2.3 Blockbusting, Steering & Redlining
Key Takeaways
- Blockbusting is inducing panic selling by claiming protected classes are moving into an area
- Steering is directing buyers/tenants toward or away from areas based on protected class
- Redlining is denying services or financing based on neighborhood demographics
- All three practices are illegal under both federal and New York law
- Even subtle steering through school district comments can violate fair housing
Last updated: January 2026
These three prohibited practices are heavily tested on the NY exam.
Blockbusting (Panic Peddling)
Blockbusting is inducing owners to sell by claiming protected classes are moving into the area:
Elements of Blockbusting
| Element | Description |
|---|---|
| Inducement | Encouraging sale |
| Fear | Based on changing demographics |
| Protected class | Race, religion, etc. |
| Profit motive | Agent seeks listings |
Examples of Blockbusting
| Illegal Statement | Why It's Blockbusting |
|---|---|
| "Property values will drop when they move in" | Fear of protected class |
| "You should sell before it's too late" | Inducing panic |
| "The neighborhood is changing" | Code for demographics |
| "Better sell now while you can" | Creating urgency from fear |
Steering
Steering is directing buyers/tenants toward or away from areas:
Types of Steering
| Type | Description |
|---|---|
| Positive | Directing toward "their" area |
| Negative | Directing away from area |
| Subtle | School district, "you'd fit in" |
| Overt | "That area isn't for you" |
Steering Examples
| Illegal Action | Why It's Steering |
|---|---|
| Only showing certain neighborhoods | Limiting choices by race |
| "The schools are better here" | Coded steering |
| "You'd be more comfortable in..." | Directing by protected class |
| Not mentioning listings in certain areas | Steering by omission |
Redlining
Redlining is denying services based on neighborhood:
Forms of Redlining
| Form | Description |
|---|---|
| Lending | Refusing loans in certain areas |
| Insurance | Denying coverage by ZIP code |
| Appraisal | Undervaluing minority areas |
| Real estate services | Refusing to work in areas |
Modern Redlining
Redlining can be subtle:
| Practice | Issue |
|---|---|
| Digital marketing targeting | Excluding certain demographics |
| Loan pricing | Higher rates by area |
| Appraisal bias | Undervaluation patterns |
Penalties
| Violation | Potential Penalty |
|---|---|
| License action | Suspension, revocation |
| Civil penalties | Up to $250,000 (NY) |
| Compensatory damages | Actual losses |
| Punitive damages | Additional punishment |
| Criminal charges | Severe cases |
Loading diagram...
Test Your Knowledge
An agent tells homeowners "The neighborhood is changing—you should sell now before property values drop." This is an example of:
A
B
C
D
Test Your Knowledge
A real estate agent only shows properties in certain neighborhoods to minority buyers. This practice is called:
A
B
C
D