Redlining, Blockbusting & Steering: Definition & Differences

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Restraint of Trade: Definition & Example

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:04 Illegal Real Estate Practices
  • 0:34 Redlining
  • 1:51 Blockbusting
  • 2:59 Steering
  • 3:51 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed Speed

Recommended Lessons and Courses for You

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.

Redlining

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.

Blockbusting

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.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support