Race, Risk, and the Emergence of Federal Redlining
with Price Fishback, Jessica LaVoice, and Allison Shertzer
Abstract: The Home Owners” Loan Corporation created maps showing the perceptions of real estate experts about the riskiness of lending in particular neighborhoods in the late 1930s. These maps have become a visual shorthand for government-sanctioned housing market discrimination in recent years as formerly redlined neighborhoods have remained racially segregated and economically disadvantaged. In this paper we provide a systematic empirical analysis of the process by which neighborhoods were graded for these maps, focusing on the role of race. We find little evidence that black neighborhoods were targeted for the highest risk rating, conditional on observable characteristics such as home values and income. The agents who drew the maps accurately assessed neighborhood trends and delineated areas that were already deteriorating. Our results suggest that the HOLC maps primarily documented the fundamental existing disparities between black and white neighborhoods that resulted from overwhelming racial discrimination elsewhere in the early twentieth century economy. Finding remedies for the persistent private market forces that maintain segregated and unequal neighborhoods remains a key challenge for policymakers today.
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