Working Paper: NBER ID: w28146
Authors: Price V. Fishback; Jessica Lavoice; Allison Shertzer; Randall Walsh
Abstract: During the late 1930s, the Home Owners’ Loan Corporation (HOLC) developed a series of area descriptions with color-coded maps of cities that summarized mortgage lending risk. We provide evidence that these maps were not the primary source used by the FHA to create their “redlining” maps for insuring mortgages. Instead, the HOLC maps provide a unique snapshot of how real estate professionals perceived lending risk in the 1930s. These perceptions were shaped by a wide range of factors including race, income, and housing quality. We use the maps to explore the mechanisms behind the prevalence of black residents in the lowest-rated neighborhoods. Our results suggest that racial bias in the construction of the HOLC maps can explain at most 4 to 20 percent of the observed concentration of black households in the lowest-rated zones. Instead, our results suggest that the majority of black households were located in such zones because decades of disadvantage and discrimination had already pushed them into the core of economically distressed neighborhoods prior to the federal government’s involvement in mortgage markets.
Keywords: HOLC maps; race; poverty; lending risk; redlining
JEL Codes: J15; N9; R28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| racial bias in the construction of HOLC maps (R28) | concentration of Black households in low-rated neighborhoods (R20) |
| historical disadvantages (N93) | concentration of Black households in low-rated neighborhoods (R20) |
| racial composition of neighborhoods (R23) | perceptions of lending risk (G21) |
| crossing from a higher to a lower security grade (F55) | declines in housing prices and income levels (R31) |