BIAS IN HOME APPRAISALS PLAYS KEY ROLE IN RACIAL WEALTH GAP
Updated: Jun 20
FOR IMMEDIATE RELEASE
DATE: June 13, 2023
CONTACT: Sarah Jenkins Program Manager, Outreach and Education Program email@example.com Cell: 419-503-0529
BIAS IN HOME APPRAISALS PLAYS KEY ROLE IN RACIAL WEALTH GAP Metropolitan Milwaukee Fair Housing Council Conducts Outreach to Raise Community Awareness and Urge Home Buyers to Report Discrimination
Milwaukee, Wisconsin – Discriminatory practices in the appraisal industry are a driving force in the significant racial disparities that exist in home values in communities across the country, including the greater Milwaukee area. In recognition of the need to educate housing consumers about their right to a fair appraisal, Metropolitan Milwaukee Fair Housing Council (MMFHC) has been conducting education and outreach activities across the greater Milwaukee area. To help raise awareness of this inequity and encourage home buyers to report instances of appraisal discrimination, MMFHC created and disseminated an educational brochure and video and conducted presentations to community-based organizations including home buyer counseling agencies.
Bias in the appraisal process occurs when the value of a home is based upon the race of the homeowner or racial makeup of the neighborhood, rather than the objective characteristics of the home such as the age, size, or condition of the property. This often leads to homes in neighborhoods of color being undervalued compared to similar homes in white neighborhoods. While common, these unfair practices often go unreported because home buyers may not recognize the signs of discrimination, especially when they are navigating the complex home buying process.
“The value of a home extends beyond home sales; it fosters financial stability, builds equity that can support future generations, and enables consumers to access other economic opportunities,” stated Bill Tisdale, President & CEO, Metropolitan Milwaukee Fair Housing Council. “Unfair appraisals mean people of color are being stripped of the wealth and opportunities that have been the backbone of prosperity for white households for generations. We urge housing consumers who believe they have been victims of appraisal discrimination to come forward and report it. The Council is committed to investigating complaints and holding appraisers accountable for practices that not only violate the law, but reinforce longstanding barriers that keep the American dream out of reach for people of color.”
Red flags of appraisal discrimination may include: a home is appraised at a lower value compared to other similar homes that have sold recently in the area; remarks on the appraisal assessment that make reference to race; evidence that subjective factors such as neighborhood characteristics influenced the appraisal; and the selection of comparable homes (“comps”) that are based on the racial makeup of the neighborhood rather than the similarity of housing stock.
“The appraisal industry is crucial in setting home values and, therefore, has a powerful impact on the financial well-being of millions of families for whom a home is their main financial asset,” stated Lisa Rice, President and CEO of the National Fair Housing Alliance. “Although the Fair Housing Act was passed 55 years ago in 1968, studies have shown that appraisal discrimination continues to restrict homeownership and lending opportunities for consumers and communities of color. In fact, homeowners in predominately Black communities have lost $162 billion in wealth due to appraisal bias. A NFHA Consortium conducted a study that found that the appraisal industry has operated with little scrutiny or oversight. This must change. Appraisal discrimination violates the Fair Housing Act as well as other federal, state, and local civil rights laws.”
“Despite the fact that it has been occurring for decades, discrimination in the appraisal process has become more obvious in the past several years, probably due to the media focus on the subject combined with low interest rates,” stated Caroline Peattie, Executive Director, Fair Housing Advocates of Northern California. “We find that many Black homeowners have had the experience of receiving appraisal reports that contained errors and deviations from standard appraisal procedures, and where choices to use comps in neighborhoods farther away with higher Black populations indicates racial bias. We know that neighborhoods of color have been historically undervalued due to deliberate racist housing policies, such as redlining. This ongoing undervaluation of homes in Black neighborhoods is, in effect, present-day redlining."
Urban sociologist and race scholar Junia Howell recently released an updated study evaluating racial inequality in appraised values using national appraisal data from 2022. Howell’s study found that “in 2022, the absolute inequality between appraised values in White neighborhoods and communities of color was the largest it has ever been,” with data revealing that “an average home in an average White neighborhood was appraised for $408,000 more than an identical home in a comparable community of color.” Dispelling the myth that appraisal disparities can merely be attributed to differences in housing quality or neighborhood characteristics, Howell asserts, “to be clear, empirical research has repeatedly documented that these differences are not the result of higher real estate demand in White neighborhoods or attributes of the local schools, amenities, or crime rates. This inequality is a feature of the appraising practices that elevate the value of White spaces above those of communities of color.”
The Biden administration recently announced efforts to combat appraisal discrimination by setting standards to regulate the valuation process, improving public access to appraisal data, and removing barriers for entering the appraisal profession.
The Fair Housing Act, passed in 1968 as part of the civil rights movement, is a federal law that prohibits discrimination in housing by making it illegal to deny housing, limit housing choices, or engage in differential treatment based on a person’s race, national origin, sex, disability, familial status, or any other protected class. Fair housing laws apply to all aspects of the housing industry, including home appraisals.
MMFHC's activities to raise awareness of discrimination in appraisals is funded in part by the U.S. Department of Housing and Urban Development.
MMFHC is a private, non-profit organization whose purpose is to promote fair housing throughout the State of Wisconsin by guaranteeing all people equal access to housing opportunities and by creating and maintaining racially and economically integrated housing patterns. It operates satellite offices in Dane County (the Fair Housing Center of Greater Madison) and in Northeast Wisconsin (the Fair Housing Center of Northeast Wisconsin).
Persons who feel they may have experienced illegal housing discrimination should call 1-877-647-FAIR, a toll-free number. Callers within the 414 area code may call 414-278-1240. Information about MMFHC services and fair housing rights and responsibilities can be found at fairhousingwisconsin.com. All services to victims of illegal housing discrimination are free of charge.