Historians have for decades chronicled instances of discriminatory practices under Federal Housing Administration and Veterans Administration mortgage programs, but the extent of these biases has been unknown. 

The first national-level analysis of early FHA and VA lending practices, reported in the latest issue of the journal Nature, offers a fuller picture. 

Researchers from New York University, the University of Virginia, and UC Santa Barbara have found that, from 1935 to 1947, only 2 percent of FHA loans and 5 percent of VA loans went to Black borrowers—at a time when this demographic group made up 10 percent of the US population and 10 percent of the veteran population. 

“This is the strongest evidence ever presented that the two federal programs most responsible for creating the American homeownership society and establishing the primary tool for wealth accumulation for most Americans largely excluded Black households,” says Jacob Faber, a sociologist at NYU and one of the paper’s authors. “The expansion of homeownership made possible through the FHA and VA nonetheless came at a time of rapidly increasing racial segregation and preceded the dramatic widening of the racial wealth gap.”

“For the majority of American families, homeownership has been the primary engine for building wealth, and these federal programs set millions of families on that path,” adds Katherine Thomas, an NYU doctoral student and the paper’s first author. “Our data show just how few Black households had access to the same opportunity to start building intergenerational wealth.”

The research team, which included Thomas Storrs, a doctoral student at the University of Virginia, and Wenfei Xu, an assistant professor of geography at UCSB, also found that lending to foreign-born borrowers was comparable to their proportion of the US population at the time. Making up just over 9 percent of the US population, they received 10 percent of FHA loans and received just over 2 percent of VA loans—a proportion nearly identical to their makeup of the veteran population during the studied period.

“Our research shows that European immigrants benefited from the FHA and VA programs at rates similar to native-born White Americans,” explains Storrs. “In contrast to the Black-White divide, we did not find differential outcomes correlated with nativity in federal programs around WWII.”

Previous studies have recounted instances of discriminatory practices or focused on a small number of cities. The new Nature study, by contrast, included 38 states, considered a larger number of loans than did earlier analyses, and examined VA lending data, which hadn’t been previously available on an individual-loan level. In their work, the researchers digitized more than 100,000 paper records of mortgages insured by the FHA and the VA and then matched them to US Census records.

“These historical inequities have real implications for our present time through the intergenerational transfers of wealth through housing,” concludes Xu. “Any new housing policy should not only consider who it helps now, but what it sets in motion 50 years later.” 

The research was supported by grants from the Russell Sage Foundation and the Washington Center for Equitable Growth.

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Journal

Nature

Funder

Russell Sage Foundation,
Washington Center for Equitable Growth

DOI

10.1038/s41586-026-10850-8