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REAL ESTATE INVESTIGATION - A follow-up to CityWatchLA’s investigation into real-estate middlemen undermining affordable housing in Los Angeles.
Los Angeles is experiencing a housing crisis that is often described as a consequence of market pressures, zoning debates, or NIMBY-vs-YIMBY politics. But the truth is darker and simpler:
LA’s housing landscape is being shaped by a modern form of redlining — one that no longer uses maps or colors, but capital flows, opaque ownership structures, and lender incentives.
This is mapless redlining.
And it is a direct descendant of the discriminatory credit practices that once shaped Los Angeles.
Pini Herman's investigation into real-estate middlemen illustrated how developers dodge affordable housing requirements. What follows here is the deeper systemic picture: how banks, through HMDA-documented discrimination and valuation manipulation, are driving the displacement dynamics underlying LA’s homelessness crisis.
Historical Redlining: The Original Map-Based Exclusion
In the 1930s–1960s, the Home Owners’ Loan Corporation (HOLC) labeled neighborhoods as “desirable” or “hazardous.”
Predominantly Jewish, Black, Mexican-American, Japanese, and immigrant communities — especially in Boyle Heights, South LA, and East LA — received “D” grades and were outlined in red on federal maps.
The consequences were devastating:
- Banks denied mortgages, refinancing, or repair loans.
- Homeownership stagnated.
- Wealth accumulation was blocked.
- Neighborhoods decayed from forced disinvestment.
- Families were pushed into enclaves where credit was allowed — for example, many Jews moved from redlined Boyle Heights into the Fairfax district and Valley suburbs.
Those maps were overt discrimination.
And although the maps are no longer used, the lending patterns they created never disappeared.
HMDA Data Shows That Redlining Never Actually Ended
The Home Mortgage Disclosure Act (HMDA), designed to detect lending discrimination, shows persistent patterns in Los Angeles:
Contemporary redlining is measurable, ongoing, and statistically undeniable:
- Black and Latino borrowers are 2–3 times more likely to be denied mortgages than white borrowers, even controlling for income, loan size, and creditworthiness.
- Majority-minority census tracts in LA receive far fewer bank branches, lending products, or refinance opportunities.
- In 2023, the Department of Justice reached the largest redlining settlement in U.S. history with LA-based City National Bank, which avoided lending in Black and Latino neighborhoods for years.
Banks today may not consult the old HOLC maps, but their loan distribution still mirrors those boundaries.
Here is the shift that matters:
Historically, banks refused loans to minority residents in redlined areas.
Today, banks willingly flood those same neighborhoods with loans — but only for developers, not for the people who live there.
This is the evolution of redlining:
from denying loans to minority families → to enabling developers to displace minority families.
How MAPLESS REDLINING Works
While the old system was drawn on maps, the new system is drawn in spreadsheets, appraisals, and financial risk models — invisible to the eye but devastating in effect.
1. Banks now treat developers as their primary customers — not residents.
HMDA data shows that banks still deny a disproportionate number of mortgages and refinances to Black and Latino residents in LA.
But those same banks aggressively lend to developers who build:
- luxury mixed-use buildings,
- “market-rate” towers with a few token affordable units,
- projects that qualify for density bonuses and fast-tracking.
Banks prefer developers because:
- loans are larger,
- fees are higher,
- risk can be securitized and sold,
- regulators pay less attention,
- affordability restrictions can be quietly ignored.
In other words:
Banks moved from redlining loans out of communities to redlining profits out of communities.
2. Developers promise affordable units — but lenders ignore affordability in their underwriting.
This is where the middlemen exposed by CityWatch fit into the picture.
- Developers apply for TOC bonuses, height increases, and expedited approvals by promising affordable units.
- But when banks produce the final appraisal, they treat every unit as market-rate.
- That artificially inflates building values by millions.
- Developers then pull out oversized loans based on a fictional rent roll.
This creates a second powerful distortion:
Affordable units become “phantom units.”
