What is Redlining?

Redlining is a term used to describe how certain practices in the US mortgage and banking system are systematically applied to different geographical areas in order to regulate access to mortgages, home improvement loans, insurance and other services based on racial or ethnic composition. To practice redlining, a bank or institution would reject or refuse to provide services to certain neighborhoods or geographic areas, typically those populated by racial or ethnic minorities, low-income households, and other vulnerable populations. The practice of redlining has had a significant and long-lasting impact on communities of color that has kept certain neighborhoods from recovering from disinvestment and economic hardship.

History of Redlining

The term “redlining” was first used in the 1930s to describe the practice of drawing literal red lines on maps of cities to indicate which areas should not receive bank loans or other services. In response to the Great Depression, the federal government established the Home Owner’s Loan Corporation (HOLC) in 1933. The HOLC created “residential security” maps which indicated areas deemed to be safe investments in which banks were encouraged to lend, as well as “hazardous” areas that were not. This was done without taking into account any factors such as local economic strength or property values. These maps had a profound and lasting impact on communities, as it effectively blocked access to banking services and mortgages, while restricting disinvestment and leading to the segregation and impoverishment of certain neighborhoods.

The Impact of Redlining

The practice of redlining has had a profound and long-lasting effect on communities of color, particularly in cities like Detroit, where disinvestment and neglect have been rampant. Without the access to mortgages that other communities often have, communities of color have had far fewer opportunities for building wealth and economic stability. Additionally, the practice of redlining has resulted in lower property values in certain neighborhoods, making them less attractive to prospective buyers, reducing economic investment in these areas, and resulting in a devastating cycle of disinvestment and poverty. Furthermore, redlining results in unequal access to access to insurance services, leading to disparate levels of protection in certain areas.

Redlining still has a powerful impact today, with the practice being carried out in both subtle and overt ways. Although the practice has become illegal, the legacy and effects of redlining remain and are still part of the contemporary racialized climate that persists in the US. Despite recent efforts to address this issue, it will take far more concerted policy action in order to end the legacies of this discriminatory system and ensure that all communities have access to fair lending practices and banking services.