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The Effects of the 1930s HOLC \"Redlining\" Maps

Author

Listed:
  • Daniel Aaronson
  • Daniel Hartley
  • Bhashkar Mazumder

Abstract

In the wake of the Great Depression, the Federal government created new institutions such as the Home Owners' Loan Corporation (HOLC) to stabilize housing markets. As part of that effort, the HOLC created residential security maps for over 200 cities to grade the riskiness of lending to neighborhoods. We trace out the effects of these maps over the course of the 20th and into the early 21st century by linking geocoded HOLC maps to both Census and modern credit bureau data. Our analysis looks at the difference in outcomes between residents living on a lower graded side versus a higher graded side of an HOLC boundary within highly close proximity to one another. We compare these differences to counterfactual boundaries using propensity score and other weighting procedures. In addition, we exploit borders that are least likely to have been endogenously drawn. We find that areas that were the lower graded side of HOLC boundaries in the 1930s experienced a marked increase in racial segregation in subsequent decades that peaked around 1970 before beginning to decline. We also find evidence of a long-run decline in home ownership, house values, and credit scores along the lower graded side of HOLC borders that persists today. We document similar long-run patterns among both redlined and non-redlined neighborhoods and, in some important outcomes, show larger and more lasting effects among the latter. Our results provide strongly suggestive evidence that the HOLC maps had a causal and persistent effect on the development of neighborhoods through credit access.

Suggested Citation

  • Daniel Aaronson & Daniel Hartley & Bhashkar Mazumder, 2017. "The Effects of the 1930s HOLC \"Redlining\" Maps," Working Paper Series WP-2017-12, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2017-12
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    1. Residential redlining of U.S. neighborhoods
      by ? in FRED blog on 2021-09-02 13:00:00
    2. Residential segregation and redlining
      by ? in FRED blog on 2021-09-09 13:00:00

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    3. Locke, Dexter & Hall, Billy & Grove, J Morgan & Pickett, Steward T.A. & Ogden, Laura A. & Aoki, Carissa & Boone, Christopher G. & O’Neil-Dunne, Jarlath PM, 2020. "Residential housing segregation and urban tree canopy in 37 US Cities," SocArXiv 97zcs, Center for Open Science.

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    More about this item

    Keywords

    Home ownership; housing; mortgage loans; redlining;
    All these keywords.

    JEL classification:

    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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