The Impact of 1930s Maps of Mortgage Risk on Modern Home Ownership

This research estimates long-term impacts of “redlining” maps on rates of home ownership. In the 1930s, the Home Owners’ Loan Corporation drew maps that split US cities into zones with 4 categories of mortgage risk. We exploit the grade discontinuities at the borders between zones to estimate effects of the grade assignments. Using newly-created shapefiles for 1940 Census blocks in Birmingham, Alabama, we match 1940 and 2010 Census blocks in Birmingham to grades and then build small neighborhoods of blocks that are close together and lie along both sides of grade borders. We compare outcomes between higher- and lower-graded blocks within neighborhoods. 2010 Households in lower-graded blocks are significantly less likely to live in an owner-occupied dwelling than their neighbors a couple blocks away in a higher-graded zone. However, the same is true in 1940, suggesting that estimates from 2010 severely overstate the effect of treatment. Extending the 2010 analysis to all US cities produces even smaller differences than in Birmingham.