VA Housing Loans and Race

How racism impacted programs to help active members and vets get homes

The U.S. Department of Veterans Affairs, known as “the VA,” offers home loan programs to help qualified individuals and families buy, build, or improve a home or refinance an existing home loan. While federal law now requires VA lenders to abide by Fair Housing laws, that was not always the case. Black veterans have been routinely denied mortgages and other benefits provided to vets under the GI Bill.

Key Takeaways

  • The GI Bill provided benefits, including education grants, unemployment insurance, and low-interest mortgages, to returning World War II veterans.
  • Black veterans received a disproportionate share of dishonorable discharges and “blue discharges,” which made them ineligible for GI Bill benefits.
  • Redlining and overtly racist covenants prevented many Black people from getting mortgages and moving into suburbs.
  • Decades of racism in housing and lending has widened the racial gaps in education and wealth in the U.S.

What Is the GI Bill?

The Serviceman’s Readjustment Act—commonly known as the “GI Bill of Rights,” or simply the “GI Bill”—was signed into law by President Franklin D. Roosevelt in 1944. The act provided a variety of benefits to returning World War II veterans, including:

  • Tuition grants (for vocational school and college)
  • Low-Interest mortgages
  • Small business loans
  • Job training
  • Privileges in the hiring process
  • Unemployment insurance

Amendments added full disability coverage and the construction of more VA hospitals. Later legislation extended benefits to all qualifying veterans, not just those who had served in World War II.

GI Bill Benefits Denied to Many Black World War II Veterans

While the GI Bill promised prosperity to veterans returning from World War II, many Black veterans missed out. One problem was that the GI Bill was available only to veterans who had been honorably discharged. Black veterans were given a disproportionate share of dishonorable discharges and so-called “blue discharges,” which were neither honorable nor dishonorable.

Nearly 75 years after receiving a blue discharge, World War II veteran Nelson Henry, Jr.’s discharge was upgraded to “honorable.” He died less than a year later. He was 96.

Black veterans who did qualify for the GI Bill faced other roadblocks. Those who applied for unemployment insurance, for example, were denied benefits if any type of work was available—even if those jobs provided less than subsistence wages.

It was also difficult to find facilities that allowed Black veterans to take advantage of GI Bill education programs. In Indianapolis, for instance, Black veterans enrolled in a vocational program at a segregated high school were unable to study plumbing, electricity, and printing because only White students were permitted to use the equipment.

GI Bill Shaped by Racism

While the implementation of the GI Bill inherently favored White veterans, fear of Black advancement shaped the bill from the beginning. Some lawmakers were afraid that Black veterans, bolstered by public sympathy toward veterans, would advocate against Jim Crow laws. In response, those lawmakers did what they could to prevent Black veterans from using the GI Bill and getting ahead in society.

Former Mississippi Rep. John Rankin, who was chair of the House Veterans Committee and a known racist, insisted that individual states—not the federal government—run the program. He also tried to exclude Black people from unemployment insurance altogether.

While he ultimately lost that fight, unemployment benefits were still doled out inequitably. Postmasters in the South were even accused of preventing unemployment forms from being delivered to Black veterans, presumably to keep them from filing for benefits.

GI Bill–Guaranteed Mortgages

Another program under the GI Bill made low-interest mortgages and small business loans available to veterans. These GI Bill–guaranteed loans were intended to help veterans become homeowners and build wealth.

Due to discrimination in housing and lending, however, Black veterans were often denied mortgages. The legal and discriminatory practice known as “redlining” was often to blame, as were overtly racist covenants that prevented Black people from buying homes in White suburbs.

Fewer than 100 of the 67,000 GI Bill mortgages in New York and the northern New Jersey suburbs helped support home purchases made by non-Whites.

VA Housing Loans

The GI Bill guaranteed low-interest loans, but the VA didn’t administer the program. That made it easy for White-run banks to deny mortgages to Black people.

Keep in mind that only a few years earlier, the Home Owners’ Loan Corporation (HOLC)—a federal agency—deployed examiners to grade neighborhoods around the country on their “perceived level of lending risk.” This was based on input gathered from local appraisers, bank loan officers, city officials, and real estate agents.

The HOLC created color-coded maps, with each color representing the neighborhood’s lending risk. They were rated as follows:

  • Green – “Best”
  • Blue – “Still Desirable”
  • Yellow – “Definitely Declining”
  • Red – “Hazardous”

Neighborhoods whose residents were predominantly Black or members of other minority groups were always colored red—hence, “redlining.” According to Mapping Inequality, “Conservative, responsible lenders, in HOLC judgment, would refuse to make loans in these areas [or] only on a conservative basis.”

