How Redlining Caused a Wealth Gap and Low Homeownership for Black Families

The racist 1930s-era housing policy that effectively blocked Black families from obtaining loans continues to widen the wealth gap. Homeowners in redlined neighborhoods have earned 52% less in home equity than those in greenlined areas over the last 40 years.

Redlining, the racist housing policy that was outlawed in the 1960s, remains a major factor in today’s wealth gap between Black and white families across the country. The typical homeowner in a neighborhood that was redlined for mortgage lending by the federal government has gained 52% less—or $212,023 less—in personal wealth generated by property value increases than one in a greenlined neighborhood over the last 40 years. Black homeowners are nearly five times more likely to own in a formerly redlined neighborhood than in a greenlined neighborhood, resulting in diminished home equity and overall economic inequality for Black families. 

“It’s a tale of two cities in Chicago. It goes back to redlining, when Black residents lived in certain neighborhoods and white people lived in others, and the difference in home value and segregation between those places have been exacerbated by policy, education, wage inequality and so many other issues,” said Chicago Redfin agent Brittani Walker. “I hear the systemic problems every day when I talk to clients. Homebuyers have boundaries they’ve set for themselves, or a friend of a friend has set for them. They don’t want to buy in certain neighborhoods, especially on the South Side in formerly redlined areas, because those places don’t get the culture, the restaurants, the fun events, they don’t even get healthy food at grocery stores. And that contributes to why home prices don’t go up in those neighborhoods.” 

Redlining” refers to the 1930s-era practice in which the Home Owners’ Loan Corporation assigned grades to, and color coded, residential neighborhoods to indicate their “mortgage security.” Neighborhoods that received the highest grade of “A”—colored green on the maps— were considered “best.” Those that received the lowest grade of “D,” colored red, were considered “hazardous.” Urban areas with a large share of Black families were most likely to be redlined, while neighborhoods made up mostly of white families were most likely to be deemed “best” and colored green. In redlined neighborhoods, it was virtually impossible to get a loan. Type B neighborhoods, those deemed “still desirable” were colored blue and Type C neighborhoods, considered “definitely declining,” were colored yellow.

Here’s an example of a redlined map of Los Angeles:

In 1896, the U.S. Supreme Court decision Plessy v. Ferguson upheld the constitutionality of racial segregation. As a result, segregation across the country continued with minimal legal challenge until the U.S. Supreme Court’s 1954 decision Brown v. Board of Education. Accordingly, when the Home Owners’ Loan Corporation enacted the practice of redlining in the 1930s, many U.S. cities were racially segregated and it was not uncommon for neighborhoods to consist predominantly of Black families or predominantly of white families.

While redlining prevented both Black and white families from obtaining loans for homes in Type D neighborhoods, the bigger impact was on Black families, who were blocked from buying homes in the neighborhoods where they already lived.

The nationwide protests against police brutality and systemic racism are now highlighting questions of how to use housing policy, among the key drivers of systemic racism in this country, as one way to tackle it. The next step is for voters, policymakers, communities and the real estate industry—Redfin included—to cooperate on solutions. Some policies proposed over the last few years include reparations for the Black community and down-payment assistance for first-time homebuyers in formerly redlined areas.

How Redlining Contributed to a Racial Wealth Gap

The Fair Housing Act of 1968 made it unlawful to refuse to rent, sell, or provide financing for a dwelling based on race, religion and national origin, and the 1977 Community Reinvestment Act further outlawed redlining. Today, U.S. residents—particularly Black families—still feel the impact. Lack of access to credit, discrimination against minorities buying homes in Type A neighborhoods, and being prevented from buying homes in their own neighborhoods led to significantly lower homeownership rates for Black families than white families. The national homeownership rate is lower for Black families than white families—44.0% versus 73.7%

“The expanding homeownership gap between Black and white families can in part be traced back to diminished home equity due to redlining, as it’s one major reason why Black families today have less money than white families to purchase homes either as first-time or move-up homebuyers,” said Redfin chief economist Daryl Fairweather. “It’s important to note that other factors play a role in lower homeownership rates for Black families, too. For instance, employment discrimination has prevented Black workers from earning equitable income.”

In Type A Neighborhoods, the Homeownership Gap Between Black and White Families Expands

In the 41 metros included in this analysis, Black individuals who are homeowners are 4.7 times as likely to own in a former Type D than a Type A neighborhood, while white individuals are just 1.5 times more likely to own in a redlined area. And even though redlining was outlawed half a century ago, the homeownership rate for Black families has dropped in every neighborhood type over the last 40 years. 

