The Effects of the 1930s HOLC “Redlining” Maps

Oct 07, 2022

Abstract: This study uses a boundary design and propensity score methods to study the effects of the 1930s-era Home Owners Loan Corporation (HOLC) “redlining” maps on the long-run trajectories of urban neighborhoods. The maps led to reduced home ownership rates, house values, and rents and increased racial segregation in later decades. A comparison on either side of a city-level population cutoff that determined whether maps were drawn finds broadly similar conclusions. These results suggest the HOLC maps had meaningful and lasting effects on the development of urban neighborhoods through reduced credit access and subsequent disinvestment. (JEL G21, J15, N32, N42, N92, R23, R31)

Date: 2021-11-01

URL: https://pubs.aeaweb.org/doi/10.1257/pol.20190414

Volume: 13

Pages: 355-392

Publication: American Economic Journal: Economic Policy

Issue: 4

Date Added: 11/1/2021, 9:20:02 AM

Reading Notes:

Objective: To examine the effect of HOLC redlining maps on residential segregation, housing values, homeownership, and credit scores

Importance: This is an important channel that may drive differences across places and people over time.

A series of papers have shows that place determines socioeconomic success. Understanding the differences between places seems increasingly important

Background: The Home Owners Loan Corporation (HOLC) rated neighborhoods on a scale of A (least risky) to D (most risky) between 1935-1940 for 239 cities. These were meant to signify the expected housing value, but explicitly too into account race/ethnicity of neighborhoods

Data & Key Variables: Geocoded renderings of HOLC maps for 149 cities

1910-2010 Census data: Share African American, homeownership, house values

1999-2016 FRB Consumer Credit Panel

Methodology:

1) Diff-in-diff across HOLC grade lines

2) Identify "missing" borders with 1/4 mile grid squares that didn't match surrounding neighborhood. PSM and synthetic control matching

3) Misaligned borders, possibly just to close a polygon. Identified with propensity to be assigned grade

Results: Significant effect of HOLC maps on racial composition and housing development.

Directly contributed to the disinvestment in poor urban neighborhoods

Patterns exist across both D-C borders (redlining) and across C-B borders (yellow-lining)

Key Table/Figure:

Dani’s Reading Notes

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