redlining

redlining, illegal discriminatory practice in which a mortgage lender denies loans or an insurance provider restricts services to certain areas of a community, often because of the racial characteristics of the applicant’s neighbourhood. Redlining practices also include unfair and abusive loan terms for borrowers, outright deception, and penalties for prepaying loans. The term redlining came about in reference to the use of red marks on maps that loan corporations would use to outline mixed-race or African American neighbourhoods. Neighbourhoods in more-affluent areas, which were deemed the most worthy of loans, were usually outlined in blue or green. Neighbourhoods outlined in yellow were also considered desirable for lending.

During the 1930s, federal programs such as the Home Owners’ Loan Corporation (created in 1933) and the Federal Housing Administration (created in 1934) were established to encourage widespread home ownership and suburban development by making home loans and mortgages affordable. However, neighbourhoods that were mixed-race or predominantly African American did not benefit from those programs, because their credit was considered high-risk.

In the early 1900s, before the practice of redlining began, racial homogeneity was preserved in suburban communities by implementing zoning laws that did not allow the construction of small, affordable houses or apartments. Racial homogeneity also was preserved through residential segregation, as whites tended not to sell or rent to nonwhite persons, often by placing racially restrictive covenants in property deeds. African American newcomers who found a way to work around such policies and practices to move into suburban neighbourhoods usually found themselves in hostile environments.

In the period following World War II, suburban communities remained largely white, despite antidiscrimination rulings and legislation to the contrary. In 1948 the U.S. Supreme Court, in the case Shelley v. Kraemer, ruled that courts could not enforce racially restrictive practices. In 1968 the Federal Fair Housing Act forbade discrimination against minorities by real estate brokers, property owners, and landlords. The Home Mortgage Disclosure Act (HMDA) of 1975 required lending institutions to report public loan data, while the Community Reinvestment Act of 1977 was intended to encourage banks and other financial institutions to help meet the credit needs of the communities in which they operate.

Although redlining is illegal, there still remains significant work to overcome racially restrictive practices. Patterns of residential segregation remain the norm in many parts of the country, despite the increasing movement of African Americans to formerly all-white communities since the late 1900s.