Redlining and Blockbusting

After the US Civil War, Black residents believed they would have the opportunity to own property and homes, and to build communities where they previously could not. But these hopes were soon dashed. In search for jobs and homes, Black families experienced hurdles too systematic and widespread. Even when these trends reached across city and state borders, the voices of those suffering were silenced in the courts and at the voting polls. Redlining and blockbusting weren't isolated incidents but were prevalent practices across the US. If you think this was wrong and unfair, you will want to read on. Also, we will be discussing the effects of blockbusting and redlining as well as the difference between them, so let's start!

Redlining and Blockbusting Redlining and Blockbusting

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Table of contents

    Redlining Definition

    Redlining was the practice of withholding financial loans and services to residents in urban neighborhoods considered high-risk or undesirable. These neighborhoods had predominantly minority and low-income residents, which prevented them from purchasing property, homes, or investing in communities.

    The effects of redlining include:

    • exacerbated racial segregation

    • income inequality

    • financial discrimination.

    While some forms of these practices began after the Civil War, they became systematic and codified in the 20th century, and weren't outlawed until 1968.

    History of Redlining

    In the 1930s, the US government initiated a series of public works projects and programs under the New Deal to help alleviate the strains from the Great Depression, reconstruct the country, and promote home ownership. The Home Owners Loan Corporation (HOLC) (1933) and the Federal Housing Administration (FHA) (1934) were both created to assist with these goals.

    The HOLC was a temporary program meant to refinance existing loans that borrowers were struggling with due to the Great Depression. They issued loans throughout the country, assisting in both white and Black neighborhoods.1 The FHA, which still exists, dealt with creating a loan insurance system to finance new housing construction.

    Redlining and Blockbusting, HOLC Redlining Grades in San Francisco Redlining Definition, StudySmarterFig. 1 - HOLC Redlining Grades in San Francisco, California (1930s)

    The HOLC produced color-coded maps in the late 1930s to better understand local mortgage markets in American cities. "Best" and "Still Desirable" referred to areas that had good infrastructure, investment, and businesses, but were also predominantly white.

    Areas deemed "Hazardous," which included all Black neighborhoods in US cities, were shaded in red. Ethnically mixed and lower-income neighborhoods were graded between "Definitely Declining" and "Hazardous."

    Although these maps did not guide HOLC's lending (the majority of loans had already been dispersed), they were influenced by the discriminatory practices of both the FHA and private lenders. These maps demonstrate a "snapshot" of perceptions from both the federal government and financial institutions.1

    The FHA took things further by not insuring homes in Black neighborhoods and demanding racial covenants in new housing construction.

    Racial covenants were private agreements among homeowners prohibiting them from selling their homes to minority groups. This was based on the argument that both the FHA and other lending companies believed the presence of other races in communities would lower property values.

    Tight housing markets arose from the racial housing discrimination that was carried out at the local, state, and federal levels. As new minority residents moved in, only a limited amount of housing was available to them due to redlining and racial covenants. As a result, real estate agents targeted areas close to or around minority-dominant neighborhoods for blockbusting. These communities were usually already mixed and had lower HOLC grades.

    Blockbusting Definition

    Blockbusting is a series of practices by real estate agents to induce panic selling and peddling of white-owned housing to minorities. High property turnover provided profits for real estate companies, because commission fees were made on the mass buying and selling of homes. Racial steering was also used to distort information about available homes in different neighborhoods depending on the buyers' race.

    Blockbusting practices exploited long-standing racial tensions to encourage urban white homeowners to quickly sell their properties, usually at below-market values.3 Real estate agents then exploited minority residents by reselling and financing homes at higher market rates with poor lending terms. Blockbusting spurred white flight during a time of urban changes in US cities (1900-1970).

    White flight describes white abandonment of city neighborhoods that are diversifying; whites typically move to suburban areas.

    Redlining and Blockbusting, Redlining Grades and Blockbusting sites in Chicago Difference between Redlining and Blockbusting, StudySmarterFig. 2 - Redlining Grades and Blockbusting sites in Chicago, Illinois

    The National Association of Real Estate Boards (NAREB) endorsed views that conflated racial mixing and inferiority while endorsing the superiority of all-white communities.5 In combination with the discriminatory practices of the FHA, blockbusting destabilized the urban housing market and the structure of inner cities. The active prevention of investment and access to loans led to the deterioration of property values, proving evidence Black communities were deemed "unstable."

