The Physical Legacy of Racism: How Redlining Cemented the Modern Built Environment

Abstract

Recent research demonstrates that land use choices, which date back to a century ago still powerfully shape the current development patterns. With advances in digitization, scholars have started studying the long-term effects of historic federal placed-based policies. One such area that has drawn attention from the housing and real estate community is “redlining,” designated by the Home Owners’ Loan Corporation in 1930s. Scholarly evidence suggest that neighborhoods graded poorly decades ago still face challenges in access to mortgage credit, homeownership rate, and housing value. However, the literature is not clear about the mechanisms through which the placed based policy in the past affects the current neighborhood performance. In this paper, we unravel one of these mechanisms. We argue that redlining has shaped the geography of housing segregation, not just that of racial segregation, by delineating the predominant location of single family and multi-family stock. We then hypothesize that these built environment effects persist even while redlining-related racial segregation diminished over time. Specifically, we explore how and why poorly-graded multi-family neighborhoods became locked in a continued cycle of impoverishment, with continued under-resourced and underinvested housing stock. We test this idea for ten U.S. cities for which digitized maps and 1930-2010 census data are available. By instrumenting the geography of housing segregation through the redlining policy, we find the connection between redlining policy and contemporary neighborhood outcomes in local housing markets with a mechanism identified.

JEL Classification: R31, R38, R52