Recent news stories locally and across the nation have shed light on what homebuyers in Black and Brown communities have known and experienced for decades: minority homeowners are at risk of having their homes vastly undervalued by appraisers.
The stories are consistent: a Black homeowner, seeking to sell or refinance their home, has the home appraised and gets back a value far below what is reasonable or expected. The Black homeowner then removes all evidence of their “Blackness,” such as family photos, and gets a second appraisal. Bingo! The home appraises at or above what was anticipated.
In a sick way, those are the success stories. For far more minority homeowners, a low appraisal translates directly to lost wealth. For prospective minority homebuyers, low appraisals mean they cannot get the loans necessary to purchase their own homes. The Black homeownership rate in Illinois is 39%, a far cry from the white homeownership rate of 73%.
Homeownership is not only a pillar of the American dream, but one of the most effective ways for families to build generational wealth. But discrimination in housing policy, private attitudes, and the vicious legacies of racist government policies including redlining and deed restrictions have contributed to an enormous racial wealth gap in the United States and placed homeownership out of reach for many. Appraisal bias is making things worse.
A recent WBEZ analysis found that the disparity between appraisal values in Black and Latinx neighborhoods versus white neighborhoods in Chicago has increased more than six-fold since 1980. Nationally, homes of similar quality in neighborhoods with similar amenities are worth 23 percent less — an average loss of $48,000 per home — in majority-Black neighborhoods, compared to those with very few or no Black residents, according to Dr. Andre Perry of the Brookings Institute.
In 2018, researchers Junia Howell and Elizabeth Korver Glenn found that appraisers in the Houston area regularly overlook higher-value comparable properties (“comps”) and instead choosing comps based on neighborhood racial demographic — despite the fact that this is explicitly prohibited by state and federal law.
There is a glimmer of hope; regulators, policymakers, and industry organizations have started to take notice. The White House, Federal agencies, and Congress have taken steps to study the issue more thoroughly. Appraisal industry groups are organizing to recruit a more diverse crop of appraisers and provide more training to root out racial bias. And to an extent, recent media coverage is increasing consumer awareness; fair housing complaints about appraisal discrimination are trending upward.
But more action is needed now to protect consumers and push for systemic changes that will put an end to the undervaluing of Black and Latinx-owned homes. Congress should pass H.R. 2553, the Real Estate Valuation Fairness and Improvement Act, which would establish an interagency task force to identify and remove barriers to equitable real estate valuation and provide federal grant funding to facilitate diversity in the appraisal profession.
Illinois REALTORS® Discriminatory Appraisals Task Force recently launched a webpage where consumers can learn how to prepare for an appraisal, share their experiences of appraisal bias, and learn what to do if they suspect bias.
And if you or someone you know experiences discrimination regarding a property appraisal, make sure to contact the Appraisal Complaint National Hotline to report it.
Racist yard signs and homeownership associations explicitly banning Black people from moving into white neighborhoods may be a relic of the past.
But the sinister legacy of housing discrimination in America lives on —and we all have a role to play in ending it.
Congressman Bobby L. Rush has represented the 1st District of Illinois in Congress for nearly 30 years. Lutalo McGhee is the Chair of Illinois REALTORS Discriminatory Appraisals Task Force