Redlining Document Definition

Redlining is the practice of excluding certain neighborhoods from access to credit and investment. Lenders and insurers use redlines to determine which areas are too risky to serve, based on race, ethnicity, and income levels.

The term “redlining” comes from the days when lenders would literally draw red lines around areas they considered too risky to lend in. Today, redlining is more subtle, but the effects are just as damaging. Redlining limits choices for where people can live, work, and worship. It drives up the cost of housing and costs families time and money. And it undermines the stability of entire communities.

There are three primary ways that redlining happens: through exclusionary zoning, mortgage discrimination, and insurance redlining.

Exclusionary zoning is a land-use practice that restricts housing development in order to keep property values high. This has the effect of preventing lower-income people from moving into certain neighborhoods. Mortgage discrimination happens when lenders deny loans or charge higher interest rates to people based on their race or ethnicity. Insurance redlining is when insurers refuse to sell or provide coverage in certain neighborhoods because they consider them too risky.

All of these practices work together to create segregated neighborhoods and limit opportunities for families who already live there.