A few definitions, per the Center for Homeland Defense and Security (Root Cause Analysis, Center for Homeland Defense and Security, Naval Postgraduate School. March 2017 ):

Proximate cause (direct cause) - Occurs immediately prior to the [outcome of interest]; directly results in its occurrence and, if eliminated or modified, would have prevented the undesired outcome

Root Cause - One of multiple factors (events, conditions or organizational factors) that created the proximate cause and subsequent undesired outcome. Typically multiple root causes contribute to an undesired outcome [my italics].

Root Cause Analysis - A method primarily used to identify the underlying cause of an incident or issue, and more effectively mitigate or prevent future similar incidents.

So the question for this post is: how would we know whether the historical practice of redlining created a causal pathway that led directly to the current Black-White homeownership gap in the US? In other words, was redlining one of multiple factors responsible for the proximate causes of the Black-White homeownership gap?

First some history of redlining, from Race, Risk, and the Emergence of Federal Redlining (Fishback et al, 2020):

[In response to the ravages of the Great Depression], the federal government created the Home Owners Loan Corporation (HOLC), [which] purchased and refinanced over one million troubled non-farm mortgages and held roughly a tenth of all non-farm U.S. mortgages… Nationwide, black households accounted for 4.5 percent of mortgages held by the HOLC in 1940, compared with only 2.6 percent held by all other lenders. The 4.5 percent matched the black share of nonfarm homeowners in 1930 and in 1940. 

The HOLC finished this refinancing project early in 1936 and then shifted to servicing the loans. But by then, refinanced borrowers were already having problems repaying their loans. To better understand the default risk of refinanced homes across hundreds of housing markets, HOLC officials developed “residential security maps” of neighborhoods throughout the country. These maps assigned colors to each grade of risk. A red rating signified the highest risk.

Fishback et al emphasize that these maps were created after the HOLC had finished making loans and did not guide the institution’s refinancing project. They also argue that racial bias played little part in rating neighborhood risk levels. In their words:

We find that racial bias in the construction of the HOLC maps can explain at most a small fraction of the observed concentration of black households in redlined zones. Instead, our results suggest that the majority of black households were redlined because decades of disadvantage and discrimination had already pushed them in to the core of economically distressed neighborhoods prior to the government’s direct involvement in mortgage markets…black households were already concentrated in the most economically challenged neighborhoods in these cities seven to ten years prior to the development of the HOLC maps.

In other words, default risk was highest in economically distressed neighborhoods, which is why they were redlined. Not because their residents were Black.

But finding a root cause isn’t a matter of assigning moral culpability. Even if we accept that racial bias had little to do with the original construction of HOLC maps, it’s still possible that living in a redlined area made it harder for Black residents to escape poverty, a disadvantage carried over generations to the present day., one that directly led to the Black-White homeownership gap.

So what kind of evidence is needed to support the case that redlining in the 1930s was at least partly responsible for the current Black-white homeownership gap? To be discussed in my next post.

Reference:

Fishback, P. V., LaVoice, J., Shertzer, A., & Walsh, R. (2020). Race, risk, and the emergence of federal redlining (No. w28146). National Bureau of Economic Research. doi: http://dx.doi.org/10.3386/w28146