- The racial wealth gap is not just a result of the racial homeownership gap - it is also the result of the persistent devaluation of Black homes and neighborhoods at roughly half the value of white homes and neighborhoods.
- The appraisal industry is one of the least diverse in the country, and the results of its systemic discrimination so impactful - in terms of the limited credit available to Black homebuyers and the limited equity that Black homeowners can reap from their devalued homes - that the Biden administration has made fixing appraisal bias one of its key initiatives for addressing the racial wealth and homeownership gaps.
Black homes are routinely undervalued compared to white homes. According to a recent study of FHFA data by sociologists Elizabeth Korver-Glenn and Junia Howell, white homes are on average appraised at twice the value of Black homes. This inequality has actually increased by 75 percent over the last decade. Unequally valued homes, in addition to fostering the racial wealth gap, make it harder for Black homebuyers to secure financing to purchase homes in Black neighborhoods. Appraisal bias further makes it harder Black for homeowners to access home equity and refinance their existing mortgages compared to white homeowners. Since Black homes are nearly twice as likely to be appraised for a value lower than their sale price, this raises entry-level costs by raising the down payment needed upfront by homebuyers.
At the time of this webpage’s publication, ninety-seven percent of home appraisers were white and two-thirds were male; less than one percent of the industry consisted of Black women.
That the contemporary art of home appraisal reinforces racism makes sense given the history of the profession. In addition to lobbying to license realtors, the NAREB also licensed appraisers in the early twentieth century in order to give the job a clearer sense of professional standards. “Official appraisements by this Board, issued under the Board seal, are the safest and most authoritative to be had,” the Real Estate Board of New York wrote in 1907. During the 1920s, researchers working with the NAREB worked to turn appraisal into a science, operating in a research division that spun off the NAREB to create today’s Appraisal Institute in 1936. With no adequate proof, those realtors and appraisers promoted the unscientific theory that race directly corresponded to property values in textbooks, classrooms, and professional practice, thus lending “objective” support to the ideas of racial zoning, racial steering, racially restrictive covenants, and redlining.
Even today, when race-explicit languages of appraisal are no longer socially or legally accepted, the industry’s current practices perpetuate inequalities. As Elizabeth Korver-Glenn explains in her book Race Brokers (2021), modern-day Realtors, appraisers, and lenders’ “emphasis on neighborhood uniformity, factors affecting value, and ‘typical buyers’ as key to appraisal logic and methods rehash the same ideas about neighborhood difference and social incompatibility as those in the FHA’s Underwriting Manual, written 80 years prior.” Turning to technology might help solve some of that bias, but because so much of the industry’s history and data has been steeped in discrimination, researchers believe that even algorithms would likely only solve some of the problem. As a recent lawsuit against the company Redfin demonstrated, algorithms could in fact reproduce the same problems without more systematic intervention and redress.