Fair Housing Act

For decades banks denied mortgages and loans to Black and minority families who lived in redlined areas—and it was legal for them to do so. The Fair Housing Act of 1968 put an end to the practice.

The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, handicap, or familial status during any part of a residential real estate transaction. It applies whether you rent or buy a home, get a mortgage, seek housing assistance, or take part in other housing-related activities.

Housing discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau (CFPB) or with HUD.

VA Housing and Fair Housing Laws

A VA loan is a mortgage offered through the U.S. Department of Veteran Affairs. The program is available to active and veteran service members and their families, including surviving spouses. The loans are backed by the VA, but issued through private lenders. The VA offers several types of mortgages:

Federal law requires VA lenders to obey Fair Housing laws. According to the Veteran Loan Center, “No one may refuse to fund a mortgage, provide different information regarding loans, discriminate in appraising and offer different terms or conditions” based on the protected classes in the Fair Housing Act.

The original GI Bill ended in 1956. By then nearly half of World War II veterans had participated in an education or a training program.

The GI Bill Today

Today the VA offers programs through the GI Bill that help active military and veterans—and, in some cases, their family members—pay for education, training, and housing fees. The two primary programs are:

The Post 9/11 GI Bill

If you’ve served at least 90 days of active duty since Sept. 10, 2001, and received an honorable discharge, you can use the Post 9/11 GI Bill. The program covers up to 100% of tuition and provides up to $1,000 toward monthly rent. If you have unused education benefits, you may be able to transfer them to your spouse or children.

Montgomery GI Bill

If you’ve served at least two years of active duty and have a high school diploma or GED, you can use the Montgomery GI Bill. The education benefit provides up to $61,000 to cover programs such as college or technical courses, flight training, apprenticeships, and job training.

The Bottom Line

While the GI Bill was arguably a great success for White Americans in the postwar years, it was a different story for veterans of color. For them, the bill—and its inequitable implementation—only furthered gaps in education, wealth, and civil rights between Black and White Americans. Today, however, VA lenders are required by law to adhere to Fair Housing laws, which prevent discrimination against protected classes, including race, color, religion, sex, national origin, handicap, and familial status.

Despite Fair Housing laws, discrimination still exists in housing and lending. If you believe you have been discriminated against by a builder, broker, lender, owner, salesperson, or appraiser, report the activity to your local VA Office. After you fill out VA Form 26-8827, your local office will investigate the complaint.

Article Sources

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  2. U.S. Department of Veterans Affairs. "History and Timeline." Accessed Sept. 15, 2020.

  3. The New York Times. "Nelson Henry Dies at 96; Fought to Correct Military Slight." Accessed Sept. 15, 2020.

  4. "How the GI Bill's Promise Was Denied to a Million Black WWII Veterans." Accessed Sept. 15, 2020.

  5. Mississippi Encyclopedia. "John Elliott Rankin." Accessed Sept. 15, 2020.

  6. National Community Reinvestment Coalition. "HOLC Redlining Maps: The Persistent Structure of Segregation and Economic Inequality." Accessed Sept. 15, 2020.

  7. University of Richmond Digital Scholarship Lab. "Mapping Inequality: Redlining in New Deal America." Accessed Sept. 15, 2020.

  8. U.S. Department of Housing and Urban Development. "Housing Discrimination Under the Fair Housing Act." Accessed Sept. 15, 2020.

  9. U.S. Department of Veterans Affairs. "VA Home Loan Types." Accessed Sept. 15, 2020.

  10. Veteran Loan Center. "Fair Housing Act." Accessed Sept. 15, 2020.

  11. U.S. Department of Veterans Affairs. "Education and Training." Accessed Sept. 15, 2020.

  12. Military One Source. "Which GI Bill Is Best For You?" Accessed Sept. 15, 2020.

  13. U.S. Department of Veterans Affairs. "Post-9/11 GI Bill (Chapter 33)." Accessed Sept. 15, 2020.

  14. U.S. Department of Veterans Affairs. "Montgomery GI Bill Active Duty (MGIB-AD)." Accessed Sept. 15, 2020.

  15. U.S. Department of Veterans Affairs. "Housing Discrimination Complaint." Accessed Sept. 15, 2020.