What is blockbusting?

Blockbusting refers to the practice of inducing property owners to sell their homes at lower prices by suggesting that the arrival of individuals from different racial or ethnic backgrounds would lead to a decline in property values and negatively affect the community. This unethical tactic exploits homeowners' fears and prejudices regarding potential demographic changes in their neighborhoods.

The practice has historically been used to manipulate the real estate market and often involves predatory tactics by real estate agents or investors. By suggesting that the neighborhood will deteriorate, these individuals create panic selling, benefiting from the lower prices at which the properties are sold. Consequently, this answer correctly identifies the essence of blockbusting as it highlights the deceptive and coercive nature of the practice aimed at inducing sales through negative suggestions.

The other choices misrepresent aspects of real estate practices; they do not capture the specific fraudulent manipulation that occurs in blockbusting. For instance, the illegal refusal of mortgage financing is a separate issue relating to discrimination in lending, and while encouraging diversity or renting at discounted rates may pertain to other real estate strategies, they do not reflect the negative implications tied to blockbusting.