What is the illegal practice of refusing to make loans in certain neighborhoods?

The illegal practice of refusing to make loans in certain neighborhoods is known as redlining. This term originated from the practice where banks and insurance companies would draw red lines on maps to indicate neighborhoods where they would not provide financial services, typically based on the racial or ethnic composition of the area. Redlining not only restricts access to necessary financial resources but also perpetuates socioeconomic disparities and reinforces segregation within communities.

This practice is considered discriminatory, as it limits opportunities for homeownership and investment in specific areas, thereby impacting the residents' quality of life and long-term financial stability. Redlining is explicitly prohibited under laws such as the Fair Housing Act, aimed at promoting equal access to housing and fair lending practices.

The other terms relate to different concepts in real estate or housing discrimination. Steering involves guiding potential buyers or renters toward or away from certain neighborhoods based on race, while blockbusting refers to the practice of inducing property owners to sell by suggesting that the racial composition of the neighborhood is changing. Down-zoning is a land use regulation that changes the permissible uses of land, which is unrelated to lending practices.