Effects of Redlining in the Twin Cities

Abstract

The depression era Home Owners’ Loan Corporation (HOLC) bought troubled mortgages from banks and refinanced mortgages with borrowers directly. The HOLC also graded neighborhoods by risk of mortgage default using racist criteria in a process now commonly called redlining. Scholarly work indicates that redlining resulted in adverse socioeconomic conditions in the decades since the depression. This study examines the possible long-term effects of redlining in the Twin Cities, Minneapolis and St. Paul, Minnesota, using decennial census and American Community Survey data. Trends were identified using socioeconomic measures at the census tract level in four areas: population, housing and rent, employment, and income. Analysis including geographically weighted regression identified significant variation in measures between best and worst rated tracts. As a percentage of a tract’s population, non-White population grew while the White population declined. However, non-White population grew mostly in census tracts with the lowest HOLC grades. Home values in the lowest graded tracts increased over time yet lagged well behind better graded areas. Median rents in worst graded tracts doubled when compared to other tracts. The best graded area outpaced median income growth in all other tracts. Generally, the influence of HOLC grades was less in later census years. While regression analysis of median home value using the selected census data failed to provide a reliable predictive model, useful explanatory variables were identified for future study. Overall, the results show that multiple adverse socioeconomic conditions continue to exist in formerly redlined areas.