Washington State Law to Offer Low-Interest Home Loans to Redress Decades of Discriminatory Housing

Racially restrictive covenants — legal instruments that barred certain populations, based on race, from buying, renting or occupying property in designated areas — mandated housing exclusion and destroyed opportunities for generations of Black, Asian, Latino and Indigenous families in the decades before the Fair Housing Act of 1968. These covenants had a decisive impact on property rights and continue to affect rates of homeownership and wealth today. Only now are the full contours of this story coming to light, and state (and local) governments are finally beginning to act to address the damage.

Nowhere is this clearer than in Washington state, which passed the Covenants Homeownership Act in April. This pioneering legislation aims to help some of those harmed by racially restrictive covenants (and their descendants) to buy homes. Legislators carefully crafted the new law to navigate the complicated issues facing reparations and race-based programs, potentially providing a road map for other states and localities.

Racially restrictive covenants became a common instrument of segregation and exclusion in the 1910s. Some covenants said “Whites only.” Others banned particular populations that sometimes included Jews and Middle Easterners, along with anyone perceived to be Black, Asian, “Indian” or “Mexican.” In the Seattle area, one subdivision developer specified “Aryans only.” Developers or owners recorded these legally binding instruments with county authorities.

Restrictive covenants were binding in perpetuity. Prospective buyers had to promise not to rent or sell the property in the future to certain races or else they could face litigation for violating the terms of this legally binding agreement.

Promoted by the American Board of Realtors (ABR), covenants were deployed in hundreds of cities and suburbs across the United States. The ABR and its local affiliates conducted campaigns starting in the 1920s to persuade land developers, neighborhood associations and individual property owners to “protect” property with racially restrictive covenants.

These racist devices gained the imprimatur of the federal government in the 1930s as President Franklin D. Roosevelt’s administration tried to revive the Depression economy by ramping up homeownership — for White Americans. The Homeowners Loan Corporation (HOLC) that was created as part of Roosevelt’s New Deal drew “redlining maps” for all major cities in 1936 to help the mortgage lending industry determine safe and unsafe areas for investment. HOLC awarded high scores to neighborhoods with restrictive covenants, while neighborhoods that allowed people of color were deemed “hazardous” for lenders, making mortgages for properties in these neighborhoods difficult to obtain and artificially expensive.

Next, the Federal Housing Administration (FHA), the agency responsible for the federally backed, low-interest loans that made homeownership possible for millions of families in the post-World War II era, encouraged developers to restrict by race and limited FHA loans to White (male) homeowners. From 1934-1962, fewer than 2 percent of FHA loans went to families of color.