Neighborhood Change and Racial Disparities in Mortgage Lending: Evidence from HMDA Data

This paper examines how neighborhood change—including racial turnover, gentrification, and long-term racial integration—shapes mortgage lending outcomes. Using Home Mortgage Disclosure Act loan data merged with census tract characteristics, we model loan denial odds in 2021. We find persistent racial disparities in lending, which are amplified in neighborhoods experiencing gentrification or recent racial change. In contrast, minority applicants face significantly lower denial odds in “persistently integrated” neighborhoods—tracts that maintained a racially balanced lending pattern for at least fifteen years. These findings suggest that stable integration is associated with smaller racial disparities in lending outcomes, even as gentrification is associated with inequalities in credit access.