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- Redlining refers to the discriminatory practice of refusing to lend mortgages in areas with a large number of people of color.
- Starting in the 1930s, color-coded maps were used to determine lending risk. Areas shaded red were often majority-Black neighborhoods, and ineligible for lending.
- Today, people living in redlined areas have less home equity, higher rates of poverty, and worse health outcomes than those in greenlined areas.
Homeownership has long helped middle class Americans build wealth. When you own your home, you can be fairly confident that, over the long term, you'll see its value increase. You can use the equity you've built up in your home to send your kids to college. You have a relatively stable form of housing to rely on. If need be, you can rent it out for extra income, or sell it.
But homeownership hasn't always been available to everyone. Redlining is a practice that's limited mortgage lending to mostly white areas, and historically kept people of color from building wealth in that same way.
What is redlining?
In real estate, redlining refers to the practice of refusing to lend mortgages in areas deemed too financially risky because of their high concentrations of people of color.
The term redlining comes from the Home Owners' Loan Corporation's (HOLC) "residential security maps," which were created in the 1930s to evaluate the risk of lending home loans in different neighborhoods throughout the US. The "red" in "redlining" refers to the red color that was used on the maps to denote areas considered to be high risk.
The HOLC was a product of New Deal-era legislation meant to provide homeowners with mortgage relief during the Great Depression.
How redlining works
In the HOLC maps, neighborhoods were categorized on a four-grade scale:
- A: Neighborhoods that earned an "A" were considered "best," and marked in green.
- B: Areas graded "B" were considered "still desirable" and colored in blue.
- C: These neighborhoods were "definitely declining" and marked in yellow.
- D: Neighborhoods graded "D" were the redlined areas, and were shaded red to indicate they were "hazardous."
According to "Mapping Inequality," an interactive map hosted by the University of Richmond where users can see HOLC maps for cities throughout the country, the HOLC said redlined areas were "characterized by detrimental influences in a pronounced degree, undesirable population or an infiltration of it." These were often majority-Black neighborhoods.
"Almost invariably, neighborhoods that had any African American presence were graded as hazardous in their mapping system," says Bruce Mitchell, senior research analyst at the National Community Reinvestment Coalition.
Banks wouldn't lend mortgages in redlined areas, and government agencies like the Federal Housing Administration wouldn't guarantee mortgages in them. This meant that communities of color, and Black communities in particular, often couldn't buy homes in their neighborhoods.
The impacts of redlining
The impact of redlining went beyond making it difficult for people of color to get mortgages.
"These are also places that are concentrated poverty, concentrated environmental contaminants and pollutants, and poor infrastructure and poor water quality, all of the other things that compound a community that prevents people from thriving," Anika Goss, president and chief executive officer of Detroit Future City, a non-profit that works to advance the quality of life for Detroit residents, says.
Today, formerly redlined communities are more likely to have higher rates of poverty and are more prone to health problems.
Mitchell co-authored a study from the NCRC on the health of formerly redlined areas. It found that people living in these areas have higher rates of asthma, COPD, diabetes, hypertension, and other conditions. They also have a lower life expectancy at birth and are more likely to have poor mental health.
Why is redlining associated with poor health outcomes? Where you live impacts the resources and healthcare you have access to, the education you get, and the job opportunities available to you.
"Racial residential segregation systemically shapes the distribution of resources, which in turn, reinforces unequal social, economic and environmental conditions that give rise to poor health," the NCRC report states.
Does redlining still happen today?
The Fair Housing Act of 1968 outlawed housing discrimination, including redlining. In 1977, the Community Reinvestment Act was also passed to further target redlining and encourage banks to work with low- and moderate-income neighborhoods.
Though redlining is now illegal, housing discrimination still happens. When mortgage lenders today are accused of redlining, it's often because they were found to be excluding neighborhoods with a large concentration of people of color from their marketing campaigns or exclusively locating their branches in majority-white areas.
The homeownership gap between white and Black households is also larger today than it was in 1960, before redlining was illegal. This is in part due to the disproportionate impacts of the housing crisis on Black homeowners.
Goss says a lack of investment in segregated areas can perpetuate the legacy of redlining.
"What can end up happening is a culture of these same kinds of attitudes of, 'this is not a place for investment,'" Goss says. "And that is the same kind of thinking that was originally used, that these places are places of higher risk for investment."
According to Goss, addressing the impacts of redlining in Detroit and other cities will take a multifaceted approach. This includes public and private investment, community development, and policy changes that make mortgages more accessible, such as using rent payment history when calculating an individual's credit score. (In fact, some mortgage lenders already offer this ability.)
"When we talk about what reparations can even mean in Detroit, this is what we're talking about," Goss says.
Many experts and advocates also argue that the CRA needs to be strengthened. Currently, the law doesn't address race directly, only requiring banks to make an effort to provide credit to low- and moderate-income areas. It also only applies to depository institutions, so nonbank mortgage lenders aren't held to the same standards.
Frequently asked questions about redlining
What is the meaning of redlining?
Redlining refers to the practice of denying financial services to people who live in areas considered "hazardous" due to their demographic makeup — often, these were areas where a large number of residents were Black or from other ethnically and racially diverse backgrounds.
What is an example of redlining?
In the past, redlining was more overt; banks would regularly deny mortgage applicants if they wanted to buy a home in a neighborhood largely populated by people of color, for example. An example of modern redlining could include a mortgage lender discouraging people in majority-Black or majority-Hispanic communities from applying for a mortgage by purposefully not advertising its services in those areas.
What is a redlined neighborhood?
Historically, redlined neighborhoods were those that were marked in red on old Home Owners' Loan Corporation maps to denote that the areas were too risky to lend mortgages in.