What term describes the strategy where lenders limit loans based on the racial composition of a neighborhood?

The strategy where lenders limit loans based on the racial composition of a neighborhood is referred to as redlining. This practice involves drawing lines on a map to delineate areas deemed too risky for mortgage lending, often corresponding with predominantly minority neighborhoods. Redlining emerged from the historically discriminatory policies and attitudes that denied financial services to people based on their race, which perpetuated segregation and economic disparities within communities.

Consequently, neighborhoods filled with residents of color may have been marked as higher risk, leading to a lack of investment and further entrenching poverty and limited opportunities for those areas. Understanding redlining is crucial to recognizing its long-standing impacts on housing access, wealth accumulation, and community development, which continue to resonate in societal and economic structures today.

The other options describe different but related concepts within the context of housing and race. Steering refers to guiding prospective homebuyers toward or away from certain neighborhoods based on their race, segregation pertains to the separation of groups within society, and blockbusting involves persuading homeowners to sell their properties at lower prices by instilling fear of incoming racial diversity. Each of these terms highlights aspects of racial discrimination in housing, but redlining specifically addresses the lending practices based on neighborhood racial demographics.