Investment Redlining is a practice of financial discrimination where services are withheld from potential customers based on race or ethnicity. This practice is done primarily through mortgage loans.
The term ‘redlining’ comes from a practice where mortgage lenders drew red lines around sections of a map to identify neighborhoods where they didn’t want to make loans. These red lines were drawn overwhelmingly in Black neighborhoods.
Today, neighborhoods with a significant racial and ethnic minority populations and low-income residents are often classified as “hazardous” to investors. This form of classification further pushes the discrimination of the redlining practice. And it comes with an economic price.
According to a Brookings Institution study covering 113 U.S. metro areas with majority Black neighborhoods, a home in a neighborhood that is 50% Black is valued 23% lower than a home in a neighborhood with no Black residents. The cost of this devaluation amounts to $162 billion to the economy.
Investment redlining is outlawed in the country today, but its effects on Black neighborhoods still lingers. This practice makes it harder for people of color to receive mortgage loans and fully engage in the real estate market, which leads to more long-term effects.