A banking and real estate strategy that discouraged new construction, investment, and mortgage lending in Black neighborhoods, with the goal of ensuring that segregated neighborhoods remained segregated.

Key Takeaways:


  • The patterns of segregation visible in redlining maps actually preceded them; redlining maps made these patterns enduring by attaching new, government-backed and more accessible long-term and low-down-payment mortgages to segregation as the nation became a nation that mostly consisted of homeowners after the New Deal.
  • Even after racially restrictive covenants once critical to federal underwriting standards were declared illegal by the Supreme Court, the agency continued to systematically discriminate against Black neighborhoods and Black homebuyers on a similar basis well into and after the 1960s. For this reason, redlining maps strongly correlate to patterns of neighborhood inequality and segregation visible today.

Multiple historians have done extensive work documenting the close relationship between the National Association of Real Estate Boards and the establishment of various federal housing programs under the New Deal during the 1930s. Ernest Fisher, H. Morton Bodfish, and Frederick Babcock, for example, all learned the art of discriminatory real estate appraisal while working as researchers associated with the NAREB. All, ultimately, became key players in the newly created Home Owners’ Loan Corporation and Federal Housing Administration responsible for the federal government’s first major intervention in the U.S. housing market through programs like the redlining maps and the FHA’s Underwriting Manual.

For guidance and for creation of their maps of neighborhood lending risk in various communities across the U.S., HOLC and FHA officials turned to various local realtors and businessmen. Many of these businessmen belonged to the local banks, title and guarantee companies, and insurers who helped previously underwrite loans in neighborhoods segregated by racially restrictive covenants. Many of them were also active members of their local Chambers of Commerce, and had knowledge of the ins and outs of local land use policies, patterns of racial segregation, and major city planning developments on the cusp of realization. The involvement of these figures in FHA practices helps explain why, even after the court ruled against the enforcement of racially restrictive covenants in Shelley v. Kraemer and the FHA removed preferences for neighborhoods explicitly segregated by racial covenants in its Underwriting Manual, discrimination in federal mortgage underwriting continued. Developers could still verbally refuse to handle mortgage financing for households of color without violating the law; title companies could refuse to insure homes for households of color moving into predominantly white neighborhoods without legal concern; and federal home financing agencies such as the FHA and VA could continue to underwrite loans on a discriminatory basis by simply cautioning underwriters from supporting loans in neighborhoods that might juxtapose “incompatible groups.”

Segregation was not just prejudicial at this point. Due to the intervention of the federal government’s housing policies for mortgage insurance in essence drafted by the NAREB, segregation was now also immensely profitable for white homeowners and businesses - due to the higher value that white homes could accrue, and due to the captive, unequal market of Black homebuyers and lessees subject to schemes like contract buying and predatory lending due to their exclusion from the full real estate market.


Redlining in theory became illegal through various forms of judicial intervention and government legislation, such as the Community Reinvestment Act (1977). But continuing lawsuits against discriminatory lending policies and differentiated mortgage approval rates for different races and ethnicities regardless of income level show that institutional redlining still nevertheless exists.