*Homeownership is not only a source of wealth for Black families, it is a source of pride. It goes without saying how hurtful it is for Black families to be forced to “whitewash” their homes in order to obtain the most accurate and highest appraisal value. At a Tuesday event convened by Vice President Kamala Harris at the White House, several Black families recounted their horrific but all too common experiences with appraisal bias. Their stories underscored the urgency of the newly announced Biden-Harris administration’s action plan. The plan ranged from higher accountability in the appraisal industry to cultivating a diverse and better training appraiser profession.
Recognizing the critical role that appraisals play in the mortgage lending process, President Joe Biden directed the creation of the inter-agency Property Appraisal and Valuation Equity (PAVE) Task Force in 2021. For the past nine months the Task Force, co-chaired by U.S. Department of Housing and Urban Development Secretary Marcia Fudge and Domestic Policy Advisor Susan Rice, worked to identify policy initiatives and fostered industry collaboration to root out racial and ethnic bias in the appraisal process.
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The wealth gap between Black and white American families has been a persistent source of racial inequity, with the median white family holding $8 of wealth for every $1 of a typical Black family. Homeownership is a significant source of wealth building, but the current 30 point homeownership gap between Black and white families is even higher than before the Fair Housing Act of 1968 outlawed housing discrimination.
The inequities persist even among Black homeowners. During the panel moderated by Secretary Fudge and Ambassador Rice, Paul Austin described the “tax of being Black in America”; which for him and his wife Tenisha Tate-Austin was a nearly $500,000 appraisal value difference after a white friend posed as the owner of their home. The updated appraisal afforded the Austin family with the ability for Mrs. Tate-Austin to start her own business and “financial freedom.”
In majority-Black neighborhoods, homeowners are nearly twice as likely to obtain an appraisal valuation below the contract sales price compared to majority-white neighborhoods. Jacquelyn and Cassius Priestly recalled their two appraisals which come in $500,000 and $300,000 lower than the cost of building their dream home. A nearly identical home by the same builder sold for $1 million more than their highest appraisal value in a neighboring county. For the Priestly family, they had to weigh the “trade-off” between a “good economic decision” and a “good community decision” so that their kids could “grow up with people that look like them”.
By eliminating the racial disparities in the wealth accumulation from homeownership, the wealth gap between Black and white families would be reduced by an additional 16 percent. It is clear, tackling this issue is a matter of both racial justice and economic justice.
Vice President Harris connected the dots between how “segregation, restrictive covenants, and redlining have long denied Black homeowners a share in the American dream” and how the “inequity continues today in the home appraisal system”. In referencing her work as California Attorney General to secure a $20 billion mortgage settlement and in crafting the Homeowner’s Bill of Rights, Ms. Harris reiterated her and the administration’s commitment to taking action.
The member agencies of the PAVE Task Force will take a number of major actions. The administration will take action to remove unnecessary education and experience requirements that have nearly shut out access to underrepresented groups; as evidenced by the fact that the appraisal profession is 97% white. In addition to cultivating a more diverse appraisal profession, the administration will strengthen anti-bias, fair housing, and fair lending training of existing appraisers.
In addition to human bias, the Task Force is tackling the role of algorithms in home appraisals. Vice President Harris explained, “home appraisal algorithms have the potential, when used properly, to reduce bias”. However, she warned that if algorithms are “based on biased data” then there is a “real risk of producing biased data”. As a result, the administration is developing a nondiscrimination quality control standard to ensure that AVMs (Automated Valuation Models) do not perpetuate discriminatory valuations.
The Task Force agencies have committed to developing a legislative framework to enhance oversight and accountability of the mostly self-regulated appraisal industry. The Task Force will also work to improve how federal enforcement agencies identify and redress discrimination in appraisals.
Importantly, the Task Force has created resources to empower families like the ones who spoke at the event. A resource guide will provide homebuyers with information on steps they can take when they receive a valuation that is lower than expected. The Task Force agencies will issue guidance and implement new policies to improve the re-evaluation appraisal process. Secretary Fudge assured the Black homeowners present that although she cannot guarantee what they experienced won’t happen again, she pledges to “do something about it if it does.”
Reecie Colbert is the founder of BlackWomenViews Media. She is renowned for her unique mix of bold, intelligent, and unfiltered commentary. Colbert is a political and culture commentator appearing weekly on the Roland Martin Unfiltered Show and the Clay Cane Show on SiriusXM radio.