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Rental costs in redlined neighborhoods

Relatively higher rents in areas with lower home values

The FRED Blog has used data compiled by Daniel Aaronson, Daniel Hartley, and Bhashkar Mazumder to show the lasting effects on U.S. home values of the color-coded maps created by the Home Owners’ Loan Corporation in the 1930s. Today, we examine the data on rent and rental costs included in that data set.

The FRED graph above shows the same type of rental cost layering we described for home values: Between 1930 and 2000, redlined neighborhoods (areas with a “D” letter code) consistently recorded the lowest rent prices. That is to be expected, as properties in the area were old or nearby unattractive or unhealthy industrial areas. However, relative to the typical home values in those redlined areas, rental costs were consistently high during much of this period.

The second FRED graph shows the rent and rental costs in each HOLC color-coded neighborhood as a fraction of the median, or typical, home value in the same area. To leave more room for the data, the graph doesn’t display the legend (graph with legends), but the line colors match those used in the first graph. Both rental costs and home values are adjusted for inflation. Their ratio, or proportion, show a broadly declining trend between 1940 and 2000: Home values were generally growing faster than rental costs.

In conclusion, while homeowners in redlined and yellowlined neighborhoods were hindered from building up wealth by the combination of higher-than-average financing costs and lowest-of-all home values, home renters in those same neighborhoods faced proportionally higher rent costs than almost all other residents between 1940 and 1990.

How these graphs were created:
Rent and Rental Costs. From FRED’s main page, browse data by “Release,” search for “The Effects of the 1930s HOLC ‘Redlining’ Maps,” and select “Summary Statistics.” Under “Panel D. Rent” check the box to the left of each of the four HOLC neighborhood categories. Next, click on the “Add to Graph” button. Lastly, from the “Edit Graph” panel, select the “Format” tab to match the color of each line to their HOLC designation and to turn off the “Recession shading.”
Rent-to-Home-Values Ratios. Edit the graph of rent and rental costs by selecting the “Edit Line 1” tab to customize the data by searching for and selecting “Median Home Values in Home Owners Loan Corporation (HOLC) Neighborhood A.” Next, create a custom formula to combine the series by typing in “a/b” and clicking “Apply.” Repeat the same steps for the other three lines in the graph, changing the letter designating the neighborhood to B, C, and D as it corresponds.

Suggested by Diego Mendez-Carbajo.

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