Redlining, Blockbusting & Steering: Definition & Differences

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  • 0:04 Illegal Real Estate Practices
  • 0:34 Redlining
  • 1:51 Blockbusting
  • 2:59 Steering
  • 3:51 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Real estate buyers, sellers, renters and professionals must be cognizant of certain unethical and illegal practices involving real estate transactions. In this lesson, you'll learn about redlining, blockbusting, and steering. A short quiz follows.

Illegal Real Estate Practices

Real estate transactions are highly regulated, and professionals in the field are subject to certain standards of ethical conduct. Consequently, it's important for real estate professionals to fully understand what conduct is unethical and what conduct is illegal. It's also important for buyers and sellers to know about this type of conduct so they are not victimized by it. Some of the most egregious and offensive conduct is redlining, blockbusting, and steering. Let's take a look.


Larry's a lender who refuses to loan any money to anyone that lives or wants to buy property in the poorer neighborhoods in town. Larry's engaging in redlining, which is an unethical and discriminatory practice committed by banks and other financial service providers, such as mortgage companies and insurance companies. These businesses either make it impossible or nearly impossible for people living in low-income neighborhoods in the 'inner city' to obtain a home loan, mortgage, or other financial product because of a high default rate in the neighborhood. The practice is called 'redlining' because in the past some of these financial institutions would literally draw a red line on a map demarcating neighborhoods where they wouldn't provide services.

This practice is unethical because the decision to withhold financial services is not based upon an assessment of the individual's credit risk and other qualifications, but is rather based upon a general prejudice about the area where the person is living. There's nothing wrong with denying a loan if an individual is not qualified, but it's completely unethical to deny a loan to an otherwise qualified individual simply because he lives in 'on the other side of the tracks.' The enactment of the Community Reinvestment Act has helped diminish this practice, but it has not been completely eradicated.


This is a pretty complex definition, but blockbusting is an illegal practice where someone convinces homeowners to quickly sell their property below fair market value by scaring them into believing that their home values are about to plummet because a group of people of a certain race, religion, or national origin are moving into the neighborhood. These unscrupulous people then turn around and sell the properties at inflated prices, often to the very group of people used to scare the previous homeowners into selling. Since this is such a complex issue, let's look at an example.

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