Racial Bias in the Appraisal industry
The appraisal industry has been called out for racial bias making it more difficult for black homeowners to get fair prices on their homes. A study posted in the journal Social Problems found that white neighborhoods were valued at $200,000 higher than similar homes found in communities of color from 1980 to 2015. This problem persists today, where many black homeowners have found themselves being discriminated against by appraisers.
Research has proven that majority-Black neighborhoods are harshly undervalued when compared to similar majority-white neighborhoods. One woman found that appraisers have undervalued her home by nearly $134,000 after hiding her race and having a friend pose as the homeowner. This case is unfortunately not isolated. Many other black homeowners have similar experiences when appraising their home, being robbed of hundreds of thousands of dollars due entirely to their race.
This type of discrimination has been around for the past 50 years due to laws put in place back in the 1930s. Redlining, the practice of devaluing homes and neighborhoods of color, was outlawed in the 1960s and 1970s. However, the effects of these laws are still prevalent today. Appraises can use past sale prices to determine a home’s value; this led to many using prices from when race lowered a home’s value, keeping the status quo set over 90 years ago where white neighborhoods were seen as more desirable than neighborhoods of color. Inequalities in home values based on race have increased from 40 years ago, leaving black homeowners out of a fair chance at building wealth through real estate.
The housing market has proven more challenging to navigate for individuals of color in many other aspects. In 2006, Black and Latino borrowers were given subprime loans, the leading cause for the great recession, which had double the interest rates than the loans given to white people. Homeownership statistics show that only 42% of black households own their homes compared to 72% of white households.
According to the White House Fact Sheet, the Biden administration is promising to look into this issue and work toward closing the gap, “The Biden-Harris Administration is announcing additional steps to end discrimination and bias in the housing market. More than 50 years since the Fair Housing Act’s passage, access to wealth through homeownership remains persistently unequal. In his first week in office, President Biden issued a memorandum directing the U.S. Department of Housing and Urban Development (HUD) to address discrimination in our housing market.”
Acknowledging the problem is the first step in ending the bias. We can only hope that progress will be made to end discrimination in the housing market and give equal opportunities and treatment to all homeowners.