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Race affects home values even more now than it did in 1980, study finds

Racial makeup of a neighborhood was a stronger determinant of appraisal value in 2015 than in 1980.

Twenty/20

The disparity in home values between houses in White neighborhoods compared to houses in non-White neighborhoods is much larger than it used to be, according to a new study published in the Oxford University Press.

Racial makeup of a neighborhood was a stronger determinant of a home's appraisal value in 2015 than it was in 1980, the study found. The race appraisal gap has doubled since 1980. The difference in average home appraisals between neighborhoods that are majority White and those that are predominantly Black and Latinx was $164,000 in 2015. In 1980, it was $86,000.

Here's why the home value appraisal race gap is getting wider.

Racism is 'baked into' the appraisal process

In the 1960 and 1970s, a slew of fair housing laws prohibited longstanding, racist housing practices such as redlining, which put certain services, like bank loans for mortgages, out of reach for people in certain neighborhoods based on race. Even though redlining still exists in the form of predatory loans and retail redlining (meaning those in Black communities have to travel farther to find health stores than those in White communities), it is not the sole reason Black Americans end up with lower home appraisal values, according to the study.

Appraisers use a pricing method called the "sales comparison approach," which calls for homes to be priced based on what other comparable properties in the same neighborhood sold for. The real estate industry believed this would take race out of the equation. However, the sales comparison approach results in appraisers valuing homes based on pricing made before fair housing legislation was introduced in the '60s and '70s. So some of the unfair pricing that existed during segregation persists today.

"Without adjusting the price, you literally baked into the system the racialized element and continued it," says Junia Howell, co-author of the study and assistant professor at the University of Pittsburgh.

Most appraisers are "genuine" when they say they are not looking at racial composition of a neighborhood when assigning a home value, says Bryan Greene, the National Association of Realtors' director of fair housing policy. After all, doing so is illegal.

Most will say they look at "market conditions," he says, "but if race is baked into market conditions, everyone can disavow blame for a big problem. Everyone can say they are innocent, but there remains a big systematic problem."

If race is baked into market conditions, everyone can disavow blame for a big problem.
Bryan Greene
the National Association of Realtors' director of fair housing policy

Often, White homebuyers will not say they are looking for a majority White neighborhood. Instead, they will say that they are looking for a community they will fit into or a school district that will most benefit their kids. Those statements can function as dog whistles.

"Because we don't talk in explicit race language, we then accept that inequality and excuse it with those other things," Howell says.

Low home appraisals affect wealth

Owning property is a good way to build wealth. However, because homes in majority Black or majority Latinx neighborhoods are being priced lower than homes in majority White neighborhoods, those who own homes in majority White neighborhoods have gained more wealth in the last 50 years than those who own homes in majority Black or majority Latinx neighborhoods.

Also, the price of housing has simply increased since the 1960s, so homeownership is more out of reach in general, according to data from the Urban Institute. As of 2017, 71.9% of White people own homes, but only 41.8% of Black Americans do.

The racial home value gap might continue to expand, too, says Andre M. Perry, a metropolitan policy fellow at the Brookings Institution and the author of "Know Your Price: Valuing Black Lives and Property in America’s Black Cities." "When you are doing the comparison price approach, everybody knows you're just recycling discrimination," he says. This means the wealth gap will continue to expand unless, Perry says, there are consequences for appraisers who devalue homes based on the race of the person who lives there.

Perry points to a vivid example of how this kind of discrimination can happen, which went viral earlier in October. Abena Horton, a Black woman in Jacksonville, Florida, presented her home to an appraiser, who valued it at a very low $330,000. Suspicious, she sought a second opinion, but first made sure to scrub all evidence that a Black family lived in the house. When her White husband showed the home to another appraiser with family photos removed, he received a valuation worth 40% more.

That first appraiser should face consequences, Perry argues.

Holding appraisers accountable isn't the only way to close the gap, though, according to Perry. "Tax credits, low interest loans, down payment assistance for renters who are buying" are all things that could help Black Americans who have been systematically deprived of wealth.

"When it comes to a personal finance level, we have got to restore the value that has been extracted by racism by getting resources to the people injured by that racism," he says.

How to price your home fairly

"Thinking about racial inequality in appraisals as something that could be fixed by just addressing communities of color totally misses the bigger picture," Howell says. "It is not just what they are being evaluated by, but how that is compared to the White community."

If you're a White homeowner and looking to sell, here are some things you can do to make sure your home will be showed to and possibly bought by someone who is not White.

  • Research your realtor and ask what appraiser they use. A supermajority of appraisers, 85%, are White and 78% of appraisers are male, according to the Appraisal Institute. Realtors of color often have more diverse networks, Howell says, and may be more likely to sell to White, Black, Latinx, and Asian homebuyers. They might also work with appraisers who price in a variety of neighborhoods and don't have as much of a blind spot when it comes to race.
  • Ask about the evaluation if it seems that the estimate is too high. "The White person has more power to challenge the evaluation of their home than a person of color," Howell says. "White homebuyers don't have to price their prices so high," she adds. "They don't have to take the higher offer."

A realtor might "laugh in your face" if you take any of these steps, Howell says. But the homeownership gap can close if White home sellers are more intentional about finding buyers of color. Ask yourself how you can make sure that a home you've enjoyed can be enjoyed by other people, too, Howell says: "Make it priced more affordably."

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