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.
Presented by:
Bhashkar Mazumder, Federal Reserve Bank of Chicago
Date & time:
October 9, 2017 3:00 pm - October 9, 2017 4:30 pm
Venue:
2N2.4.16
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