Association for Public Policy Analysis & Management

This paper analyzes the effects of racially-restrictive covenants prevalent during the early-to-mid 20^th century on the modern-day housing prices, segregation, and neighborhood characteristics. Racially-restrictive covenants were contracts in sale deeds that prohibited the sale or renting of a property to specific religious and ethnic minorities. For our econometric analysis, we use a newly constructed geographic dataset of over 30,000 historical property deeds from 1910-1955 with information on racially-restrictive covenants. We link the covenants data with tax assessor data on 70,000 houses from Hennepin county and census data from 1910-2010. Using the novel dataset, we document that racially-restrictive covenants have not only affected the house prices in modern-day Minneapolis but have also affected the current socioeconomic geography of the city as measured by racial segregation and low home ownership by minorities. We use regression discontinuity methods to causally show that houses and neighborhoods that used racially-restrictive covenants in the past have higher house prices on average today. We also use regression discontinuity methods to establish a causal link between covenants and modern-day segregation in Minneapolis. This study hopes to highlight the long-term and persistent effects of the historical racial discrimination in housing in the U.S.