. Then both candidates can compare the difference in treatment. Because Canadian policy makers and researchers don’t typically collect enough data about race, smaller studies like Darden's are the best source of empirical data we have on the mechanisms of housing discrimination.

And the data suggests we have a serious problem. A 2012 report from the Centre for Equality Rights in Accommodation revealed that 92% of recent newcomers went through significant discrimination as a barrier to accessing rental housing. Applicants with East or South Asian accents are more likely to be denied outright, while applicants with African and Middle Eastern accents are more likely to be required to provide proof of payment — or be deemed ineligible to rent entirely — than applicants with British and Australian accents.

The report also found that landlords tend to use shady discrimination tactics against racialized tenants and recent immigrants. Landlords arbitrarily asked for illegal requirements such as excessively large deposits or a long history of Canadian credit — which, for people who are literally newcomers to Canada, is damn-near impossible to have.

These insidious practices attest to one of Dr. Teixeira’s points: that the effects of redlining are not explicitly stated, but imposed by “urban social gatekeepers.” Practices like these keep people in low income brackets by limiting their ability to develop one of the biggest assets you can have: a home. For low-income people the question becomes “are you even able to purchase a home,” according to Meryl Afrika, the president of the Canadian Association of Urban Financial Professionals. “If you’re not able to purchase a home that means you’re renting, therefore there’s no asset that’s transferred to your children.”

Redlining on the internet

The future of housing accessibility is already being impacted by the internet and automation. And despite silicon valley swearing their tech is totally neutral, digital discrimination is still a huge risk for people of colour. A snapshot of your digital data can make or break automated responses.

This novel “algorithmic redlining” was identified in a 2016 study by ProPublica, meant to measure former criminals’ likelihood of reoffending. The study found that Black defendants were twice as likely as White defendants to be misclassified as being a higher risk of reoffending. Some companies have already rolled out commercial tools that use machine learning to automate the mortgage loan process. How would a similar program impact people applying for mortgages? Algorithms deployed as screenings to mortgages could further entrench redlining, even through something as simple as relying on a dataset that encodes the biases of the programmers, who themselves might have internalized a stereotype about Black and newcomer populations constituting a higher financial risk.

These tools were made to diminish the chance of bias, but instead our bias is coded right into them. Banks, governments and all the gatekeepers in between, risk repeating the dubious tactics that cemented wealth inequality across America and in cities like Africville.

As more of our lives — including the way we bank — are lived online, banks and the government have to be careful not to carry on their complicity in housing discrimination. Pair-testing studies like Darden’s are only a start.

Putting an end to housing discrimination is going to require changes in those institutions that started it all. Equitable housing and financial strategies are a must if we truly want equal housing opportunity for everyone in Canada.

Daniel McIntosh is a writer and researcher based in Toronto. His writing has appeared in MoneyWise, the Financial Post and Yahoo Finance. Find him on twitter: @aphexting

Recent Articles

How to improve your credit scoreRedlining in CanadaThe Canada Recovery Benefit and YouWhat is a good credit score in Canada?How not to spend your student loanHow long does it take my credit score to change?

Get a KOHO account

Sign up for a free Personal or Joint account (or both!) in minutes.

Open Account

Company

AboutCareersLearnStatus

Connect

The KOHO Visa* Prepaid card is issued by Peoples Trust Company pursuant to license by Visa Int. *Trademark of Visa Int., used under license. **These services are provided by Service Providers, including Visa, Peoples Trust Company and Galileo Processing. Learn more about your finances with Visa Practical Money Skills.