Abstract
Excerpted From: John Byrnes, Racial Discrimination, Home Appraisals, and the Fair Housing Act: Regulating Private Appraisers to Reduce the Racial Wealth Gap, 20 Rutgers Journal of Law & Public Policy 45 (Spring, 2023) (139 Footnotes) (Full Document)
Like many families during the COVID-19 pandemic, the Hortons hoped to refinance their home with a lower interest rate. Surrounded by midcentury homes valued at upwards of a half a million dollars in Jacksonville, Florida, the couple expected a modest appraisal of around $450,000. However, the appraiser came back with a value of $330,000, shattering their dreams of a successful refinance. As the Black member of an interracial couple, Abena Horton suspected discrimination--and she conducted an experiment to prove racial bias. asked the bank for a second appraisal, and this time she took steps to remove all traces of Blackness from her family home. A lawyer by trade, Abena “knew immediately what needed to happen”--she took all the family's photos from the mantle and gathered up works by Toni Morrison and Zora Neale Hurtson. In their place, Abena hung paintings of her white husband's family and put Shakespeare on the shelves. And on the day of the appraisal, Abena took her son to a nearby Target and left her white husband alone with the appraiser. Finding white-coded books and paintings of a white family, the second appraiser came back with a far higher value for Abena's home--$465,000, or a more than 40% increase in value. experiment revealed what Black homeowners have known for decades--white appraisers undervalue Black-owned homes. With “less than 2 percent of appraisers identifying as Black,” Black homeowners must confront this issue almost every time they seek a mortgage loan or a refinance. Indeed, even Black appraisers face an uphill battle with lenders when they try to value properties in Black neighborhoods as they would for comparable properties in white neighborhoods. One Black valuation director with Cushman & Wakefield described how banks treat Black neighborhoods: “Oh, it's a Black neighborhood. It's crime-ridden and violence and all of that. There's no way this place is going to be able to make money.” The numbers support this description, as the Brookings Institute found that houses in majority Black metropolitan neighborhoods “are valued at roughly half the price” as homes in comparable white neighborhoods. Abena's problem extends beyond a single biased appraiser--the problem is systemic.
To that end, this paper proposes a systemic solution grounded in the critical race theory (CRT) principles of anti-bias education, community engagement, and racial recognition. In Part I, this article identifies the problem of racist appraisals and highlights how important appraisals can be to build generational wealth in the United States. In Part II, this article analyzes the current legislative solution, the Fair Housing Act (“FHA”), and employs the classic CRT criticisms of liberalism to show how ineffective the FHA has been. In Part III, this article offers a different legislative solution, a solution that draws from the work of CRT scholars. Instead of private rights of action, the proposed legislation creates state review boards with community stakeholders in key positions. Instead of a reactive solution, the proposed legislation offers proactive tools to combat discrimination, including mandatory antibias training as a precondition for appraisal licensure. Finally, the proposed legislation requires appraisers to include the racial composition of neighborhoods when they use comparable properties to avoid the hidden bias that lurks behind a race-blind appraisal regime.
[. . .]
A home should not be worth more simply because the owner is white. The FHA failed in its mission to eliminate racial bias in housing services. Specifically, it has completely failed to eliminate the appraisal gap between Black and white neighborhoods. Time and again, Black homeowners tell their stories to the press or to courts, only to receive little to no relief. Courts take every opportunity to dismiss FHA appraisal claims, and they do not even permit Black homeowners to introduce the appraisal itself as evidence of discrimination. Moreover, courts require Black homeowners to make a near-impossible showing of intentional discrimination without the use of the undervalued appraisal, a threshold requirement that effectively bars the courthouse doors to would-be litigations.
The time has come to dismantle the state-based appraisal system and erect a national, community-oriented system in its place. Only through engagement with Black communities and through the conflation of white and Black interests can the appraisal gap be eliminated once and for all. And in the end, all citizens of the United States will benefit. Family wealth will increase, and more Black families will be able to access equity from their homes to start businesses, pay medical bills, pay off student loans, and other benefits. The proposed Act will be the first step toward eliminating the racial wealth gap in this country, a step long overdue.