Since 1980, the homeownership rate for Black families in Type A, or “best,” neighborhoods dropped from 50.4% to just 44.0%, while the rate for white families rose 4.1 percentage points to 71% in 2017, the most recent data that was available at the time of the analysis for this report. That makes for a 27 percentage-point homeownership gap between Black and white families in “best” neighborhoods, up from a 16.5 percentage-point gap 40 years ago. The gap has widened in all neighborhood types except those that were formerly redlined, where Black and white families both have relatively low homeownership rates (29.8% and 45.6%, respectively). 

Black homeowners were hit harder during the 2008 housing bust, with 7.9% of Black families with mortgages losing their homes to foreclosure between 2007 and 2009 versus 4.5% of white families, and it’s likely that the subsequent tightening of credit has been an exacerbating factor in the homeownership gap. 

Homeownership Rates by Race and Redlining Category: National

Overall homeownership rate
 19802017
Type A / Best65.5%66.0%
Type B / Still Desirable56.2%55.0%
Type C / Definitely Declining50.0%47.4%
Type D / Hazardous46.3%38.5%
Homeownership rate for white families
 19802017
Type A / Best66.9%71.0%
Type B / Still Desirable58.3%61.1%
Type C / Definitely Declining53.6%54.4%
Type D / Hazardous46.3%45.6%
Homeownership rate for Black families
 19802017
Type A / Best50.4%44.0%
Type B / Still Desirable49.0%43.7%
Type C / Definitely Declining39.9%35.9%
Type D / Hazardous30.8%29.8%
Homeownership rate: Percentage point difference between white and Black families
 19802017
Type A / Best16.5 pts.27.0 pts.
Type B / Still Desirable9.3 pts.17.4 pts.
Type C / Definitely Declining13.7 pts.18.5 pts.
Type D / Hazardous15.5 pts.15.8 pts.

In some areas, the difference is more pronounced. The homeownership rate for Type A areas in Atlantic City, NJ is just 14.8% for Black families, versus 75.3% for white families. That’s a bigger gap than any other metro. It’s followed by Fresno, CA, where the Type A homeownership rate for Black families is just 2.5% compared to 62.6% for white families, and Greensboro, NC (9.3% versus 67.7%).

The homeownership gap for “best” neighborhoods is smallest in Oakland, where Black families have an 84.1% homeownership rate versus 85.9% for white families. It’s followed by Miami (42.7% versus 56.8%).

Below is a table with three of the 41 metros included in this analysis (the first three alphabetically), with homeownership rates by race and redlining category in 1980 and 2017. Click here for the full table, which includes all 41 metro areas.

Homeownership Rates by Race and Redlining Category: Metro Areas
 19802017
Metro Area and Redlining CategoryOverall Homeownership RateRate for White FamiliesRate for Black FamiliesPercentage Point

Difference Between White and Black Families

Overall Homeownership RateRate for White FamiliesRate for Black FamiliesPercentage Point

Difference Between White and Black Families

Akron, OH
Type A / Best74.1%74.7%69.4%5.3%70.2%76.4%50.5%25.9%
Type B / Still Desirable67.5%69.7%56.2%13.5%58.1%64.9%36.7%28.2%
Type C / Definitely Declining64.0%66.1%41.7%24.4%57.3%65.0%25.3%39.7%
Type D / Hazardous63.7%69.0%48.6%20.4%50.7%59.1%31.9%27.2%
Atlanta, GA
Type A / Best67.0%67.6%44.7%22.9%64.2%67.8%25.3%42.5%
Type B / Still Desirable50.5%50.7%51.2%-0.5%56.4%64.3%33.4%30.9%
Type C / Definitely Declining43.2%43.3%43.6%-0.3%46.3%58.4%33.0%25.4%
Type D / Hazardous30.1%43.6%22.2%21.4%33.9%50.2%22.7%27.5%
Atlantic City, NJ
Type A / Best54.4%54.6%20.0%34.6%73.5%75.3%14.8%60.5%
Still Desirable62.4%62.7%34.8%27.9%66.4%73.1%23.7%49.4%
Type C / Definitely Declining62.0%66.8%41.5%25.3%54.9%64.8%35.0%29.8%
Type D / Hazardous41.1%59.3%34.9%24.4%39.0%55.9%25.3%30.6%
Here’s the full table

Redlined vs. Greenlined: Identical Homes but Very Dissimilar Equity

“More than half a century after it was abolished, redlining continues to dictate the racial makeup of neighborhoods and Black families still feel the socioeconomic effects of such a racist housing policy,” Fairweather said. “Black families who were unable to secure housing loans in the neighborhoods where they lived have missed out on one of the major ways to build wealth in this country. And even families who were able to buy homes in their neighborhood after redlining ended haven’t earned nearly as much home equity as people who bought homes in neighborhoods that were considered more valuable.”

