We study how racial segregation shaped Manhattan landlords’ incentives, rent-setting practices, and maintenance decisions in the middle of the twentieth century. We construct a novel data set linking Census records to real estate transaction data, property images, and renovation records. We show that landlords operating in Black neighborhoods exercised substantial pricing power and faced weak incentives to incur the costs of maintenance or to limit overcrowding. Rents for Black tenants were more closely tied to household size than to measures of housing quality. Moreover, properties with Black tenants generated disproportionately high rental income relative to their market values. These short-term profit incentives had long-run consequences: properties housing Black residents in 1940 experienced fewer renovations and showed greater visual exterior deterioration by 1980. Landlord behavior thus perpetuated racial divides in economic conditions and housing quality.