The Effects of the 1930s Holc "Redlining" Maps

102 Pages Posted: 19 Sep 2017 Last revised: 21 Oct 2019

See all articles by Daniel Aaronson

Daniel Aaronson

Federal Reserve Bank of Chicago

Daniel A. Hartley

Federal Reserve Bank of Chicago

Bhashkar Mazumder

Federal Reserve Bank of Chicago

Date Written: 2017-09-17

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.

Keywords: Home ownership, housing, mortgage loans, redlining

JEL Classification: H81, O18, R21, R31

Suggested Citation

Aaronson, Daniel and Hartley, Daniel A. and Mazumder, Bhashkar, The Effects of the 1930s Holc "Redlining" Maps (2017-09-17). FRB of Chicago Working Paper No. WP-2017-12. Available at SSRN: https://ssrn.com/abstract=3038733

Daniel Aaronson (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States

Daniel A. Hartley

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://www.danielaaronhartley.com

Bhashkar Mazumder

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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