Honors Project - Open Access
Between 2006 and 2015, approximately 16.2 million homes entered foreclosure, directly affecting nearly one in six American households (Hall et al., 2015). Yet, the consequences of foreclosure were not distributed evenly amongst all Americans. The foreclosure rate for Black Americans was 11%, compared to 6% for white people during the Great Recession (Hwang et al., 2015). Previous studies point to residential segregation as a driver of the disproportionate consequences of the crisis borne by minority communities. In Hennepin County, racial covenants were the first mechanized form of residential segregation. Written into property deeds, racial covenants prevented anyone who was not white from residing in or owning the home. By exploiting the exogenous shock of the 1948 Supreme Court ruling deeming racial covenants unenforceable, I employ a fuzzy regression discontinuity model to show that covenants impacted foreclosure outcomes during the financial crisis in the early 2000s. I find evidence that covenanted homes were 15% less likely to foreclose during the Great Recession.
Whipple, Hannah R., "The Effect of Racial Covenants on Modern Day Foreclosures: Evidence from Hennepin County" (2021). Economics Honors Projects. 109.
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