According to a study by the Brookings Institute and Gallup, homes owned by Black Americans are
historically under-appraised.
Discrimination based on race in home appraisals was made illegal by the Fair Housing Act of 1968. But not much has changed, says Andre Perry, author of “
Know Your Price: Valuing Black Lives and Property in America’s Black Cities.” He spoke about the issue at the Financial Services Subcommittee hearings on Capitol Hill in 2019.
“Laws changed, but practices stayed the same,” he says.
Segregation and discrimination against Black people is deeply rooted in the country’s history, he says. Many of the appraisal practices still used today were developed during segregation and remain a part of the culture, he says.
After controlling for housing metrics such as education, crime and walkability, the study found “homes in Black neighborhoods where the share of the Black population is greater than 50% are undervalued by 23% — about $48,000 per home,” he says. “That equates to about $156 billion in lost equity.”
The problem doesn’t lie only within appraisers, he says, but rather every aspect of the housing industry — real estate agents and lenders included.
“When we look at Black assets, we judge them like we judge Black people,” he says. “And so we reduce the value.”
Regulating the way appraisers create comparable homes is one part of the solution, he says.
While appraisers can easily see
comps in all white suburbs where homes all look alike, they can't see comps in more diverse urban neighborhoods because of racism, he says.
“Bias creeps in — 93% of the appraisal industry is white,” he says. “And so another part of the solution is diversifying the field. We have got to address the bias that's robbing wealth, extracting wealth from Black families and Black communities.”
Appraisers responded to this notion during the Financial Services Subcommittee Hearings Perry was involved in. An appraiser from Chicago, Maureen Sweeney, wrote a letter to the House subcommittee acknowledging there is a problem with poor and underserved communities in the U.S. — but that it’s not the appraisal professional’s fault. Perry says that sentiment is a “white myth that the conditions of Black neighborhoods are a direct result of the people in them.”
Inner cities are often neglected by landlords or city services, he points out. But as a result of “generations-long bias,” appraisers also lowball prices in wealthy, Black neighborhoods as well, he says.
For white people thinking that this isn’t their problem — think again, Perry says. If a Black or mixed family down the street gets under-appraised, the value in the neighborhood also goes down.