    Infamous blockbusting sites in the US include Lawndale in Western Chicago and Englewood in Southern Chicago. These neighborhoods were around "hazardous" graded neighborhoods (i.e., minority communities).

    Redlining Effects

    The effects of redlining include racial segregation, income inequality, and financial discrimination.

    Racial Segregation

    Even though redlining was banned in 1968, the US is still experiencing its effects. For instance, while racial segregation is unlawful, most US cities remain de facto segregated by race.

    The US Government Accountability Office (GAO) recently reported that over a third of students attended a school that had a predominant race/ethnicity, while 14% attend schools that are almost entirely a single race/ethnicity.6 This is because the majority of students go to school in their neighborhoods, which in many cases have histories of racial segregation.

    Income Inequality

    Income inequality is another major effect of redlining. Due to nearly a century of redlining, generations of wealth were created primarily for white families.

    Access to credit, loans, and a booming housing market in the 1950s and 60s allowed wealth to concentrate in suburbs and within specific racial groups. In 2017, the homeownership rate among all races was highest for white families at over 72%, while lagging at only 42% for Black families.7 This is because, regardless of income, Black families experienced greater financial discrimination.

    Redlining and Blockbusting, US Homeownership by Race Redlining Effects, StudySmarterFig. 3 - US Homeownership by Race (1994-2009)

    Financial Discrimination

    Financial discrimination remains a prevalent issue. Predatory lending and financial discrimination were in full swing during the 1920s, affecting minority and lower-income families most.

    The 2008 Economic Crisis is linked to the expansion of subprime lending, which uses a range of predatory lending practices (i.e., excessive fees and prepayment penalties). Subprime loans were disproportionally offered in minority and low-income neighborhoods in the 1990s.9

    Based on the U.S. Department of Housing and Urban Development's findings, these disproportionalities occurred in Atlanta, Philadelphia, New York, Chicago, and Baltimore. The practice was carried out in other major metropolitan regions as well, it is believe. On average, one in ten families in white communities received subprime loans while one in two families in Black communities received them (irrespective of income).7

    Blockbusting Effects

    The effects of blockbusting are similar to the effects of redlining -- racial segregation, income inequality, and financial discrimination. However, blockbusting also fueled white flight and the growth of suburbs. It likely exacerbated racial tensions that were already prevalent at the neighborhood, city, and national levels.

    While both racial turnover in cities and suburbanization occurred before WWII, the acceleration of these processes occurred postwar. Millions of Black who left the rural US South altered spatial landscapes across the country quickly. This was known as the Great Migration.

    In Kansas City, Missouri over 60,000 Black residents moved in between 1950 and 1970, while over 90,000 White residents left. Within two decades, the population had a net loss of 30,000 residents.5 Despite major population shifts, segregation remained high.

    Later programs did not remedy the problems that had accumulated. For example, the Department of Housing and Urban Development (HUD)'s urban renewal programs aimed to build affordable housing, bring in businesses, and save areas from further deterioration. However, urban renewal programs targeted many of the same neighborhoods deemed "Hazardous," evicting residents and destroying their homes.

    Mismanagement of projects and unequal access to financial services allowed affluent business leaders greater access to urban renewal funds. Many projects sought to attract affluent suburban commuters by building highways and luxury businesses. Over a million US residents, predominantly low-income and minority groups, were displaced in less than three decades (1949-1974).

    Difference Between Redlining and Blockbusting

    Redlining and blockbusting are distinct practices with the same result -- racial segregation.

    While redlining was primarily carried out by financial institutions, real estate markets profited from racial housing discrimination by using blockbusting methods in tighter housing markets.

    Both redlining and blockbusting were outlawed under the Fair Housing Act of 1968. The Fair Housing Act made it unlawful to discriminate based on race or national origin in the selling of homes. It took nearly another decade for the Community Reinvestment Act to pass in 1977, which meant to undo the housing discrimination created by redlining, by expanding lending to middle and low-income residents.

    Blockbusting and Redlining in Urban Geography

    Redlining and blockbusting are examples of how urban geographers, politicians, and private interests can discriminate, deny, and restrict access to areas of the urban space.

    The urban landscapes we live in today were created from the policies of the past. Most areas experiencing gentrification now were considered "Hazardous" on redlined maps, while areas considered "Best" and "Still Desirable" have the lowest rates of mixed-income and lack of affordable housing.

