New York State Real Estate Salesperson Licensing Exam

What is it called when lenders or insurance agents refuse to conduct business in a certain area based on the characteristics of the residents?

1. Redlining

2. Discrimination

3. Segregation

4. Exclusionary zoning

The correct answer is: Redlining

The term used when lenders or insurance agents refuse to conduct business in a certain area based on the characteristics of the residents is known as redlining. This practice typically involves denying services based on the racial or ethnic makeup of a neighborhood, and it has significant implications for the residents affected. Redlining originated in the 1930s when the Home Owners' Loan Corporation created maps color-coding areas, which influenced lending policies. Areas deemed high-risk (often predominantly inhabited by minority groups) were outlined in red and effectively denied access to loans and insurance. This practice contributed to systemic inequality and long-term economic disadvantages for those groups. Discrimination, while related, is a broader term that encompasses any unfair treatment based on specified characteristics, not limited to geographic areas. Segregation refers to the enforced separation of different racial or ethnic groups, and exclusionary zoning involves land use regulations that limit who can live in certain areas, often to maintain property values or social status. Each of these terms addresses aspects of social policy or practice, but redlining specifically pertains to financial discrimination based on neighborhood demographics.