Redlining
Redlining is the illegal discriminatory practice of denying or limiting financial services, insurance, or other services to residents of certain areas based on racial or ethnic composition rather than individual qualifications.
Exam Tip
Redlining = denying services based on AREA (usually racial composition). ILLEGAL under Fair Housing Act. Different from steering (directing people).
What is Redlining?
Redlining is a discriminatory practice where financial institutions, insurers, or service providers deny or limit services to residents of specific geographic areas, often based on the racial or ethnic makeup of those neighborhoods. The term comes from the practice of drawing red lines on maps around "undesirable" areas.
History of Redlining
| Year | Event |
|---|---|
| 1934 | FHA created, adopted discriminatory mapping |
| 1935 | HOLC created "residential security" maps |
| 1968 | Fair Housing Act banned redlining |
| 1975 | HMDA required lending data disclosure |
| 1977 | Community Reinvestment Act (CRA) passed |
Types of Redlining
| Type | Description |
|---|---|
| Mortgage lending | Refusing home loans in certain areas |
| Insurance | Denying coverage in certain areas |
| Appraisal | Undervaluing properties by location |
| Banking | Limiting branch access in minority areas |
How Redlining Worked
- Areas mapped and graded by "risk"
- Minority neighborhoods marked as hazardous
- Loans/insurance denied or overpriced
- Property values suppressed
- Neighborhood deterioration accelerated
- Wealth gap perpetuated
Fair Housing Act Protections
Redlining is prohibited based on:
- Race or color
- National origin
- Religion
- Sex
- Familial status
- Disability
Modern Redlining (Digital)
| Form | Example |
|---|---|
| Algorithmic bias | AI-based lending decisions |
| Targeted advertising | Excluding protected groups |
| Appraisal bias | Undervaluing minority areas |
| Insurance pricing | Higher rates in certain areas |
Reporting Redlining
| Agency | Role |
|---|---|
| HUD | Investigates housing discrimination |
| CFPB | Monitors lending practices |
| State AG | Enforces state fair housing laws |
| DOJ | Prosecutes pattern violations |
Long-Term Effects
- Generational wealth gap
- Educational disparities
- Health outcome differences
- Neighborhood segregation
- Property value suppression
Study This Term In
Related Terms
Steering (Fair Housing Violation)
Real EstateSteering is an illegal practice where real estate agents direct prospective buyers or renters toward or away from certain neighborhoods based on their race, color, religion, national origin, sex, familial status, or disability.
Blockbusting
Real EstateBlockbusting is an illegal practice where real estate agents induce homeowners to sell by exploiting fears about racial or ethnic groups moving into the neighborhood, then profit by reselling to minority buyers at inflated prices.