What does redlining refer to in real estate?

Redlining refers to the practice wherein lenders, particularly banks and mortgage companies, discriminate against specific neighborhoods—often predominantly inhabited by people of color—by refusing to issue mortgages or define areas as too risky for investment. This discriminatory practice originates from the use of red ink on maps to indicate areas where these lenders would avoid giving loans, effectively outlining areas with poor access to capital and thus limiting residents' ability to purchase homes or improve their neighborhoods.

This action is illegal as it perpetuates systemic inequality and hinders economic development in those targeted communities. The ramifications of redlining extend beyond just housing availability; they contribute to broader social and economic disparities in health, education, and wealth accumulation.

Understanding this term is crucial for anyone in the real estate industry, as it highlights the importance of fair lending practices and equity in property sales and financing.