The Chicago Reporter is committed to producing stories that identify marginalized communities’ challenges and opportunities. In recent months, the racial bias in home appraisals has dominated the conversation in Chicago, the state, and across the country.
In Part 1 of Racial Bias In Home Appraisals, we outlined what thought leaders have identified as some of the root causes for the widespread, pervasive disparities undervaluing Black and Brown homes, preventing them from attaining wealth.
In Part 2, we learn from lawmakers, industry leaders, and the community what solutions are (or should be) on the table to confront racial bias in the appraisal industry from enforcing laws, enacting new legislation, and empowering the public to act.
“No. I’m not going to create a business that says, “Black people aren’t good enough.” No,” said Don Robinson, a resident of the Woodlawn neighborhood of Chicago’s South Side. Robinson had thought about starting a whitewashing business that would help Black homeowners like himself erase the “Blackness” in their house by taking down family photos and cultural art so their properties could appraise at a higher value.
A tactic that some Black families have used such as Tenisha Tate-Austin and her husband, Paul, from Marin County, California. After spending months on renovations, a white appraiser valued their home much lower than they had anticipated. Then, when a white friend showed the couple’s home as her own, its appraisal rose by $500,000. Tenisha and Paul say they were victims of bias.
Similarly, Robinson said his family had experienced discrimination by the appraisal industry. Robinson and his wife, Solonge, renovated their 19-century house and, in 2020, decided to refinance it, which required an appraisal. The couple was expecting the value of their home to be $660,000. Instead, it was assessed at $480,000 despite comps (comparable properties in the same neighborhood) being estimated at higher prices.
“It is reinforcing discrimination,” said Don about hiding his family’s race in their home as a solution to the problem of racial and ethnic bias in home appraisals.
Freddie Mac and Fannie Mae, two of the largest financial institutions believe they have a remedy for Black and Brown homeowners low-balled by bank appraisers compared to their white counterparts. In March the companies launched remote desktop appraisals, in which an appraiser never meets a homeowner or has an opportunity to see their family portraits on the wall, etc.
Remote appraisals are created with information from existing sources such as appraisal reports, multiple listing service (MLS) data, and public record data. The initiative is a result of the COVID-19 social distancing mitigations started in 2020. From April 2020 through May 2021, Fannie Mae and Freddie Mac implemented temporary flexibilities on appraisals, allowing them to be conducted entirely remotely or through a hybrid model.
Freddie Mac’s analysis found that appraisals for home purchases in majority Black and majority Latino neighborhoods resulted in a value below the price for which the home sells compared to predominantly white neighborhoods.
Another solution is to increase the number of people of color entering the home appraisal business.
“We want to increase minority representation in the ranks of the appraisers,” said Lutalo McGee, chair of the Illinois REALTORS Discriminatory Appraisal Task Force, which aims to end discriminatory home appraisals. “Less than 4 percent of appraisers (nationally) are African American.”
In the Chicago area, 5 percent of appraisers are African American, 3 percent are Latino, 1 percent are Asian, and 1 percent are “other,” while 90 percent are white, according to the U.S. Census.
Cultivating a more inclusive appraiser profession as a solution can be challenging for underrepresented groups. Industry experts say that after finishing the required education, appraisers must complete a certain number of hours under a supervising appraiser to become certified. Finding a supervisor can be difficult for newcomers who don’t know anyone in a field that is primarily insularly family-owned and knowledge passed down from generation to generation.
Some lawmakers suggest the solution starts with improving on what already exists.
“Our committee will dig deep to figure out how to solve it,” said Congressman Jesús “Chuy” Garcia (D-4th). Garcia serves on the House Financial Services Committee. “We must start by strictly enforcing the laws that are already in the books, like the Fair Housing Act and the Equal Credit Opportunity Act.”
The Fair Housing Act of 1968 prohibits discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, or sex.
The Equal Credit Opportunity Act of 1974 makes it unlawful for any creditor to discriminate against applicants based on race, color, religion, national origin, sex, marital status, age, or income generated from public assistance programs.
Both laws were enacted to deal with rampant discrimination creating systemic barriers, policies, and biases preventing equitable access to housing. Housing discrimination became more striking after the abolition of slavery as part of Jim Crow laws that enforced racial segregation.
Congresswoman Maxine Waters (D-CA) is chairwoman of the House Financial Services Committee, “A home’s value is critical to closing the wealth gap and ensuring that communities of color build generational wealth,” Waters said. “Both over and under-valuation of a home is harmful to buyers and homeowners by either saddling a buyer with a home worth less than the debt they take on or selling short homeowners of their nest egg.”
“My bill, the Fair Appraisal and Inequity Reform Act of 2022, addresses appraisal bias and discrimination by establishing a new Federal Valuation Agency—responding to a key recommendation made by President Biden’s Interagency Task Force on Property Appraisal and Valuation Equity (PAVE),” she said. Waters addressed a full Committee hybrid hearing on March 29 entitled, “Devalued, Denied, and Disrespected: How Home Appraisal Bias and Discrimination Are Hurting Homeowners and Communities of Color.”
Vice President Kamala Harris unveiled the PAVE Action Plan in March, 21 steps to root out racial and ethnic bias in home evaluations by the appraisal industry.
The steps in the initiative include being more accountable by calling on federal agencies to create a legislative proposal to modernize the appraisal industry’s governance structure. And improve coordination and collaboration between federal enforcement agencies to help identify discrimination in appraisals.
Another step is to empower consumers with information and assistance. The plan offers steps homeowners and buyers can take when a valuation comes in lower than they expected. It commands issuing guidance and implementing new policies to improve the reconsideration of value processes.
The plan also removes “unnecessary educational and experience requirements that make it difficult for underrepresented groups to access the profession and to strengthen anti-bias, fair housing, and fair lending training of existing appraisers.” To view the full details of the action plan click on this link: PAVE.hud.gov.
Having acknowledged bias in the process, the Appraisal Institute (AI) has suggested changes for addressing discrimination, including unconscious racial bias training, updating professional ethics and guidelines, and offering scholarships to encourage more diversity in the appraisal industry.
As a South Side real estate broker and member of the Illinois REALTORS Discriminatory Appraisal Task Force, Don Robinson knows all too well the problems. He is collaborating with the 22-member task force on finding solutions to improve the appraisal industry.
Robinson agrees that more diversity and answerability are necessary to right the wrongs. “The reason why it’s gotten so out of hand,” says Robinson, is because the monitoring of what appraisers are doing is not happening. “Until you bring accountability into the mix, it’s going to continue to happen.”
Cover Photo Credit: Thirdman