This should be the simplest of searches and I may well be embarrassed by this, but here goes. (I’ve checked the Big List.)
Stephen Ambrose, among our very best of American historians suggests in his book on the building of the American trans-continental railroad [Nothing Like it in the World] that this come from
But Take our Word for it has:
The locomotives put forth so much smoke that the downwind side of the tracks on the cars was less desirable and it generally was on the poorer side of town, thus the phrase ‘the wrong side of the tracks’. [cite] Jeanne Minn Bracken, ed., Iron Horses Across America (Carlisle, Mass.: Discovery Enterprises, 1995) p. 5.
Well, etymologists like Christine Ammer don’t think the phrase has anything to do with soot. There would have been plenty of soot from everyone’s fireplaces, because most people did not have any kind of heating other than fireplaces, and for a long time that is also where cooking was done. Ms. Ammer suggests that the phrase is simply the same as “the wrong side of town” or “the wrong side of the street”. Why, there’s even a phrase born on the wrong side of the blanket. When railroads were built and became the primary mode of long-distance transportation, the tracks became an important fixture through town, literally dividing the town’s more prosperous half from its poor half, or perhaps only figuratively doing so. However, another etymologist, Adrian Room, recently revised Brewer’s Dictionary of Phrase and Fable, and he does believe that soot, smoke, and prevailing winds did result in poor or industrial areas being located on the downwind side of the tracks, which then gave rise to the phrase. Whatever the precise notion behind the wrong side of the tracks, it arose in the U.S., probably in the 19th century, though the OED’s first record of it is from 1929.
What think you all?