Redlining

What is redlining?

Redlining is a discriminatory practice that denies or restricts access to financial services—most commonly mortgages—based on the racial or ethnic composition of a neighborhood rather than an individual’s creditworthiness. It typically results in reduced lending, higher-cost or predatory lending, and disinvestment in minority communities. Racial redlining is illegal.

Origins and how it worked

The term “redlining” dates to the 1960s and describes the literal practice of drawing red lines on maps to mark neighborhoods deemed “risky” for investment. Beginning in the 1930s, federal agencies and many lenders used these maps to exclude predominantly Black and minority neighborhoods from federally backed mortgage programs.

When mainstream mortgage credit was denied, many residents turned to exploitative alternatives—such as contract sales with no equity build-up or subprime loans—making homeownership far more costly and unstable for affected families.

Forms and modern examples

• Mortgage denial and steering: Systematically refusing mortgages or offering worse terms in minority neighborhoods.
• Reverse redlining: Targeting minority communities for predatory products (e.g., high-cost subprime loans).
• Business lending disparities: Lower rates of lending to businesses in Black-majority neighborhoods and fewer SBA loans to Black-owned firms.
• Insurance and retail discrimination: Differential pricing or refusal of services based on neighborhood demographics.

Effects

• Wealth and home-value disparities: Homes in formerly redlined areas have historically been worth far less than homes in areas designated “best” for lending, contributing to persistent racial wealth gaps.
• Health impacts: Research links the legacy of redlining, segregation, and disinvestment to worse health outcomes and shorter life expectancy in many high-minority neighborhoods (one study estimated an average life-expectancy gap of several years).
• Community disinvestment: Reduced access to credit undermines business development, home repair, infrastructure investment, and intergenerational wealth building.

Legality and regulations

Redlining based on race, religion, national origin, sex, or marital status is illegal under federal civil rights and fair housing laws (including the Fair Housing Act). The Community Reinvestment Act (CRA) encourages financial institutions to meet the credit needs of all communities.

Lenders may, however, base decisions on legitimate economic and geographic risk factors (for example, flood zones or seismic risk), and they may set different rates or terms based on credit risk so long as decisions are not based on prohibited characteristics.

What lenders may lawfully consider

Lenders can evaluate:
* Credit history and scores
* Income and debt-repayment capacity
* Property condition and comparable nearby properties
* Local amenities and city services that affect property value
* Portfolio and diversification requirements

These considerations must be applied without regard to protected characteristics such as race, religion, national origin, sex, or marital status.

If you suspect discrimination

Homebuyers or borrowers who believe they’ve faced discrimination can:
* Contact the Consumer Financial Protection Bureau (CFPB)
* File a complaint with the U.S. Department of Housing and Urban Development (HUD)
* Reach out to local fair housing centers or legal aid organizations for assistance

Key takeaways

• Redlining is the practice of denying or limiting financial services in neighborhoods based on the racial or ethnic makeup of those neighborhoods.
• It produced long-lasting economic and health harms in affected communities and contributed to the racial wealth gap.
• Redlining based on protected characteristics is illegal; however, lenders may use legitimate economic and geographic risk factors when making decisions.
• Individuals who suspect housing or lending discrimination have avenues to file complaints and seek remedies.