Redlining is a discriminatory lending practice that dates back to the 1930s when lenders would draw red lines on maps around neighborhoods that were predominantly Black as a way to deny loans or backing for loans on properties in those neighborhoods. The term "redlining" comes from how the federal government and lenders would literally draw a red line on a map around the neighborhoods they would not invest in based on demographics alone. Here are some key points about redlining in real estate:
- Redlining refers to a real estate practice in which public and private housing industry officials and professionals designated certain neighborhoods as high-risk, largely due to racial demographics, and denied loans or backing for loans on properties in those neighborhoods.
- Redlining practices were prevalent from the 1930s to the 1960s.
- Redlining was encouraged by government policy for decades until the Civil Rights movement in the 1950s caused Congress to pass laws that prevented banks from discriminating against protected classes of borrowers in certain areas based on their race or gender.
- Redlining is illegal under the Fair Housing Act (FHAct) .
- Redlining is the practice of denying a creditworthy applicant a loan for housing in a certain neighborhood even though the applicant may otherwise be eligible for the loan.
- Redlining on a racial basis has been held by the courts to be an illegal practice.
- The current housing financing system is built on the foundations that redlining left in place. To decrease the effects of redlining and its legacy, it’s essential to address the underlying biases that led to these practices.
Mortgage applicants and homebuyers who believe that they might have been discriminated against can take their concerns to a fair housing center, the Office of Fair Housing and Equal Opportunity at the U.S. Department of Housing and Urban Development, or in the case of mortgages and other home loans, the Consumer Financial Protection Bureau.
