• 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.

• The median home value in neighborhoods labeled "best" 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.

• Of 151 areas examined, only in Haverhill, Mass., are median home values in formerly redlined neighborhoods higher than those in neighborhoods that were labeled "best."

Editor’s Note: April 11, 2018 marked the 50th anniversary of President Lyndon B. Johnson’s signing of the landmark Fair Housing Act, which now prohibits housing discrimination on the basis of race, color, national origin, sex, familial status and/or disability. While a lot has improved, there is still much progress to be made toward ensuring true equality in housing. Zillow Research has examined this topic throughout April in honor of Fair Housing Month, and we invite you to read all the related research and analysis.

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.

Color Coded

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.

"Mapping Inequality is the most ambitious and important project we've done to date," said Nelson, director of the Digital Scholarship Lab at the University of Richmond. "The materials in it regrettably remain relevant 80 years after their creation."

Current home values in formerly redlined areas skew higher than the national median of $210,200 in part because most of the 151 areas examined for this analysis are in or near major urban areas, where home values tend to be higher than in the suburbs or rural locations. It's also worth noting that in three-quarters of the 151 mapped areas, formerly redlined neighborhoods have lower median home values than communities that carried different labels.

‘Success’ as Failure

The widening gap between neighborhoods that were labeled "hazardous" (red) and "best" (green) is particularly noticeable in Los Angeles, the second-largest metro area in the country. 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.

Of the 151 mapped areas, only in Haverhill, Mass., are median home values in formerly redlined neighborhoods higher than those in neighborhoods that were labeled "best."

Beyond Haverhill, in 37 additional mapped areas – about a quarter of the total – median home values for communities that were redlined have climbed above medians in those labeled "definitely declining" and, in some cases, above those labeled "still desirable." Most are in smaller cities, but a few major areas stand out. Four of them are in or near New York: the Bronx, Brooklyn, Queens and Hudson County. Large markets where formerly redlined neighborhoods are doing better than others include Boston, Minneapolis, Philadelphia, Portland and St. Louis.

Improved home values in formerly redlined areas do not necessarily reflect rosy outcomes. For example:

• Gentrification is at play in some formerly redlined neighborhoods that are now home not to thriving non-white communities, but to the white and the wealthy – the same demographic that fled inner cities 80 years ago.

• Swaths of redlined neighborhoods in some cities have been taken via eminent domain and other processes to build highways, airports and shopping malls, leaving the areas with fewer homes – something experts say has happened in St. Louis.

A different dynamic happened in Portland, Ore., where major efforts started in the 1970s to prevent housing deterioration in and near downtown, including redlined neighborhoods – although there has been displacement of black residents.

Modern-Day Redlining

Redlining – and other forms of systemic discrimination going back to slavery, from Jim Crow laws to racial covenants – contributed to a serious divide in homeownership rates between blacks and whites that has had devastating consequences for both the financial wealth and social health of non-white Americans.

"The practice of redlining has denied millions of American families access to fair housing," Lisa Rice, President and CEO of the National Fair Housing Alliance (NFHA) said in a statement. "Redlining is one of the main drivers of wealth disparities in America. This is a serious civil rights issue."

NFHA references redlining in the present tense, which is no accident.

Zillow's analysis is the just latest indication that the effects of redlining persist. The 50^th anniversary of the Fair Housing Act this month spurred a flurry of research into how far we have come – or not – since its passage.

A new report by the Center for Investigative Reporting's Reveal platform shows that modern-day redlining persists in 61 metro areas in the form of racial discrimination in the mortgage process, even after controlling for mortgage applicants' income, loan amount and neighborhood. The modern form of redlining exposed by this research reveals overt discrimination against individuals of color, while historical redlining labeled whole neighborhoods, often with race as a reason.

"Redlining harms individuals and families by restricting their access to quality financial products and services as well as their opportunity to own a home and build wealth. It harms all members of the community by driving disinvestment and blight and continuing the unfortunate history of systemic economic oppression of marginalized groups by causing a decrease in home values," NFHA's Rice said.

Zillow's analysis further highlights the need for "sound financial institutions that provide quality products and services expanding their reach and physical presence in underserved areas," according to NFHA.

It may sound simple, but the fact that this issue has plagued our country since slavery ended attests to how difficult it can be.

As Rothstein points out in The Color of Law, the Fair Housing Act itself was a Congressional cure for a housing market that did not abide by the 1866 Civil Rights Act, which banned racial discrimination in housing.

More mapped areas: The graphic above does not include all 151 mapped areas. Here's a list of all 151.

Footnote: Although home values in the vast majority of redlined neighborhoods examined remain lower than values in all three types of non-redlined neighborhoods, values in some particularly large redlined neighborhoods have gained so much value that the national median for redlined areas collectively is now higher than the median for "definitely declining" (yellow) neighborhoods.

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