They exist on paper, not in practice.
And because no public registry tracks them, they disappear into private leasing offices that:
- selectively rent,
- ignore income qualification procedures,
- keep units vacant to raise valuation,
- or convert them to corporate pads / STRs for mega-events like the World Cup and Olympics.
3. Developers use inflated loans to buy up rent-controlled buildings.
This is one of mapless redlining’s most destructive effects.
With new capital extracted from inflated post-construction loans, developers aggressively acquire:
- RSO buildings,
- older rent-stabilized apartments,
- naturally affordable housing.
Once purchased, tenants are cleared out through:
- cash-for-keys pressure,
- deferred maintenance,
- Ellis Act removals,
- or vacancy churning.
This wipes out the most stable, integrated, and community-rooted housing in Los Angeles.
The people displaced are the same populations historically harmed by redlining — but now the discrimination occurs unit by unit, not neighborhood by neighborhood.
4. Shell LLCs and opaque ownership make the system untraceable
Developers split ownership among:
- LLCs of LLCs,
- private equity layers,
- management operators,
- tax-credit syndicators,
- mezzanine lenders.
This creates deliberate opacity:
- The public can’t find who owns a building.
- The City can’t enforce affordability covenants.
- Tenants can’t prove violations.
- Fair-housing testers can’t access leasing processes.
This invisibility is not accidental — it’s structural.
5. Most of LA’s affordable units are completely untracked.
This is the biggest scandal in the current system.
Los Angeles maintains lists of:
- 100% affordable buildings
- publicly subsidized projects
- tax-credit developments
But the City does not track the majority of affordable units that exist within:
- TOC buildings
- density bonus buildings
- luxury buildings with covenant-required affordable units
- developer-negotiated affordable units
- mixed-income FHA-backed buildings
These are the affordable units most likely to be:
- unoccupied,
- illegally converted,
- misrepresented,
- or erased entirely.
In many cases, the City does not even know how many such units exist, let alone who lives in them.
What Los Angeles MUST Do: A Universal Affordable Housing Registry
To break mapless redlining, LA must establish a public, granular, real-time database of every affordable unit in the city — not just affordable buildings.
The database must include:
- unit-by-unit affordability levels,
- covenant type and expiration dates,
- the financing and appraisal used at time of construction,
- whether lenders ignored affordability in underwriting,
- ownership and beneficial ownership details,
- occupancy status (vacant/occupied),
- income qualification records,
- all violations and enforcement actions.
This transparency will:
- expose phantom affordable units,
- prevent illegal conversions,
- allow tenant groups to track abuses,
- allow NCs and journalists to follow patterns,
- and give policymakers real data to regulate lenders and developers.
Without this, LA is flying blind — while developers and banks fly private.
Conclusion: HMDA Tells the Story — Redlining Is Still With Us. It Just Changed Customers.
Banks once refused to lend to minority homeowners.
HMDA data shows they still underserve them.
But now banks do something even more profitable:
They lend enormous sums to developers — who clear out minority tenants, extract value, and leave behind token affordability that rarely reaches the people it was supposed to serve.
This is the new redlining.
Not neighborhoods fenced off with red lines —
but people fenced out by capital flows.
Old redlining kept people from buying homes.
New redlining keeps them from staying housed at all.
Until Los Angeles tracks every affordable unit, regulates lender behavior, and confronts the financial architecture driving displacement, we will continue to reproduce the same inequalities — only now hidden in spreadsheets instead of maps.
Mapless redlining is not subtle. It is sophisticated.
And unless the City — and federal regulators — act decisively, it will define Los Angeles for the next century.
(Pini Herman is a candidate for U.S. Congress CA 30th district. He is demographer who received his doctorate from the USC School of Social Work. He later served as Research Director at the Jewish Federation of Greater LA and is currently a One LA leader at Temple Emanuel of Beverly Hills. Pini Herman’s email is [email protected]. He would like to hear from readers who can add to this article.)
