The Federal Government, local politicians and private interest groups all played a part in decisions about land use that shaped the character and culture of the black community in Detroit. During the Great Depression when the nation’s economy was crippled, the federal government established the Federal Housing Authority (FHA) to boost the slumping housing industry. The FHA insured low-interest loans to stimulate housing construction, subsidize homeownership, and put people back to work to boost the national economy.

As construction and homeownership boomed, however, African Americans were largely excluded from the huge benefits the FHA provided to white Americans. The FHA adopted policies that prevented African Americans from securing loans to buy homes. In its Underwriting Manual, the FHA declared that black neighborhoods were undesirable investments and endorsed the practice of “redlining” to restrict loans to white communities. Redlining was a policy of ranking the credit-worthiness of potential buyers based on the racial composition of the neighborhood they lived in. Real estate agencies and loan agencies would draw red lines around African American neighborhoods on maps and discourage banks from offering loans within the lines. With these practices, the FHA and federal government played a lead role in segregating northern cities, and stimulated the development of racially-restrictive suburban communities.

White people were encouraged to seek single-family home ownership in newly constructed suburban communities outside Detroit. The FHA insured construction of these all-white areas, such as Taylor, Livonia, and Warren, while black people were largely confined to inner-city areas that were redlined, and drained of their tax base.

In addition to preventing access to loans, white communities adopted “restrictive covenants” to keep African Americans from moving into their neighborhoods. From 1945-1965, roughly 200 white neighborhood associations were formed, according to historian Thomas Sugrue, “most with the explicit purpose of keeping Blacks away.” Groups like the Palmyra Home Owners’ Protective Association drew up legal agreements called “restrictive covenants” which forbid members from selling or renting to non-white families. In many cases, these covenants were written into the deeds of houses and enforced both legally and physically.