How Redlining Shaped Urban Inequality: A History of Discriminatory Lending Practices in the United States

Redlining

A form of systemic racism in the banking sector that severely restricted opportunities for Black people to buy homes, reduced property values in neighborhoods inhabited by Black people, and led to the erosion of Black communities. The practice began in 1935, when the Home Owners’ Loan Corporation, a government-sponsored entity, produced maps that rated the relative security of granting and insuring home loans in parts of a city. The maps divided communities into zones, each marked with a different color: green, blue, yellow, and red. Green indicated the “best” areas, where affluent business people lived. Blue areas were populated by white-collar families. Yellow indicated areas in decline that were occupied by working-class families. Red areas were categorized as having “adverse influence.” Neighborhoods in the red category—”redlined” areas—were populated overwhelmingly by Black and brown people. Local banks denied home loans to the residents of redlined areas. Studies indicate that people living in redlined neighborhoods were no more likely to default on their loans than people in the other zones. The practice of redlining prevented Black families from building wealth through homeownership, while white families could and did. Through the federal government’s influence on the private banking industry, the practice of redlining has had a multi-generational impact on the financial stability of Black families and communities, and has strengthened patterns of racial segregation in American cities. The practice officially ended in 1968 with the passage of the Fair Housing Act, but its effects are still evident today through the racial wealth gap.The article cites research finding that formerly redlined areas have about half as many trees as some white neighborhoods in the same cities.

Redlining is a discriminatory practice that was once commonly used in the United States to deny loans, insurance coverage, or other financial services to certain neighborhoods, often those with high concentrations of minorities or low-income residents. It was often carried out by governments, banks, and other lending institutions through the use of color-coded maps that designated certain neighborhoods as high-risk for investment.

The term “redlining” comes from the practice of drawing a red line around neighborhoods considered to be too risky for investment, based on their racial and socioeconomic composition. This practice began in the 1930s as part of the federal government’s efforts to create maps that identified areas of different levels of risk for real estate investment.

Redlining had a significant impact on the economic development and stability of affected communities, making it difficult for residents to obtain loans for homes, businesses, and other investments. As a result, these neighborhoods often experienced decline and disinvestment, while predominantly white neighborhoods received access to more resources and financial opportunities.

Redlining was outlawed in the 1970s with the passage of the Fair Housing Act, but its effects are still felt today in the form of persistent racial and economic disparities in many urban areas. Efforts to address the legacy of redlining have included initiatives to increase access to affordable housing, promote economic development, and improve financial literacy in affected communities.

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