“That has had a lingering effect on their children and grandchildren, who don’t have the same economic opportunities as their white counterparts,” Fairweather continued. “Not only are Black parents less likely to have the resources to pay for higher education and help with other expenses, but studies show that children of homeowners are about 7.5% more likely to become homeowners than children of renters.”

In a former Type D—or redlined—neighborhood, the typical homeowner has earned $196,050 in home equity since 1980, versus $408,073 for Type A neighborhoods. Homeowners in former Type B, “still desirable,” and Type C, “definitely declining,” neighborhoods have also missed out on sizable home equity compared to those in Type A neighborhoods. In C neighborhoods, the typical homeowner has earned $218,976 worth of home equity since 1980; in B areas the median gain is $299,439.

While the median home equity in redlined neighborhoods has seen a bigger percentage increase since 1980 than those in greenlined neighborhoods—292% versus 204%—it’s largely because equity in redlined neighborhoods started out so low.

Here’s a look at national home equity gain for all four redlining categories, from the five-year period spanning 1975-1980 to 2019*.

 Median Home Equity* in 1975-1980 (in today’s dollars)Median Home Equity in 2019 Home Equity Growth (dollars)Home Equity Growth (percentage)Total Home Equity Growth (dollars)Total Homes Sold 1975-1980
Type A / Best$200,122$608,195$408,073204%$18.9 billion32,845
Type B / Still Desirable$129,195$428,634$299,439232%$47.6 billion101,436
Type C / Definitely Declining$93,732$312,707$218,976234%$62.1 billion160,964
Type D / Hazardous$67,100$263,150$196,050292%$22.5 billion61,922

*We measured median home equity in the period from 1975-1980, the furthest back in time data is available, by subtracting the loan amount from the sale price for homes in the 41 metros we included in this analysis. Because a standard 30-year mortgage would have been paid off by 2010, median home equity in 2019 is equal to total home value.

Lack of Equity in Redlined Areas Pervades Across the U.S., With One Exception

Overall, 2017 homeownership rates are lowest for both white and Black families in former D neighborhoods, where redlining prevented homebuyers from obtaining loans. And home equity in former A neighborhoods outstrips former D neighborhoods in 40 of the 41 metros in this analysis.

The starkest example of the imbalance is in Warren, MI (a Detroit suburb), where in 2019 the typical homeowner in a former A area had 1,309% more home equity than one in a redlined area—$634,000 versus $45,000. It’s followed by Jacksonville, FL (836% more; $571,000 versus $61,000) and Memphis (663% more; $412,000 versus $54,000).

Philadelphia is the only exception: The median home equity for the greenlined neighborhoods is 40% less than it is in redlined neighborhoods: $160,000 versus $268,000.

Philadelphia is currently grieving over the deaths of George Floyd, Ahmaud Arbery, Tony McDade and Breonna Taylor and some neighborhoods such as Center City, and parts of West Philadelphia and Kensington have experienced damage despite otherwise peaceful protests,” said local Redfin agent Mason Gallik. “This may change some dynamics of the real estate market while neighborhoods recover. But as of a few months ago, some of the formerly redlined neighborhoods were among the most desirable areas in the city, like parts of Fairmount and Northern Liberties. Those neighborhoods have two things a lot of the former ‘best’ neighborhoods do not have: vacant land and proximity to downtown, both of which are valuable to modern homebuyers. Vacant lots in formerly redlined neighborhoods also allow for newly built homes, which tend to sell for more than older homes.”

