The Lingering Legacy of Redlining on School Funding, Diversity, and Performance

Between 1935-1940 the Home Owners' Loan Corporation (HOLC) assigned A (minimal risk) to D (hazardous) grades to neighborhoods that reflected their lending risk from previously issued loans and visualized these grades on color-coded maps, which arguably influenced banks and other mortgage lenders to provide or deny home loans within residential neighborhoods. In this study, we leverage a spatial analysis of 144 HOLC-graded core-based statistical areas (CBSAs) to understand how HOLC maps relate to current patterns of school and district funding, school racial diversity, and school performance. We find that schools and districts located today in historically redlined D neighborhoods have less district per-pupil total revenues, larger shares of Black and non-White student bodies, less diverse student populations, and worse average test scores relative to those located in A, B, and C neighborhoods. Conversely, at the school level, we find that per-pupil total expenditures are better for those schools operating in previously redlined D neighborhoods. Consequently, these schools also have the largest shares of low-income students. Our nationwide results are, on the whole, consistent by region and after controlling for CBSA. Finally, we document a persistence in these patterns across time, with overall positive time trends regardless of HOLC security rating but widening gaps between D vs. A, B, and C outcomes. These findings suggest that education policymakers need to consider the historical implications of redlining and past neighborhood inequality on neighborhoods today when designing modern interventions focused on improving the life outcomes of students of color and students from low-socioeconomic backgrounds.