What does redlining refer to in real estate practices?

Redlining refers to the practice of limiting beneficial loan terms based on geographic areas, often associated with racial and economic demographics. This term originates from the practice where lenders would literally draw red lines on maps to delineate which neighborhoods were deemed “risky” for mortgage lending, effectively excluding certain areas from receiving loans or favorable rates. As a result, properties in these neighborhoods, often predominantly inhabited by minority communities, faced significant barriers in obtaining financing, which perpetuated segregation and inequality in housing opportunities.

This practice is not only unethical but has also been deemed illegal under federal law, specifically the Fair Housing Act and the Home Mortgage Disclosure Act. These laws were enacted to combat discrimination in lending and ensure equal access to housing finance regardless of race, ethnicity, or neighborhood location.

The other options refer to concepts or practices that promote diversity, equitable housing, or commercial development, which are not characteristics of redlining.