Redlining is the practice of restricting or denying access to services in a spatially defined area. Typically, redlining refers to the practice of restricting access to financial service products, such as mortgages, to residents of minority areas. The term arose from urban activists in Chicago in the 1960s in response to the literal practice by banks of drawing red lines on local maps to demarcate minority areas to which lending should be curtailed. Until the Fair Housing Act of 1968, this practice was legal and commonly used as a way to minimise the real or perceived risk of lending in these areas. Because minority areas are correlated socio-economic risk factors, they also tend to be correlated with financial risk. Current research has attempted to identify whether lenders differentiate supply of credit due exclusively to financial risk or due to racial factors.
|This chapter was published in: Steven N. Durlauf & Lawrence E. Blume (ed.) , , pages , 2010, 4th quarter update.|
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