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Working Paper, No. 2017-12, 2017
The Effects of the 1930s HOLC “Redlining” Maps (Revised August 2018)

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 drew residential security maps for over 200 cities to grade the riskiness of lending to neighborhoods. The maps were color-coded using an A to D scale. We trace out the effects of these maps over subsequent decades 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 methods. In addition, we exploit borders that are least likely to have been endogenously drawn. We find that areas that were on the lower graded side of “D-C” and “C-B” boundaries in the 1930s experienced a marked increase in the share of the population that is African American in subsequent decades, a result that peaks around 1970 and declines thereafter. We also find evidence of a long-run decline in home ownership, house values, rents, and credit scores along the lower graded side of borders that persists today. For some outcomes, these declines were larger and more enduring along the C-B than the D-C boundaries. We confirm these findings using an independent discontinuity strategy that exploits the HOLC’s decision to limit maps to cities with a population of 40,000 or more. In total, our results provide strongly suggestive evidence that the HOLC maps had a causal and lasting effect on the development of urban neighborhoods through credit access.

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