How home appraisal methods can end up perpetuating racial inequality
How home appraisal methods can end up perpetuating racial inequality
Homes in predominantly white neighborhoods are appraised at double the value of similar homes in neighborhoods where most residents are people of color.
That’s according to a new report out this morning that analyzed appraisal data from the Federal Housing Finance Agency. And, the gap is growing.
This is not a new problem, but Elizabeth Korver-Glenn at Washington University in St. Louis said it’s getting worse, fast.
“Neighborhood racial inequality in market appraised values has increased dramatically over the past decade, especially during the pandemic,” she said.
In the last two years, the average home in white neighborhoods has appreciated by more than $130,000. Comparable homes in communities of color appreciated just $60,000 in that time.
“It’s a structural issue. It’s an issue with how we are actually appraising,” said Junia Howell at the University of Illinois in Chicago. She said one of the main things appraisers look at is how much comparable homes in the neighborhood have sold for recently.
And given the decades-long history of redlining and racism in the housing market, home prices in communities of color have long been undervalued.
“What we see happening is that appraisers are way more likely to go under the offer rates in communities of color. And that becomes a self fulfilling prophecy … because they have to use previous sales to justify their costs,” she said.
Until the criteria for appraising homes changes, Howell said this inequality is going to just keep getting worse.
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