The Biden administration on Wednesday released its road map for removing racial and ethnic bias from home valuations.
What You Need To Know
- Vice President Kamala Harris announced Wednesday the administration’s action plan for removing racial and ethnic bias from home valuations, written by a new task force
- Studies have found that homes in minority-owned homes are more likely to be undervalued in appraisals than homes in white neighborhoods
- One step, according to the task force, is to boost the small number of Black appraisers in the United States — the Labor Department says 97% of those in the profession are white
- Harris said the administration also is proposing new rules aimed at eliminating bias in appraisal algorithms used by lenders
In a speech on the White House campus, Vice President Kamala Harris announced the administration’s action plan, written by the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), which President Joe Biden formed last year. Biden announced the creation of the panel June 1, the centennial of the Tulsa Race Massacre.
“Appraisals are meant to be fair and objective estimates of the market value of a property,” Harris said. “There's a lot that rides on that estimate and far too often for far too many people, they are not fair and objective.”
A study by Freddie Mac in September found that homes in minority neighborhoods were much more likely than homes in white neighborhoods to be appraised at a value below the contract sales price. A Fannie Mae analysis last month found that white-owned homes were more likely to be valued above algorithm predictions than Black-owned homes.
And a study by the think tank Demos and the Institute for Assets & Social Policy at Brandeis University concluded that eliminating racial disparities in the amount of wealth families gained from owning a home could close the wealth gap between white and Black households by 16%, and between white and Latino households by 41%.
“Systemic bias in home valuations widens the racial wealth gap and deepens the longstanding financial inequities that divide our communities,” Harris said.
Before introducing Harris on Wednesday, Tenisha Austin, of Marin City, California, told the story of how she and her husband, Paul, wanted to refinance their home and were shocked when they received by how their appraisal was. They then tried again, this time asking a white friend to meet the appraiser and removing family photos and artwork from their walls.
The second appraisal was 50% higher — nearly a $500,000 difference — Austin said.
“The impact of devaluing the home in this country is powerful. It can set back a whole community,” she said, explaining that the higher home valuation gave her family the financial freedom to help pay for college and for her to start a business.
The PAVE task force, which is co-chaired by co-chaired by Housing and Urban Development Secretary Marcia Fudge and White House domestic policy adviser Susan Rice, identified several steps for tackling the problem.
One is to boost the small number of Black appraisers in the United States — the Labor Department says 97% of those in the profession are white.
“This lack of diversity can introduce both conscious and unconscious biases that make home appraisals less accurate and less fair,” Harris said.
The vice president said the administration will now require companies that conduct appraisals for federal programs to participate in anti-bias fair housing and fair lending training and also work with the entire industry to require the training.
Harris said the administration also is proposing new rules aimed at eliminating bias in appraisal algorithms used by lenders. While the algorithms have the potential to remove bias, she said, they sometimes use biased data.
The White House also is launching a public awareness campaign aimed at ensuring consumers know their rights before seeking a home appraisal, as well as a resource guide for homeowners and homebuyers who suspect they have received a biased appraisal.
“Our administration will continue to fight to ensure that all homeowners and homebuyers in our nation are treated fairly,” Harris said. “For so many people in our country, a home is more than just a roof over your head and a place to live. Those are essential needs. But a home represents, in addition to that, so much that is about financial security, that is about the potential to build intergenerational wealth. Owning a home, well, it means a shot at a better future.”
The action plan also include proposing legislation to increase government oversight of the industry, improving coordination between federal enforcement agencies to end discriminatory practices and developing an aggregated federal database to better study appraisal bias.