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The Long-Term Impact of Redlining on Home Prices

As the nation is celebrating the 50th anniversary of President Lyndon B. Johnson’s signing of the Fair Housing Act, Zillow Research has taken a look at the impact of the sort of policies the Fair Housing Act was intended to counter. Some eight decades after the federal government “redlined” certain neighborhoods as being hazardous for mortgage lenders, Zillow finds that home prices in those areas still lag behind those of unaffected neighborhoods.

During the 1930s and 1940s, the federal government’s Home Owners’ Loan Corp. (HOLC) would classify neighborhoods with one of four ratings: best, still desirable, definitely declining, and hazardous. According to Zillow Research, the median home value in redlined neighborhoods “was 47.1 percent that of the areas rated ‘best’—and the gap has worsened since then.” During the intervening two decades, the median home value in those “best”-rated neighborhoods has risen 230.8 percent to $640,238. For the redlined neighborhoods? The same amount of time has witnessed an increase of only 203.1 percent, with median home values in those areas hitting $276,199.

Unsurprisingly, neighborhoods classified as “hazardous” very often tended to be those occupied primarily by racial or ethnic minorities, and by the poor.

Zillow found that these price discrepancies were particularly noticeable in Los Angeles, which is the second-largest metropolitan area in the country. Zillow’s report states, “The median home value in formerly redlined neighborhoods of Los Angeles is just 7.2 percent above its bubble-era peak, whereas the median in areas formerly ranked ‘best’ climbed 45.6 percent from its bubble-era peak, to $4.2 million in December 2017.”

Zillow tracked 151 different metro areas for the study, and in only one of them were median home values in formerly redlined neighborhoods higher than formerly “best”-labeled neighborhoods from the same region. That standout metro? Haverhill, Massachusetts.

To read Zillow’s full research report on the lingering effects of redlining, click here.

About Author: David Wharton

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 16 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@thefivestar.com.

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