Long Shadow of Racial Discrimination: Evidence from Housing Covenants of Minneapolis

Abstract

This paper studies the effect of racially-restrictive covenants prevalent during the early-to-mid 20th century on present-day socioeconomic outcomes such as house prices and racial segregation. Racial covenants were clauses in property deeds that prohibited the sale or renting of a property to specific religious and ethnic minorities. Using a newly created geographic data set of over 30,000 historical property deeds (1910-1955) from Hennepin County in Minnesota, we exploit the unanticipated 1948 Supreme Court ruling that made racially-restrictive covenants unenforceable. We employ a fuzzy regression discontinuity around the ruling to document that racial covenants have had time-persistent effects and have significantly affected the socioeconomic geography of Minneapolis and adjoining areas. In particular, we document that houses that were covenanted have on average 4-15% higher present-day prices compared to properties which were not covenanted. We also find that census blocks with larger share of covenanted lots have smaller black population and lower black home ownership rates.

Keywords: Segregation, Covenants, Racial Discrimination, Housing, Racial Wealth Gap

JEL Classification: N3, N9, R1, R23, R31