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Redlining is the denial of financial services to people in certain neighborhoods, creating ghettos where people can’t buy houses, take out loans, or get insurance. This practice was banned by the Fair Housing Act and Community Reinvestment Act, but some believe it still persists.
The term “redlining” is used to refer to the conscious denial of financial services to people in particular neighborhoods. Redlining played a major role in the distortion of US housing up until the 1970s, and some people argue that the practice persists, although it’s much more subtle than it once was. As you can imagine, the redline harms communities and the people in them, creating ghettos where people can’t buy houses, take out loans or get insurance, and typically affects low-income and minority neighborhoods.
This word refers to the fact that financial institutions used to literally draw red lines around the neighborhoods they didn’t want to get involved with. Many U.S. cities were sectored in the early 20th century, with institutions indicating that newer, whiter neighborhoods should receive more financial support than older, minority neighborhoods. Some historians believe that redlining created the urban ghettos that exist in many American cities today.
A classic example of redlining is mortgage discrimination. Historically, people looking to buy homes in a struggling neighborhood could have their applications denied, even though they provided ample evidence to indicate that they were financially responsible people capable of meeting the obligations of a mortgage. Additionally, redlining also made it difficult for people to get small business loans and other loans that could have been used to improve their communities.
Redlining could also make it difficult for people to get insurance, with insurance agencies refusing to take the risks of covering people in certain areas, and this practice persists to this day, although insurance companies vehemently deny it . Banks may refuse to service red-flagged neighborhoods, forcing people to use pawnshops and check cashing services for their financial needs, and many retail chains practice so-called “retail redlining,” refusing to open branches in certain areas. As a result, people in some neighborhoods may not be able to access the grocery stores, banks and other institutions they need.
The Fair Housing Act of 1968 banned redlining, and the Community Reinvestment Act of 1977 also specifically banned redlining by forcing lenders to evaluate applicants based on their individual cases, not their neighborhoods. These pieces of legislation arose in response to public outcry about redlining and other practices that violated civil rights. However, some people believe redlining is still an issue, pointing to the extremely poor and often minority neighborhoods that persist across the United States despite laws that are supposed to create equal access to financial services.
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