Redlining: Definition, History, and Examples

Redlining refers to a practice of housing discrimination whereby government-sponsored groups drew boundaries around non-white or Black neighborhoods using red lines. This color-coded system designated redlined areas “high risk” and ineligible for federal mortgage insurance. Black families attempting to buy real estate within redlined districts often found it impossible to find mortgage lenders who would give them a loan.

The mapping inequality and lending practices encouraged by redlining relied on the basis of race alone and didn’t take into account potential property values in the neighborhoods in question. The stated rationale was that if Black Americans bought property outside redlined areas, property values would decline. In reality, property values went up in situations where Black homebuyers could buy, since sellers charged them exorbitant prices for homes. In effect, redlining was racial discrimination in housing that operated within the bounds of federal law.

Redlining began in the 1930s, and its legacy continues to impact the United States.

• Federal Housing Administration: In 1934, President Franklin D. Roosevelt signed the National Housing Act as part of the New Deal, creating the Federal Housing Administration (FHA). The stated goal of the FHA was to make homeownership and home construction easier and stop foreclosures during the Great Depression, in part through federally backed mortgage loans. From its inception, the FHA would not subsidize the development of subdivisions that allowed Black residents to buy property, contributing to racial segregation in America.
• The Underwriting Manual: In 1936, the FHA released its infamous Underwriting Manual, which recommended separating majority-Black areas from white areas by walls or highways.
• Redlining maps: From the 1930s through the 1970s, mortgage lending institutions continued to use redlining maps released by the Home Owners’ Loan Corporation (HOLC), a government-sponsored group responsible for rating risk levels within cities.
• Civil Rights Act: In 1964, the Civil Rights Act banned discrimination in federally funded programs, including financial services.
• Fair Housing Act: The Fair Housing Act of 1968 banned lending discrimination based on criteria including race, disability, sex, and national origin. Learn more about the Fair Housing Act.
• The Home Mortgage Disclosure Act: The Home Mortgage Disclosure Act of 1975 required lending institutions to retain and publicly disclose borrowers’ records.
• The Community Reinvestment Act: The Community Reinvestment Act of 1977 created a framework for federal regulators to rate financial institutions based on how well they serve low-income communities in the hopes of increasing the amount of fair lending.
• Reverse redlining: Discriminatory lending continues in different forms in today’s housing market, including reverse redlining, in which people of color experience predatory lending at much higher rates than their white counterparts. For example, according to a recent study conducted by Harvard’s Joint Center for Housing Studies, Black homeowners are more likely to pay high-interest rates on loans than white homeowners.

The most immediate effect of redlining is the wealth gap between Black and white families. According to the Brookings Institute, as of late 2020, Black households had four percent of the total household wealth in the United States compared to eighty-four percent of total household wealth for white households. This disparity is partially due to the federal housing policy that made it easier for white families to buy their homes while actively discouraging Black families from doing the same. Home equity is a significant source of generational wealth, in addition to being a means of paying for big-ticket investments like a college education.

Disinvestment in redlined neighborhoods—many of which were in the inner city—had a ripple effect in those areas, including hindering urban development. For example, studies have shown that life expectancy is 3.6 years lower in previously redlined neighborhoods, primarily due to the historical lack of health infrastructure within those communities.

In American cities that employed redlining, redlined areas are still, on the whole, more disadvantaged than other areas, and home values are lower compared to non-redlined areas.

Redlining was a common practice in metropolitan areas across America. Here’s how these discriminatory practices impacted four major cities.

1. 1. Chicago: According to the Chicago Tribune, as of 2017, there was a thirty percent gap between the number of Black residents who own homes and the number of white homeowners in Chicago. Similarly, over five times as many Black Chicagoans live under the poverty line as white Chicagoans.
2. 2. Detroit: The Detroit area continues to be one of the most segregated areas in the United States. A recent Michigan Chronicle report found that Black-owned homes still only sell for about half the value of homes in surrounding areas.
3. 3. Philadelphia: A deep dive by Philadelphia’s Office of the Controller found that formerly redlined neighborhoods in the city have much lower levels of educational achievement and general health while having much higher levels of both poverty and crime compared to historically white neighborhoods.
4. 4. San Francisco: UC Berkeley reports that people who live in previously redlined districts in San Francisco are more than twice as likely to require an emergency room visit for asthma. Studies also found air pollutants to be higher in these areas.

There’s a lot of information that history textbooks don’t cover, including the ways in which systems of inequality continue to impact everyday life. With the MasterClass Annual Membership, get access to exclusive lessons from Angela Davis, Dr. Cornel West, Jelani Cobb, John McWhorter, Kimberlé Crenshaw, Nikole Hannah-Jones, and Sherrilyn Ifill to learn about the forces that have influenced race in the United States.