The City Council of Austin decided that they needed a comprehensive city plan and zoning map in 1927. One of the leading objectives of the all-white Council was to find a way to encourage residential segregation and find a way to compel black families, who at that time were living throughout the city, to move to East Austin. The city used techniques such as eliminating utility services in certain areas where black citizens lived in order to force them from their homes and neighborhoods. Private developers then purchased these areas at very low prices and built new roads, homes, and commercial buildings. When these same neighborhoods re-opened, higher rents and restrictive covenants prevented African American families from returning. Because of these same practices, the displaced minorities had few choices but to find housing in areas the city reserved for non-whites.
The Great Depression accelerated the process, and by the mid-1930s nearly every black family lived in East Austin which the city unapologetically labeled The Negro District. This allowed the city to close black schools in other parts of the city. For example, in 1931 the city closed the all-black Wheatsville School after 60 years because so few black families lived downtown. After Wheatsville was closed, black children who still lived downtown were transferred to the E. H. Anderson School in East Austin. This measure placed added pressure on black families to move to East Austin so that their children could attend a neighborhood school. Black institutions beyond East Austin also faced extreme prejudice from city officials that threatened their continued existence if they did not voluntarily relocate. For example, a black business or church might be denied permits or service from public utilities.
Ten years later, the city created Santa Rita Courts, the nation’s first federally funded housing project. The city claimed that their intention was to provide a low-cost housing option for Latinos. At the same time, documents reveal that the city hoped that their twin practice of eviction and construction of housing projects would compel non-white families living downtown to move to East Austin. Between racially restrictive covenants prevented non-whites from occupying certain neighborhoods, and because of the general lack of affordable housing in the city, East Austin became home to the majority of the city's African American and Mexican American residents.
This pattern of residential segregation persisted with little change until the late 1990s. Urban growth and gentrification, along with urban development planning, have led parts of East Austin to become a desirable location among affluent young whites and students at the University of Texas at Austin. In fact, a section of East Austin is today known as The Hippest Hipster Neighborhood in America.