Thursday, June 29, 2023

The Trouble With Reparations for Redlining

Jason L. Riley writes in the WSJ:
. Research by economists William J. Collins and Robert A. Margo shows that between 1940 and 1980, homeownership rates climbed by 37 percentage points for blacks and by 34 points for whites. If homeownership builds wealth, this was a period of extraordinary gains for blacks.

But there is a more fundamental problem with linking reparations to past redlining policies. While a higher percentage of the black population lived in redlined areas, most residents of neighborhoods where the FHA refused to insure mortgages weren’t black, according to a 2021 National Bureau of Economic Research study by Price V. Fishback, Jessica LaVoice, Allison Shertzer and Randall Walsh. “In our sample, over 95 percent of black homeowners lived in the lowest-rated ‘D’ zones,” they found. “Yet, the vast majority (92 percent) of the total redlined home-owning population was white.” If being a victim of redlining is a qualification for reparations, what is the argument for excluding whites?

Regardless of this, it is pretty crezy to argue that Whites are somehow to blame for Blacks having low real estate values. It is just the opposite. Blacks drive down real estate values.

Redlining has been illegal for decades, but it turns out that using AI race-neutral objective algorithms gives similar results:

In the 1930s, Chicago was known for the discriminatory practice of “redlining,” in which the creditworthiness of properties was heavily determined by the racial demographics of a given neighborhood.

“There would be a giant map on the wall of all the districts in Chicago, and they would draw red lines through all of the districts that were primarily African American, and not give them loans,” she added.

“Fast forward a few decades later, and you are developing algorithms to determine the riskiness of different districts and individuals. And while you may not include the data point of someone’s race, it is implicitly picked up.”

The banks do not care about race. THey just their loans to be repaid.

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