What is redlining?
Updated June 18, 2021
“Redlining” is a term for early- and mid-20th-century housing policies that denied mortgages to prospective homeowners based on race and location. The practice disproportionately targeted Black homeowners and neighborhoods, and has had long-term repercussions that still affect neighborhoods and communities across the U.S.
Redlining began in the 1930s with the creation of the Federal Housing Administration and the Home Owners’ Loan Corporation, which were designed to increase access to mortgages during the Great Depression as part of the New Deal.
Loan eligibility was determined based on maps from the HOLC, which designated neighborhoods by color based on “residential security,” and their supposed risk for loan insurance purposes. High value (and generally, all white) neighborhoods were marked in green, and neighborhoods that were considered high risk and therefore ineligible for FHA lending were marked in red. (Hence the development of the shorthand “redlining,” a term coined in the 1960s by sociologist John McKnight.)
Redlining is a racist housing policy that led to segregation across the U.S.Credit: Unseen Histories/Unsplash
Neighborhoods marked as red were almost always areas in inner cities with a high number of Black residents and other communities of color. (There were also blue and yellow designations denoting various levels of risk. Neighborhoods bordering red neighborhoods were often marked as yellow, the next lowest category, because of their proximity to supposedly higher risk areas.)
While buyers in “green” neighborhoods were being given federal subsidized home loans, lenders and investors were discouraged from doing business in “red” neighborhoods, effectively shutting huge swaths of Black residents out of homeownership and the potential to create generational wealth. In many cases, residents in these areas were also targeted with predatory subprime loans, having few other available options.
The HOLC shut down in 1951 and the Fair Housing Act, which prohibits lending discrimination based on race, was passed in 1968. Court rulings have also deemed various forms of redlining (including for financial services other than mortgages) to be illegal, but the effects of the practice on the housing market were seismic and can still be seen to this day.
By shutting Black residents and neighborhoods out of homeownership, redlining was a major contributing factor to the creation of a cycle of poverty and disinvestment in communities of color across the U.S.
In addition to widening and reinforcing the racial wealth gap, the lack of available lending led many buildings in these neighborhoods to fall into disrepair as property owners walked away from their buildings or were unable to finance repairs. Some studies have also shown higher rates of chronic disease and premature death in formerly redlined areas.
The long-tail effects of redlining still show up in current gentrification debates. For example, parts of Park Slope, Brooklyn—now one of the wealthiest brownstone enclaves in New York City—were previously redlined, and homes that had fallen into disrepair under those policies were frequently bought by wealthier white newcomers to the area starting in the 1980s. While the neighborhood has seen enormous property appreciation in the ensuing decades, long-term residents of the neighborhood were largely shut out of those financial gains, having been unable to secure loans to purchase their own properties.
The result? Neighborhood residents who may have been affected most by redlining wound up priced out of the area just as it was starting to see major reinvestment, a pattern seen in gentrifying urban areas across the country.
Numerous housing policies have been enacted over the past several decades in an effort to combat the long-term effects of redlining, but the social and economic damage of these policies has been enormous and is difficult to undo.