Redlined Yesterday and Redlined today: the Home Owners Loan Corporation's Long Shadow

The Home Owners Loan Corporation (HOLC), passed during the Great Depression, stabilized a mortgage market in which half of all debt was in default. While designed as short term relief, HOLC had a lasting effect on the mortgage market through institutionalizing the racist practice of denying mortgages to communities of color. Over subsequent decades, “redlining” funneled billions of dollars away from black neighborhoods and shaped segregation patterns and the racial wealth gap. Contemporary housing inequality is a result of this history of racialized exclusion. This paper combines newly-digitized archival data with data describing recent mortgage outcomes to investigate the intransigence of spatial inequality in housing finance. I show that borrowers in the early Twenty First Century were at a severe disadvantage when pursuing mortgages in neighborhoods redlined by HOLC appraisers in the first half of the Twentieth Century. Specifically, such applicants were more likely to be denied loans and receive subprime loans. Furthermore, foreclosures were more common in redlined areas during the Great Recession. This paper shows that the geographic patterns of vulnerability to exclusion and exploitation are remarkably stable and highlights the role of persistent institutional marginalization in replicating racial and spatial inequalities.