    Many cities are still primarily zoned for single-family housing. This means only single-family houses can be built, excluding apartments, multi-family housing, or even townhomes that are more affordable for low-income families. This policy is based on the idea that these types of housing would lower property values.10 It's a familiar argument made to exclude minority and low-income families from communities for decades. However, this exclusive zoning is hurting families across the country regardless of race, because housing affordability continues to be an issue.

    While blockbusting and redlining aren't lawful policies anymore, the scars left from decades of implementation can still be seen and felt to this day. Academic disciplines such as geography and urban planning, politicians, and private interests implicated in these practices now have the responsibility to introduce new measures to combat the effects. Greater accountability, community outreach, and regulations in the housing and financial markets have helped solve some issues, however, change is ongoing.

    Redlining and Blockbusting - Key takeaways

    • Redlining is the practice of withholding financial loans and services to residents in urban neighborhoods considered high-risk or undesirable. These areas had more minorities and low-income residents, discriminating against them and preventing them from purchasing property, homes, or investing in their communities.
    • The HOLC produced color-coded maps in the late 1930s in order to better understand local mortgage markets in American cities. Although they didn't enforce discriminatory redlining, the FHA and other financial institutions did.
    • Blockbusting is a series of practices by real estate agents to induce panic selling and peddling of white-owned housing to minorities. High property turnover provided profits for real estate companies, because commission fees were made on the mass buying and selling of homes.
    • The effects of redlining and blockbusting are segregation, income inequality, and financial discrimination.
    • Redlining, blockbusting, the rapid migration of Black residents into cities, and the rapid migration of white residents into suburbs changed the urban landscape of the US within a few decades.


    1. Fishback., P., Rose, J., Snowden K., Storrs, T. New Evidence on Redlining by Federal Housing Programs in the 1930s. Federal Reserve Bank of Chicago. 2022. DOI: 10.21033/wp-2022-01.
    2. Fig. 1, HOLC Redlining Map Grade in San Francisco, California (,_California.png), by Joelean Hall (, licensed by CC-BY-SA-4.0 (
    3. Ouazad, A. Blockbusting: Brokers and the Dynamics of Segregation. Journal of Economic Theory. 2015. 157, 811-841. DOI: 10.1016/j.jet.2015.02.006.
    4. Fig. 2, Redlining Grades in Blockbusting sites in Chicago, Illinois (,_Illinois.png), by Joelean Hall (, licensed by CC-BY-SA-4.0 (
    5. Gotham, K. F. Beyond Invasion and Succession: School Segregation, Real Estate Blockbusting, and the Political Economy of Neighborhood Racial Transition. City & Community. 2002. 1(1). DOI: 10.1111/1540-6040.00009.
    6. Carrillo, S. and Salhotra, P. “The U.S. student population is more diverse, but schools are still highly segregated.” National Public Radio. July 14, 2022.
    7. National Association of Realtors. "You Can't Live Here: The Enduring Impacts of Restrictive Covenants." Fair Housing Makes U.S. Stronger. 2018.
    8. Fig. 3, US Homeownership Rates by Race (, by Srobinson71 (, licensed by CC-BY-SA-3.0 (
    9. U.S. Department of Housing and Urban Development. Unequal Burden: Income & Racial Disparities in Subprime Lending in America. 2000.
    10. Badger, E. and Bui, Q. "Cities Start to Question an American Ideal: A House With a Yard on Every Lot." The New York Times. June 18, 2019.
    Frequently Asked Questions about Redlining and Blockbusting

    What is blockbusting and redlining?

    Redlining is withholding financial loans and services to residents in high-risk or undesirable areas, usually targeting low-income and minorities. Blockbusting is a series of practices by real estate agents to induce panic selling and peddling of white-owned housing to minorities.

    What is racial steering?

    Racial steering is one of the techniques used in blockbusting, where real estate brokers limited access and options to homes depending on race. 

    What is the difference between redlining and blockbusting?

    The difference between redlining and blockbusting is that they are different forms of racial discrimination techniques with the same goal of segregation. Redlining was used by financial institutions such as banks and insurance companies while blockbusting was done within real estate companies. 

    What is an example of redlining?

    An example of redlining is the HOLC maps the federal government created, which placed all Black neighborhoods within a "Hazardous" category for insurance and lending. 

    What is an example of blockbusting? 

    An example of blockbusting is telling white residents that they need to sell their houses quickly and at below-market values because new black residents are moving in.

    Test your knowledge with multiple choice flashcards

    Who was the target for redlining?

    Who created the infamous redlining maps in the 1930s?

    What did the Federal Housing Administration (FHA) do?


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