Home Equity In 2019 For “Best” and “Hazardous” Neighborhoods By Metro Area
Metro AreaMedian Home Equity For “Best” NeighborhoodsMedian Home Equity For “Hazardous” NeighborhoodsDollar Difference Between Home Equity In “Hazardous” And “Best” NeighborhoodsPercent Difference In Home Equity Between “Hazardous” And “Best” Neighborhoods
Warren, MI$634,000$45,000$589,0001,309%
Jacksonville, FL$571,000$61,000$510,000836%
Memphis, TN$412,000$54,000$358,000663%
Birmingham, AL$862,000$131,000$731,000558%
Atlantic City, NJ$900,000$143,000$757,000529%
Tampa, FL$832,000$151,000$681,000451%
Oklahoma City, OK$246,000$45,000$201,000447%
Greensboro, NC$341,000$69,000$272,000394%
Virginia Beach, VA$226,000$49,000$177,000361%
Columbus, OH$424,000$100,000$324,000324%
Richmond, VA$648,000$156,000$492,000315%
Charlotte, NC$926,000$232,000$694,000299%
Trenton, NJ$152,000$41,000$111,000271%
Atlanta, GA$1,052,000$326,000$726,000223%
Phoenix, AZ$511,000$165,000$346,000210%
Tacoma, WA$656,000$218,000$438,000201%
Pittsburgh, PA$380,000$133,000$247,000186%
Dayton, OH$278,000$103,000$175,000170%
Akron, OH$166,000$62,000$104,000168%
New Orleans, LA$515,000$196,000$319,000163%
Cleveland, OH$308,000$123,000$185,000150%
Nashville, TN$648,000$281,000$367,000131%
Miami, FL$688,000$302,000$386,000128%
San Diego, CA$1,058,000$471,000$587,000125%
Camden, NJ$202,000$92,000$110,000120%
Seattle, WA$1,212,000$562,000$650,000116%
Newark, NJ$699,000$338,000$361,000107%
Chicago, IL$462,000$230,000$232,000101%
Denver, CO$756,000$390,000$366,00094%
Montgomery County, PA$450,000$234,000$216,00092%
Los Angeles, CA$1,111,000$587,000$524,00089%
Boston, MA$1,039,000$578,000$461,00080%
Fresno, CA$282,000$158,000$124,00078%
Oakland, CA$1,300,000$752,000$548,00073%
Milwaukee, WI$251,000$154,000$97,00063%
Baltimore, MD$335,000$208,000$127,00061%
San Jose, CA$1,329,000$854,000$475,00056%
Sacramento, CA$778,000$522,000$256,00049%
New York, NY$666,000$502,000$164,00033%
Philadelphia, PA$160,000$268,000-$108,000-40%

New York and San Jose both have relatively smaller gaps in home equity gains between former A and D neighborhoods. That’s likely because both are job centers with high wages and in-demand housing, and in each home prices have risen substantially in almost every neighborhood.

But rising home values throughout all redlining categories in New York and San Jose doesn’t mean Black Americans there have benefited. The Black homeownership rate in both areas is lower than the national average of 44%: just 32.4% in New York and 31.4% in San Jose.

“Relatively low homeownership rates for Black families means landlords are the ones reaping the benefits of increasing home equity in formerly redlined neighborhoods,” Fairweather said. “Black families are mostly renters in those neighborhoods, which means rising home values leads to increased rent payments and possibly being pushed to less desirable, albeit more affordable, parts of town.”

Methodology

For the home equity analysis, we measured median home equity in the period from 1975-1980, the furthest back in time data is available, by subtracting the loan amount from the sale price for homes in the 41 metros we included in this analysis. County records were not available for several metro areas and in some there were too few records. Thus, to be included, metros must have had at least 1,000 home sales between 1975 and 1980. Because a standard 30-year mortgage would have been paid off by 2010, median home equity in 2019 is equal to total home value. The national home equity figures are the averages of the medians of the 41 metros included in this analysis. 

We obtained redlining map shapefiles from the Mapping Inequality website for 41 metro areas across the U.S. that were “redlined” by the Home Owners’ Loan Corporation. There were 357,167 home sales from 1975-1980 that fell inside of the redlining map boundaries. For the purposes of this analysis, we assumed the homes are still owned by the person who owned them in 1975-1980 to calculate equity gained. The 1975-1980 home equity values are adjusted for inflation and expressed in terms of today’s dollars using the consumer price index

For the analysis of homeownership rates, the data on the number of occupied units (by race) comes from the 1980 decennial census as well as the 2013-2017 5-year American Community Survey, the most recent data that was available at the time of analysis for this report. We used GIS tools to match and aggregate the census tract level data by each redlined category. The homeownership rate represents the percentage of families belonging to a particular racial group that owned versus rented in 1980 and 2017. A homeownership rate refers to the share of homes that are owned by their occupants.

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