redlining

Redlining can be defined as a discriminatory practice that consists of the systematic denial of services such as mortgages, insurance loans, and other financial services to residents of certain areas, based on their race or ethnicity. Redlining disregards individual’s qualifications and creditworthiness to refuse such services, solely based on the residency of those individuals in minority neighborhoods; which were also quite often deemed “hazardous” or “dangerous.” 

Beyond the discriminatory banking practice of excluding certain neighborhoods from financial services, redlining can also reach the withholding of more important and essential services such as the construction of grocery stores and supermarkets or even the withholding of healthcare services.

The term redlining finds its origins in the U.S. Government’s homeownership programs established in the 1920s and 1930s. During the New Deal era, government-insured mortgages were established for homeowners as a form of support for the economy and a way out of the crisis in the wake of the Depression. The government therefore set out maps of different areas and properties that would be the subject of the above mentioned loans. These maps were color-coded, each color corresponding to the loan worthiness of the neighborhoods in the U.S. and the color red was attributed to the neighborhoods that were deemed not worthy of inclusion in the homeownership programs. Most of the neighborhoods marked in red were predominantly inhabited by Black residents. The consequences of this were that Black residents were denied the government-insured loans.

Following these practices, the term redlining was used during the Civil Rights movement to put an end to these discriminatory practices. In 1968, the Fair Housing Act prohibited discrimination concerning the sale, rental and financing of housing based on race, religion, national origin or sex. The aim of the Act was to put an end to race-based housing patterns. Later, the Home Mortgage Disclosure Act of 1975 was adopted, which requires the collection by financial institutions of information about their mortgage lending activity. Redlining and the public concern regarding credit shortages in certain neighborhoods were the reasons why the act was adopted.

As an illustration of redlining, reporter Bill Dedman published a series of articles in the 1980s demonstrating that Atlanta banks would lend in lower-income white neighborhoods but would refuse to lend in middle-income or upper-income Black neighborhoods. An early illustration of redlining can also be seen in this map from Syracuse, New York. 

[Last updated in April of 2022 by the Wex Definitions Team]