Race, Risk, and the Emergence of Federal Redlining

72 Pages Posted: 1 Dec 2020 Last revised: 29 May 2021

See all articles by Price V. Fishback

Price V. Fishback

University of Arizona; National Bureau of Economic Research (NBER)

Jessica LaVoice

Bowdoin College

Allison Shertzer

University of Pittsburgh - Department of Economics

Randall Walsh

University of Pittsburgh - Department of Economics

Date Written: November 2020

Abstract

During the late 1930s, the Home Owners Loan Corporation (HOLC) created a series of maps designed to summarize spatial variation in the riskiness of mortgage lending in different neighborhoods. The HOLC maps, in conjunction with contemporaneous maps produced by the Federal Housing Agency (FHA), are at the center of debates regarding the long-run impacts of government-imposed redlining, particularly because black households were concentrated in the highest risk zones on these maps. This concentration, combined with the fact that these formerly redlined neighborhoods largely remain economically distressed today, suggest racial bias in the construction of the maps has had important effects over the long run. Using newly digitized data for ten major northern cities, we assess the maps for the importance of this channel in explaining the prevalence of black residents in redlined neighborhoods. We find that racial bias in the construction of the HOLC maps can explain at most a small fraction of the observed concentration of black households in redlined zones. Instead, our results suggest that the majority of black households were redlined because decades of disadvantage and discrimination had already pushed them in to the core of economically distressed neighborhoods prior to the government’s direct involvement in mortgage markets. As a result, the HOLC maps are best viewed as providing clear evidence of how decades of unequal treatment effectively limited where black households lived in the 1930s rather than reflecting racial bias in the construction of the maps themselves. We argue that the systemized treatment of neighborhood risk vis-à-vis mortgage lending that was adopted by HOLC and the FHA may have played a central role in locking these patterns of inequality in place.

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Suggested Citation

Fishback, Price V. and LaVoice, Jessica and Shertzer, Allison and Walsh, Randall, Race, Risk, and the Emergence of Federal Redlining (November 2020). NBER Working Paper No. w28146, Available at SSRN: https://ssrn.com/abstract=3739643

Price V. Fishback (Contact Author)

University of Arizona ( email )

Tucson, AZ 85721-0108
United States
520-621-4421 (Phone)
520-621-8450 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Jessica LaVoice

Bowdoin College ( email )

Brunswick, ME 04011
United States

Allison Shertzer

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

Randall Walsh

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

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