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Home Values Remain Low in Vast Majority of Formerly Redlined Neighborhoods

The long legacy of structural racism in the New Deal-era housing market.
National Archives and Records Administration

Home values in the vast majority of neighborhoods that were “redlined” as hazardous for mortgage lending by the federal government 80 years ago are lower now than in areas rated more highly.

A new Zillow analysis looking back to 1996 shows that at that time, the median home value in redlined neighborhoods was 47.1 percent that of the areas rated “best” – and the gap has worsened since then. The median home value in the “best” neighborhoods has risen 230.8 percent to $640,238 over the past 22 years, whereas the median value in the areas rated “hazardous” has climbed only 203.1 percent, to $276,199.

It’s a striking example of how discrimination – financial and racial – codified nearly a century ago continues to affect homeowners and whole communities.

In the 1930s and 1940s, representatives for the Home Owners’ Loan Corp. (HOLC), created as part of Franklin D. Roosevelt’s New Deal to bolster the economy by refinancing homes, ranked neighborhoods in cities nationwide as “best,” “still desirable,” “definitely declining” and “hazardous” for lending.

Neighborhoods were assigned colors to match their perceived danger to lenders: Green, blue, yellow and red, respectively – hence the term “redlining,” the practice of shading red the areas that the government labeled least desirable/most “hazardous” for lending.

In part because HOLC hired real estate agents – whose national ethics code required them to maintain segregation – to appraise homes for refinancing, the neighborhood designations were closely tied to race. Ethnic composition, socioeconomic status and environmental factors also were considered to some degree.

“A neighborhood earned a red color if African Americans lived in it, even if it was a solid middle-class neighborhood of single-family homes,” Richard Rothstein writes in The Color of Law: A Forgotten History of How Our Government Segregated America.

Today, homes in areas that were deemed “hazardous” and “definitely declining” continue to have lower median values than those in areas previously labeled “still desirable” and “best.” This research combined Zillow’s home value estimates with geocoding data from Mapping Inequality, a project of four universities led by Robert K. Nelson, LaDale Winling, Richard Marciano, Nathan Connolly and others.